Energy &#39;Rector ManagementU Aist.nce

Leo Mataruka

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This paper analyzes the current factors causing an energy crisis, including depletion of the natural resources, geopolitical tensions, energy security, search for climate stability and absence of universal access to energy. Through the deductive method, the study analyzes if investments are considered as a possible solution to promote sustainable energy. It assesses the current position of intergovernmental organizations linked in some way to the topic of energy, such as the WTO, ECT, G8, G20, IEF, IEA and OPEC, to identify whether the initiatives are being developed and the political will to do so. Some organizations are connected but with limited and insufficient focus. Funding initiatives are below of what is necessary to achieve the goals considered relevant. In the absence of a global governance of energy due to the lack of sufficient cooperation and collaboration of international actors to efficiently mitigate the energy crisis. The challenge is to alter from high to low carbon economy, and the shift from fossil fuels to renewable energy will contribute substantially to this transition. It concludes the necessity of cooperation between organizations such as IRENA and ONU's programme Sustainable Energy for All, which have Global energy govrnance through intergovernmental organizations the potential to become catalysts for a new trend.

Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Energy 'Rector ManagementU Aist.nce Prog'aemze J/?savza4e% /992 Zimbabwe integrated Energy Strategy Evaluation Report No. 878-ZDAI ~~~~~-4 6 JOINT UNDP I WORW BANK XNERGY SECTO MANAGEMENT ASSISTANCE PROGRAMME (ESMAP) PURPOSE The Joint UNDP/WorldBank Energy Sector ManagementAssistance Programme(ESMAP) was launchedin 1983 to complementthe Energy AssessmentProgramme,cstablishedthree years eadier. reports ESMAP'soriginalpurposcwas to implcmentkey recommendationsof the EnergyAssessrmient and ensurethat proposedinvestmentsin the energysector representedthe most efficient use of scarce domesticand external rcsources. In 1990,an internationalCommissionaddressedESMAP'srole for the 1990sand, notingthe vital role of adequateand affordableenergyin economicgrowth,concluded that the Programmeshould intensifyits efforts to assist developingcountriesto managetheir energy sectorsmore effectively.TheCommissionalsorecommendedthat ESMAPconcentrateon makinglongterm effors in a smaller numberof countries. The Commission'sreport was endorsedat ESMAP's November 1990Annual Meetingand promptedan extensivereorganizationand reorientationof tht Programme. Todav, ESMAP is conductingEnergy Assessments,performing preinvestmentand profeasibilitywodc, and providinginstitutionaland policy advice in selected developingcountries. Throughtheseefforts,ESMAPaimsto assistgovernments,donors,and potentialinvestorsin identifying, economicallyand environmentallysound energystrategies. funding,and im.plementing GOVERNANCE AND OPERATIONS ESMAPis governedby a ConsultativeGroup(ESMAPCG),composedof representativesof the UNDP and WorldBank, the governmentsand institutionsprovidingfinancialsupport,and representativesof the recipientsof ESMAP'sassistanco. TheESMAPCG is chairedby the WorldBank's Vice President, Operationsand SectorPolicy,and advisedby a TechnicalAdvisoryGroup(TAG)of independentenergy experts that reviews the Programme's strategic agenda, its work program,and other issues. The Managerof ESMAP,who reports to the World Bank's Vice President,Operationsand SectorPolicy, administersthe Programme. The Manager is assisted by a Secretariat,headed by an Executive Secretary,whichsuppors the ESMAPCG and the TAG and is responsibletor relationswith the donors and forsecuringfundingfor the Programme'sactivities. The ManagerdirectsESMAP'stwo Divisions: The Strategyand ProgramsDivisionadviseson selectionof countriesfor assistance,carriesout Energy Assessments,preparesrelevantprogramsof technicalassistance,and supportsthe Secetariat on funding issues. T'heOperationsDivisionis responsiblefor formulationof subsectoralstrategies,preinvestment work,institutionalstudies,technicalassistance,and trainingwithinthe frameworkof ESMAP'scountry assistanceprograms. FUNDING ESMAPis a cooperativeeffortsupportedby the WorldBank,UNDPandother UnitedNationsagencies, the EuropeanCommunity,Organizationof AmericanStates(OAS),LatinAmericanEnergyOrganization (OLADE),and countriesincludingAustralia,Belgium,Canada, Denmark,Germany,Finland,France, Iceland,Ireland,Italy, Japan,the Netherlands,New Zealand,Norway,Portugal,Sweden,Switzerland, the United Kingdom,and the UnitedStates. FURTHER INFORMATION For furtherinformationor copic3 of completedESMAPreports,contact: The Manager ESMAP The WorldBank 1818 H Stet N.W. Washington,D.C. 20433 U.S.A. or The ExecutiveSecretary ESMAPConsultativeGroup The World Bank 1818H Street N.W. Washington,D.C. 20433 U.S.A. DEPARTMENTOF ENERGYRESOURCESAND DEVELOPMENT(DOERD) WORLDBANKIUNDP ENERGYSECrOR MANAGhMENTASSISTANCEPROGRAMME INTEGRATEIENERGYSTRATEGY EVALUATION FOR ZIMABWE January 1992 ESM,APStrategyand ProgramsDivision TMeWorldBank Washington,D.C. 20433 USA Departmentof EnergyResourcesandDevelopment Ministry of Energyand Water Resources and Development Harare, Zimbabwe The EnergyStrategyEvaluationon Zimbabwehas beencarried out in cooperation betweenthe Governmentof Zimbabweand the Energy Sector ManagementAssistance Program supportedby the WorldBank, UnitedNations DevelopmentProgramme, and BilateralDonors. The Evaluationis basedon the analysisthat was carried out by a team of national and internationalspecialists during November 1989-February 1990 and updated during February-May 1991. The team was led by Mr. Ioerg-Uwe Richter (senioreconomist,WorldBank). The nationalteam consistedof Messrs.PeterRobinson (National Team Coordinator; macroeconomicspecialist); Stanley Majero (electricity generation specialist); Ross Emmerton (electricity transmission and distribution specialist); Roy Jacobs (petroleumspecialist); John Holloway (coal specialist); J.C. Nkomo, Elkana Ngwenya, and Leo Mataruka (energy demand specialists); and Ian McDonald (computer programmingspecialist). The internationalteam consisted of Messrs.PeterEglington(seniorenergyplanner),MarkKosmo(energyeconomist),Peter Beard (electricitygenerationspecialist),Karl Bjorkman (transmissionand distribution specialist),John Stocks (coal productionand marketingspecialist),Peter Cross (coal conversionspecialist),John Mulckhuyse(energyefficiencyspecialist),John Shillingford (petroleumspecialist),and Timothy Murphy (environmentalspecialist). Messrs. John Besant-Jones(principaleconomist,World Bank) and Robin Broadfield(senior energy economist,WorldBank)providedadviceduring the mainmissionand the preparationof the report. The draft report was jointly reviewed in Harare in February 1991. The cooperationby the Governmentof Zimbabweis gratefullyacknowledged,particularlyby the Departmentof Energy Resources and Development(DOERD)of the Ministry of Energy,Water Resourcesand Development(MEWRD);the Ministryof Mines; and the National Planning Agency of the Ministry of Finance, Economic Planning and Development. Numerousparastataland private organizationsassisted the Evaluation team, in particularthe ZimbabweElectricitySupplyAuthority(ZESA);the NationalOil Companyof Zimbabwe (NOCZIM);the Wankie Coal Colliery (WCC); the National Railwaysof Zimbabwe (NRZ); the IndustrialDevelopmentCorporationof Zimbabwe; and the Confederationof ZimbabweIndustries. The financialand logisticalsupport of UNDP and SIDA made this Evaluationpossible. ABSTRACT The DOERD/ESMAPEnergy Strategy Evaluationof the electricity, coal, and liquid fuels subsectorsin Zimbabwepresents a detailedanalysisof relevant issues and developmentoptions. (Woodfuelsand other issuesrelatedto householdenergyare being analyzedthrough an ESMAP-supportedEvaluationof the Energy Strategy for LowerIncomeGroups, which is being carried out in paralelto this Evaluation.) Based on this analysis,the Evaluationassessesoptionsfor improvingenergypolicies, energyplanning, and other institutionalarrangements;identifiesan investmentprogram for the energy sector for the 1990-95 period, and, indicatively,for the 1995-2010period; and recommends a set of technical assistance activities to improve sector policies and strengthensector institutions. The Evaluationconcludesthat supplying energy for the growing economyover the 1990-2010period will pose complex issues concerningthe needfor reliabilityat least-costand maximumcompatibilitywithenvironmentalconcerns. The Evaluationrecommendsas componentsof an energydevelopmentprogramthat (a) energy demand management through pricing and non-pricing measures aimed at increasing energy efficiency be given high priority; and (b) the requirementsfor electricity be met in the short term through load management,rehabilitationof the municipalthermal plants, and imports from Zambia; and over the medium to longer tern, through continued load managementand imports from Zambia, imports from Cahora Bassa and a generationexpansionsequenceconsistingof gas turbine (whose justificationneeds to be reviewedby around 1995), and Batokahydro-power;for coal, through productionat Wankiein line with requirementsfor thermalpower station coal, complementedby relativelylimited output from Sengwa; and for liquid fuels, through continued importationof petroleumproducts as the most economicform of securing supplies. In addition, options to improve the efficiency of energy production, transformation, marketing, and end-use of electricity and fuels would contribute importantlyto the sustainedmanagementof the environmentand shouldbe given higher priority. Investmentin the energy sector over the 1990-2010period could total about Z$7.6 bn for the Trend Caseand BaseCase/Policy-activeScenarioand as muchas Z$9.5 bn in the Base Case/Policy-neutralScenario(1989prices and exchangerates). There is the risk that an investment program in the upper levels of this range would be unfinanceable. In order to meet the sector expansionrequirementswhile maintaining prudentberrowing limits, the Evaluationrecommendsthat a core investmentprogram totalling about Z$5.2 bn in 1990-2010be pursued that is restricted to high-priority projects; that favorablefinancingconditionsbe secured; and that private investmentbe mobilizedboth as a source of financingand for stimulatingsector development. CURRENCYEQUIVALENT CurrencyUnit = ZimbabweDollar (Z$) Z$l.- = US$0.43 US$ 1.- = Z$2.30 (as of March 31, 1990) ABBREVIATIONS AC BOOJBOT DC dwt GDP GWh kg km kv kw kWh I LOLP LPG LRMC mcf m3 MW MWh M.T. NPV TOE tpd tpy alternativecurrent build, own, operate/build,owna,operate, transfer direct current dead-weightton gross domesticproduct gigawatt-hour kilogram kilometer kilovolt kilowatt kilowatt-hour liter loss of load probability liquefiedpetroleumgas long-runmarginalcost thousandcubic feet cubic meter megawatt megawatt-hour metric ton net presentvalue ton of oil equivalent ton per day ton per year EnerFySource LiquidFuels GasolineI/ AviationGasoline Diesel Jet Fuel/Kerosene Z1 LiquefiedPetroleumGas Ethanol PbysicalUnit/TOE Density M.T.tTOE M.T.m3 1.05 1.03 1.03 1.02 1.03 1.11 0.73 0.71 0.83 0.79 0.52 Coaland Coke n.a. WankieHPSCoal WankieWC Coal 1.69 1.31 - 1.44 SengwaCoal 1.49 - 1.67 Coke 1.53 n.a. Biomass Charcoal Wood Bagasse 1.40 2.84 5.68 Electricity(MWh) 1.16 ECONOMICPARAMETERS ShadowExchangeRate DiscountRate LI 1.5timesOfficialExchangeRate 10% Gasolfneis referredto in Zanbabweas 'petrolI Kerosene is referredto in Zimbabweas mIIninaung Parqfin- n.a. ACRONYMS AFDB CAPC CIDA CPMZ CZI DOERD ECGD EDM ESKOM ESMAP GTZ HCB HPS IDC IFC KSE LONRHO MEWRD MFEPD NOCZIM NPA NRZ SADCC SIDA UNDP WCC ZESA ZESCO ZIMASCO ZISCO ZRA AfricanDevelopmentBank Central AfricanPower Corporation CanadianInternationalDevelopmentAuthority Companhiado Pipeline Mocambique- Zimbabwe Confederationof ZimbabweIndustry Departmentof EnergyResourcesand Development ExportCredit GuaranteeDepartment(UnitedKingdom) Electricidadede Mocambique ElectricitySupply Commission(SouthAfrica) EnergySector ManagementAssistanceProgram Gesellschaftfuer TechnischeZusammenarbeit Hidroelectricade CahoraBassa S.A.R.L. HwangePower Station IndustrialDevelopmentCorporationof Zimbabwe InternationalFinanceCorporation KaribaSouthExtension Londonand RhodesiaMining and Land CompanyLtd. Ministryof Energy, Water Resources,and Development Ministryof Finance, EconomicPlanning,and Development NationalOil Companyof Zimbabwe NationalPlanningAgency NationalRailwaysof Zimbabwe SouthernAfricaievelopment CoordinatingConference SwedishInternationalDevelopmentAuthority UnitedNations DevelopmentProgram WankieCoal Colliery ZimbabweElectricitySupply Authority ZambiaElectricitySupplyCompany ZimbabweAluminumand Steel Company ZimbabweIron and Steel Company ZambeziRiver Authority FISCAL YEAR July 1 to June 30 TABLEOF CONTENTS SUMMARYOF CONCLUSIONSAND RECOMMENDATIONS ..................... i I. INTRODUCrION ............................................... I Objectivesand Definitions........................................ 1 Scopeof the Evaluation ......................................... 2 U. ENERGYAND THE ECONOMY.................................... EconomicBackground .......................................... Positionof the Economy .................................... EconomicPerformance,1980-1990 ............................. Energy in the Economy ......................................... General .............................................. Energy-EconomyLinkages ................................. Intra-EnergySectorLinkages ................................ 4 4 4 5 9 9 ;1 12 m. ENERGYSECTORINSTfTUTIONSAND STRATEGIES .................... 13 13 13 14 15 16 16 16 22 23 IV. ENERGYRESOURCES,SUPPLY,AND DEMAND ....................... CurrentPosition ............................................. Energy Resources ....................................... Energy Supplies ........................................ Energy Conversion ...................................... EnergyDemand ........................................ Compositionand Growth ............................. Final EnergyConsumptionby Fuel Type .................... Consumptionby EconomicActivity ........................ EnergyDemandOutlook, 1990-2010 ................................ Overview ............................................ Electricity............................................ 26 26 26 27 27 28 28 29 31 32 32 32 InstitutionalFramework ........................................ Overview ............................................ Major Issues .......................................... Requirementsand Recommendations ........................... GovernmentEnergyObjectivesand Strategy .......................... General ............................................. Past Objectives,Strategies,and Main Projects ..................... RegionalCooperationOptions ............................... Requirementsand Recommendations ........................... Coal ........... LiquidFuels ............. 32 , 36 V. ENERGYDEMANDMANAGEMENT................................ EnergyPricing ........................................ Overview LiquidFuels ,............... ....... Electricity .... Coal .. Requirements andRecommendations General....... LiquidFuels ...... Electricity Coal 38 38 38 38 ,.,....... .. .. .... .. Non-Pricing Measuresto ImproveEnergyEfficiency........ .. ............ ScopeandImpediments....... ........ .. .................. Industry ... Transportation ......................................... PublicBuildings ................... ..................... Requirements andRecommendations ........... .. .............. PolicyLevel ........ ........ .. ................... OperationalLevel ................................ .. TheImpactof EnergyPricingActionon EnergyDemand,Balanceof Payments, andPublicFinances...................... VI. ENERGYSUBSECTORISSUES ................................... Eectricity................................................. Background ........................................... SupplyRequirements andOptions,1991-2010..................... 45 46 47 48 48 50 51 52 52 52 55 56 60 60 60 62 SupplyOptions.................................... Government Strategy..................................... SystemExpansionSimulation................................ Least-costProgramwithZambiaImportsto 2010 .............. Least-CostProgramwithNo ZambiaImportsafter 1999 .... SensidvityAnalysis...................................... RiskElements ......................................... ConclusionsandRecommendations ............................ Transmission andDistribution............................... MajorIssues ..................................... Requirements andRecommen.'ations...................... RuralElectrification..................................... MainIssues...................................... Requirements andRecommendations ...................... ElectricitySystemEfficiencyImprovements ....................... ScopeandOptions............................. 41 43 44 44 ...... 62 66 67 68 72 74 77 79 83 83 84 85 85 86 87 87 Requrementsand Recommendations Coal 88 91 91 93 94 .......... 95 96 ....................... ..... Background ................. Wankie CollieryCompany................. SENCOLCollieryCompany ................. Coal TransportIssues ............ InstitutionalIssues ....................................... Coal Conversion................................. PrincipalIssues .............. Requirementsand Recommendations ...................... Liquid Fuels . ............................................... Procurementand Storage .................................. ....................... StorageExpansionOptions .......... ...................... Feruka-HararePipelineProject ......... PetroleumRefining.15...................................... Ethanol ............................................. Benzol ............................................. Requirementsand Recommendations ........................... Procurementand Storage ........ ..................... Pipeline Project ............. ...................... PetroleumRefining ........... ...................... Ethanol ........................................ VII. ENVIRONMENTALIMPACTSOF ENERGYOPERATIONS................. Overview .......................................... .................................... Institutionaland PolicyIssues . Optionsto ImproveEnvironmentalManagement ......................... ...................... Requirementsand Recommendations .......... InstitutionalRequirements. Policy Requirements.115 OperationalRequirements.116 VII. INVESTMENTAND FINANCINGSTRATEGY,1990-2010.119 Scope and Compositionof Investment.119 Overview.119 SubsectoralComposition.119 Financingof Investment.121 Scope and Sources .......... MacroeconomicImplications.122 Core InvestmentProgram .123 Investmentand Financingunder RestrainedElectricityImports.125 Requirementsand Recommendations.126 Future Approachesto EnergyStrategyEvaluation.128 TechnicalAssistanceand Training.129 97 97 100 101 101 103 104 108 109 109 109 111 111 111 112 122... 113 114 114 114 121 TABLES I 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Energy SectorContributionto NationalAggregates,1988 ................... 10 Energy and Foreign ExchangeRequirements,1980; 1985; 1987-90and 1991 .. ..... 10 Primary EnergySuppliesand Final EnergyConsumption,1980; 1988 ........... 28 EnergyIndicators, 1980; 1988 ................. ................... 30 Increases In Consumptionof Coal, Liquid Fuels, and Electricity, 1981-1989 .. ..... 31 ProjectedEnergyDemand, 1995;2000; 2010 .. 33 ProjectedElectricityDemand, 1995; 2000; 2010 .......... .. ............. 34 ProjectedCoal Demand, 0995; 2000; 2010 ........... .. ............... 35 ProjectedLiquidFuels Demand, 1995; 200'); 2010 ....................... 37 PetroleumProductsPricing Structure,Harare, 1990-91..................... 39 Changesin PetroleumProduct Prices to Consumers,1,80-March 1991 .... ....... 41 ElectricityTariffs and their Ratiosto LRMC, 1988-90 ....... .. ............ 42 EstimatedLong-RunMarginalCostsof Coal .......... .. ............... 44 PotentialEnergyEnd-UseSavingsin Industry, Transport, and PublicBuildings,1989 ............. .. .................. 49 EnergyConsumptionin RailwayTransport, 1987-91 ........ .. ............ 51 ProjectedTax Revenuefrom LiquidFuels, 1991-95....................... 57 ProjectedEnergyImports, 1990; 1995;2000; 2010 ........ .. ............. 59 ZESA: InstalledCapacityand Sourcesof Electric Energy, FY 1988/89 ..... ...... 61 ZESA: ElectricityLine Data, 1990 ............... .................. 62 ProjectedElectricityCapacityand EnergyBalatrces,1990-2010 ......... . ... 69 Sensitivityof the ElectricitySupplyDevelopmentProgramto Loss-of-LoadProbabilityand BatokaIn-ServiceDates ....... ......... 77 Prices and TransportTariffs for Wankie and Sengwa,F.O.R. Kwekwe,1989-91 . .. 96 RefiningOptions- Major Indicators ............. .. .................. 107 ProjectedEnergyInvestment,1990-2010...... .... ................ 120 ProjectedEnergyInvestmentFinancing, 1990-2010- UnrestrainedElectricityImports . 124 Projected EnergyInvestment,1990-2010- RestrainedElectricityImports . .126 Projected EnergyInvestmentFinancing, 1990-2010- RestrainedElectricity . .127 ANNEXES 1 2 3 4 5 6 7 Summaryof Issues, Objectives,and RecommendedActions ...... .. .......... Conceptsand MethodologyUnderlyingthe IntegratedEnergyStrategy .... ....... Energy Balances, 1980; 1988 ..................................... ProjectedEnergy Balances, 1995;2000; 2010 ......... .. ............... Summaryof AssumptionsUsed for EnergyDemandForecasting ...... ......... ElectricityDemand,By ConsumingSector, 1980-89 .............. .1 PetroleumProductsImports, 1980-90. ................................ 131 137 143 145 154 ;61 I . 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Liquid Fuels Sales, By Product and ConsumingSector, 1980-90 ............... 163 ProjectedElectricityDemand, 1990-2010 ............................. 164 Projected Liquid Fuels Demand, 1990-2010............................ 165 ProjectedCoal Demand, 1990-2010................................. 166 Projected Coal Output, 1990-2010............................. 167 Energy Prices, 1980-90........................................ 168 EconomicSubsidieson EnergyConsumption,1989-90 ..................... 169 RecommendedRetailPrices for Liquid Fuels - Base Case/ Policy-ActiveScenario, 1990-2010. ......................... 170 ProjectedCost of PetroleumImports, 1990-2010......................... 172 Preparationof a NationalEnergy EfficiencyProgram for Zimbabwe- Task Description.173 177 Investmentin the Coal Subsector, 1980-89............................ Investmentin the Liquid Fuels Subsector, 1980-89 ....................... 178 Elecricity SupplyOptions, 1991-2010- UnrestrainedElectricityImports......... 179 ElectricitySupplyOptions, 1991-2010- RestrainedElectricityImports .... ....... 199 Methodologyfor ElectricitySupplyPlanning ........................... 210 Characteristicsof ZimbabweCoals ................................ . 216 The Gasificationof Coal - Blue Water Gas Option ....................... 217 220 CoalbedMethanePotentialin Zimbabwe .............................. Optionsfor Expansionof Liquid Fuels Storage .......................... 223 230 EmissionControlat Coal-firedPower Plants ........................... .......................... 232 NaphthaReformingOptions ............ Health Effectsof Pollutantsfrom Motor Vehicles ........................ 242 ProjectedEnergy SectorInvestment,1990-2010 ......................... 243 ProjectedInvestmentfor the Coal Subsector, 1990-2010 .................... 246 ProjectedInvestmentfor the Liquid Fuels Subsector, 1990-2010 ............... 249 ProjectedEnergySector Investmentand Financing, 1990-2010 ................ 252 Energy SectorSummary: Trend Case ............................... 255 EnergySector Summary:ProjectedEnergy-Sectorand Financing Requirements,EnergySector Debt, and Effectson the Balance of Payments- RestrainedElectricityImports ...................... 261 ProjectedOperatingSurplusesof EnergySectorEnterprises, 1990-2010 .... ...... 271 ProjectedGovernmentRevenuefrom Taxeson Liquid Fuels, 1990-2010.... ...... 272 ProjectedNOCZIMRevenuefrom Liquid Fuels, 1990-2010 ................. 273 GovernmentCommentson Draft Final Report .......................... 274 ESMAPReply to GovernmentCommentcon Draft Final Report ............... 279 GRAPHICS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 PercentageDistributionof GDP, by Industryof Origin ....... Energy Supplyand Uses, 1988 .................... Final EnergyConsumptionby Sector, 1988.284 Electr1citySupply, 1980-90.285 Liquid Fuels Imports, 1980-89. AverageElectricityPrices, 1980-90.287 AverageCoal Prices, 1980-90.288 Year-end Prices for LiquidFuels, 1980-90............................ Liquid Fuels Cost Build-Up,October 1990;March 1991.290 LiquidFuels Price Build-Up,October 1990;March 1991.291 ElectricityDemandProjections,1990-2010.292 Coal Output Projections, 1990-2010................................. Coal DemandProjections,1990-2010.294 LiquidFuel DemandProjections, 1990-2010.295 MAPS IBRD22659 IBRD22589 IBRD21091 Zimbabwe- Power SectorInfrastructure Zimbabwe- CoalOccurrencesand Infrastructure Zimbabwe- PetroleumSectorInfrastructure .............. ................ 282 283 2 , 289 293 SUMMARYOF CONCLUSIONSAND RECOMMENDATIONS Bic Issues and ibjectivesof Energy SectorDevelolment t. Despitea considerableenergy resource endowmentconsistingof biomass, coal, and hydropower,Zimbabwe'senergypositionhasbecomecriticalbecauseof deterioratingproductivecapacity in the electricitysubsectorand deforestationin the communallands wherethe bulk of the rural population lives. In line withthe relativelyadvancedeconomicdevelopment,biomassaccountsfor only 43% of final energy consumption(which is low in the SubsaharanAfrican context), whereas the share of modern energysources is elevated(coal and coke, 25%; liquid fuels, 17%; electricity 15%). Supplyingenergy to the Zimbabweaneconomythus is capital-intensiveand costly, regardlessthat energy consumption throughoutthe 1980shas grownrelativelyslowly (2.2% p.a. in 1981-88),in line with low GDP growth (about3% p.a. over the sameperiod). Energydevelopmentover the mediumto longerterm will involve investmentdecisionsof extremecomplexity,given the magnitudeof required investmentsand the tradeoffs between domesticoutput and importson the one hand, and the interlinks betweenthe electricity, coal, and liquid fuels subsectors,on the other. 2. The principalchallengesfacedby the policymakersare, first, to providesufficientenergy at least cost and adequate reliability for the growing economy; and second, to reconcile energy productionand use with a sustainableenvironment. Meetingtheseobjectiveswill dependcriticallyin the short term, on energy pricing and non-pricingmeasuresto improvethe efficiencyof energy supplies, allocation,and end-use, rehabilitationof electricitygeneratingcapacity,and overcominginadequaciesin energytransportand transmission/distribution; and over the mediumto longerterm, on providingenergy investmentsand importsat least-costwithinthe frameworkof balancedmacroeconomicdevelopment,and strengthening the institutional and legal/regulatory framework so as to improve the planning, implementation,and monitoringof energyactivities. The policymakersshouldgive high priorityto the following: Over the short term: (a) Increaseprices of electricityand maintainprices of petroleumproducts in real terms so that they meet the requirementsof the operatingentitiesto cover financial costs and to generatesurplusesfor rehabilitationand expansion; (b) Secure electricitysuppliesthrough load management,continuedimports from Zambia, the upgrading at Kariba South and Hwange, and the rehabilitationof the municipal thermalstations; (c) Reducecostsof procuringpetroleumproductsthroughimprovedcontractualand logistical arrangements; Over the mediumterm: - Enr ii - (d) Set prices of electricity,liquid fuels, and coal based on their economiccosts, so as to attain a sustainedimprovementin the efficiencyof energy production,transformation, and end-use; (e) Ensure least-cost and reliable supply of electricity, through judicious combinationof domesticcapacityexpansionand imports; (f) Reinforceand extendthe electricitytransmissionand distributionsystemwhereeconomic; (g) Enhance the efficiency and reliability of liquid fuels supplies through improved transportationand least-costexpansionof storage; (h) Optimizecoal miningin line with future demand, especiallyfor electricitygeneration; (i) Improve the efficiency of energy production, transformation, and end-use through market-relatedincentives,information,and regulatorymeasures,in additionto economic pricing of energy; (i) Ensure environmentallysustainable energy developmentthrough appropriate energy demandmanagementand a strengthenedlegal/regulatoryand institutionalframework;and (k) Reinforce the sectoral institutions and operating agencies in their planning, inmplementation, and monitoringfunctionsto achievemore effectivesector management. Suply Sta 3. The Governmenttraditionallyhas exerted a strong influenceon energy development trough direct ownership,controlover energyprices, and large-scaleinvestments. The latterwere aimed at maximizingself-sufficiencywhilecost considerationsreceivedcomparativelyless attention. As for the future, the Governmentis consideringproposalsto investin Kariba South Extension(KSE), domestic petroleumrefining,and, possibly,coal-basedproductionof ammoniaand liquidfuels. ZESA's planning -criteriafor the electricitysystemare that generatingcapacityinstalledin Zimbabweshouldat least equal maximumdemand,and that importsought to be limitedto 25% of total consumption.However,pursuing domesticoptionsthat are not least-costsimplybecausetheyreducedependenceon foreignenergysupplies would adverselyaffect investmentsin other economicsectors and becauseof high operationalcosts in foreign exchangeand foreigndebt servicing,the balanceof paymentsas well. On the other hand, the Governmentis interestedin binationalor regional schemesthat wouldreduce the costs and increasethe reliabilityof egy suppliesto Zimbabwe. Amongtheschemesare continuedimportsof electricityfrom Zambia, importationof up to 500 MW of electricityfrom the CahoraBassahydroelectricscheme(HCB) in Mozambique,wheelingZambianelectricityacross Zimbabweto Botswanaand/or power from HCB through Zimbabweto South Africa, poolingthe processingof petroleumproducts in existing refineries in the SADCCregion, continuingif limitedcoal exports to the SADCCregion, and, possibly, the use - jjj - of natural gas from Mozwnbiqueor Tanaia as petrochemicalfeedstock. 'Te selectedstrategyshould be that which minimizesthe cost of energy suppliesat an acceptablelevel of reliability. Ewa Dem Managemnt 4. Comparedto investment,demandmanagementthroughefficiencypricingandnon-pricing measuresto improveenergyefficiencyhavereceivedminoremphasis. This has resulted in inadequacies in absoluteand relativeenergypricesand inefficienciesin energyuse. While increasesin energydemand have been relatively moderate, this has been due to either slow increases in consumingequipment vehicles)or slow connectionof consumers(electricity). As regards liquid fuels, (a) diesel and kerosene are priced at less than 60% of the price of gasoline; (b) no allowanceis made for any overvaluationof the nationalcurrency;and (c) NOCZIM's sellingprices do no; cover its costs plus taxes. Some minor products(kerosene,aviationgasoline)continueto be subsidizedevenat the official exchangerate. The retail price of diesel would need to be raisedby about 50% and that of kerosene,by about 165%from their April 1991levelsto reflectthe internationalprice relationshipsvis-a-visthe retailprice of gasoline. Consumerprices needto be adjustedin line withthe movementsof internationalpetroleumprices as well as exchange rate and domestic cost movements. Relativeprices need to be more closely alignedto intenational prices. The consumerprice of diesel should at least be at 80% that of gasolineblend, and the price of keroseneshould be set at 90% the price of diesel. Pricing of liquid fuels should be used more activelyto cover road user costs and mobilizeadditionalfiscal revenue. Higher taxes on diesel would also contributeto improvingthe equity of road user charges. 5. Eletriciq tariffs are about one-third below their long-run marginal costs (LRMC). There is extensive cross-subsidizationof residential and preferential industrial consumers by other consumers. Inadequatetariffs compound ZESA's financial weakness so that its net revenue has contributedlittle to financinginvestmentand has been negativein recent years. Electricitytariffs should be raised as soon as possible towardstheir LRMC levels so as to (a) cover economiccosts and reflect cost differentis for consumergroups; and (b) generatesufficientrevenuefor ZESA to fund its operating costs, workingcapital, debt service, and a major share of the local costs of its investment. This entails tariff increasesof 35% in mid-1991and beyondthat, of 5% p.a. in real terms over the next 10 years or so. The Governmentshould allow tariffs to be regularly and automaticallyadjusted for inflationand unavoidablecost increases. To avoidthehigh cost of meutingpeakdemandand to improvethe reliability of supply, greater use should be made of peak/off-peakpricing and of load management. A tariff smoothingand project developmentfund should be consideredto avoid excessive tariff swings and facilitatethe fundingof electricityinvestment. To soften the impactof tariff increases, a lifelinetariff for small-volume/low-income consumerscould be introduced. 6. Coal gicing accordingto the Wankie agreementis based on a cost-plusformula which guarantees a reurn on - historical - assets but effectively insulatesthe Wankie Colliery Company (WCC) from cost pressurf-. The Agreementshouldbe modifiedto relateprices to domesticconsumers to LRMC, adjustedto cover WCC's financialcostsand debtservice. Prices of exportedcoal need to be set based on inernational prices of competingcoals. HwangePower Station(HPS) coal up to a certain output level is a by-productof coking (WC) coal. Therefore, up to that level, all overheads and - iv - overburdenremovalcosts should be chargedto the higher-valueWC coal, and prices of HPS coal be relted to the margial cost of processingand delivery to the power station, estimatedto be presently about Z$31M.T.. Once the required output of HPS co0l exceeds that volume, its mining costs will increase:thus, HPS coal in excess of the volumes mined as by-productshould be costed based on its higherLRMC. Prices for different types of coal thus shouldbe set in line with their LRMC, but they also should meet the requirementsfor regulatingthe return to WCC, giventhat this entity is essentially a monopoly. Mining costs at Sengw fur a full-fledgedoperationwould be high, reflectingthe effects of equipmentunder-utilizationas a result of low forecastdemand. Therefore, its prices shouldbe based on the - lower - LRMCof a contractoroperation. Impact of Energy Prices on Future Demand. According to the Evaluation team's 7. projections,economicpricing of energywould reduce demandgrowth for electricityduring 1990-2010 from 5.1% p.a. to 3.9% p.a. and for liquidfuels from 4.6% to 4.1% p.a., resultingin savingsof 4,950 Gwh and 0.2 mn M.T., (worth about 1989US$40mn) respectively,in the terminal year. More active energypricingpolicies,through highertaxation,would increaserevenuefrom petroleumtaxesby nearly 20% during 1990-95whereasover the sameperiod,petroleumproductsimportswoulddeclineby around 10%. Non-PricingMeasuresto ImproveEnergyEfficiency. Traditionally,energyuse has been 8. inefficient because of (a) low prices over extended periods; (b) use of outmoded equipment and technologies and below-standardrepair and maintenance; (c) lack of awareness of energy saving opportunities;and (d) the complexityof energyefficiencyprojects. In addition,barriers to competition and to structural change, and the lack of Governmentpolicies and of a focal institutionhave adversely affectedany efforts to improveenergyefficiency. In industry, the specificenergy use may be 40-80% the absence of a national masterplan has impeded the above international norms. In Io=r, coordinationofenergyefficiencymeasures. In the publicbuildingssector, weaknessesin regulationhave impededeconomicenergyuse. Restructuringthe majorproductivesectors in itself wouldlead to major energyefficiencyimprovementsand to concomitantsavings in importsand investments. Initially,the emphasisshouldbe on low-costimprovements(whichmightmobilizeas much as one-halfof the energy savingspotential)and on institutionalsupport includingtechnicalassistanceas part of a NationalEnergy EfficiencyProgram. Such a programshouldbe carried out in close cooperationwith the private sector especiallythe Confederationof ZimbabweIndustry, but the individualenergy users themselvesshould be responsiblefor preparingand implementingthe relevant aeasures. Impedimentsto financingenergy efficiencyprojects should be removed. The feasibilityof energy service companiesto participatein funding of energy efficiencyprojects should be evaluated. Specificmeasures may include (a) regular energy audits, (b) equipmenttesting and labelling, (c) obligatory maintenance,and (d) incorporating energyefficiencystandardsintotechnicalcodes. In transport,improvedroad maintenancewouldenhance both fuel efficiencyand road safetyand couldbe financedfrom higher fuel taxes. Governmentvehicles shouldbe regularlycheckedfor maintenanceand fuel consumption.The scope for developingback-haul freighttraffic shouldbe studiedand ways foundof promotingit. However,the proposedmeasuresneed to be carefilly evaluatedto ensure that they are cost-effectiveand that marketdistortionsare avoided. v - EStigtySubseX 9. Eectriciq 5"31. Themedium-to longer-term strategyfordeveloping electricity supplies involvesbasic decisionson hydro vs. coal, capacityvs. energyprojects,and nationalvs. regional supplies. For optimizingthe objectivesof least-costsuppliesand supply reliability,important considerations relatedto alternativeoptionsneedto be balanced,i.e. (a) investment andoperatingcosts; (b) the technicalreliabilityof the system;(c) the technical,economic/financial, and institutional risks, includingthose inherentin increasedimports;(d) ZESA's managerialand operationalmaintenance capabilities; and(e)the availability of financing.Thekeyquestionsconcerningthefuturesupplystrategy andthus,the sequenceof thesupplyprogram,are whetherto emphasizeindigenousgenerationor to rely on importsfromZambiaand Mozambique beyondthe presentZESAplanningcriterion,andwhetherthe presentplanningstandardfor generationreliabilityof fivehrslyearis too stringentto be economically justified. The Ministryof Energyand WaterResourceDevelopment giveshighpriorityto the Kariba SouthExtension(KSE)schemeto provide300 MWadditionalcapacityby 1998(butno additionalfirm energy)buthas agreedthatZESAfrom1995onwardsshouldacquireupto 500MWof firmenergyfrom CahoraBassa(HCB),for whicha newtransmission line is needed.The 800 MWBatokaI hydropower schemeis the lynch-pinof the longer-termexpansion.Thisschemecouldbe completedby around2002 at the earliest,althoughcompletionby around2005mightbe a morerealisticestimate. Completionat thelatterdatealsowouldproducesavings- in NPVterms- in investmentcostsandwouldbe consistent withmeetingelectricitydemandunder a relaxationof the LOLPstandardfrom five to 20 hours/year. From a regionalperspective,it mightbe least-costover the longerterm to developthe northbank at CahoraBassaprior to otherhydroschemes,or to tap the largesurplusof hydrocapacityavailablein Zaire. 10. Accordingto the Evaluationteam'sprojections,a capacitydeficitcouldemergeas early as 1992-93and an energyshortfallby 1995-96.Overcoming suchshortfallsis the criticalrequirement fortheelectricityexpansion sequence.In theshortto mediumterm,the recommended strategycomprises the upgradingof Hwangeandthe rehabilitation of the municipalthermalstations,the upgradingof the KaribaSouth station,and the HCB interconnection.The longer-termexpansionprogramdepends criticallyon the periodover whichelectricityimportsfrom Zambiaare availableon a firm basis. Assumning that electricityfrom Zambiais availablethrough2010 and applyinga strict loss-of-load probability(LOLP) criterionof five hrs/year, a detailedsimulationanalysis of various system development optionsindicatesthat (a) theHCBInterconnection providesthe lowest-cost sourceof power andenergyfrom 1995onwards,andshouldthereforebe commissioned as earlyas possible,subjectto guaranteeingthe securityof the line; (b) Batokais not requiredbefore 2002, its earliest possible commissioning date; and (c) for providingpeakingcapacityin the years immediatelyprior to the completionof Batoka,the inclusionof KSEwouldbe morecostlythangas turbines. However,in the caseof electricityfrom Zambianotbeingavailablebeyond1999,KSE in the year 2000wouldbe part of the least-costexpansionprogram,and wouldbe lesser-costthan gas turbines. If KSE were to be commissioned around1998,its principalrole wouldbe to providecapacityback-upfor two additional years. This, however,couldbe moreeconomically attainedthroughintensified loadmanagement which ZESAalreadyhas withits mainindustrialcustomers.Therewouldbe no firmenergybenefitsattributable to KSEbeforeBatokacomeson stream,althoughsomecapacitybenefitsmayflowfromit. The riskthat - vi - Batolamay be delayed beyondits envisagedcommissioningdate of 2002 wouldfurther diminishKSE's significance,makingit necessarythat an energyproject shouldbe held in reserve. If the LOLP criterion were to be relaxedto 20 hrsJyear,new capacityto followHCB wouldnot be requiredbefore2000. The Upper Zambezi scheme would provide only relatively limited capacity and energy output and is environmentallycontroversial,which coulddelayits implementation.A solutionto these complexIssues mayhave to await firmer informationon the completiondate of lBatokaand the availabilityof electricity from Zambiaas well as on the deploymentof future electricitydemand. 11. Given the high costs of investmentsover the 1991-2010period, the Evaluation team considers it crucial that the Governmentadopts the least-cost program to meeting future electricity requirements. This program should be based on (a) policy-activedemand management through appropriatepricing and non-pricingmeasures;(b) a LOLP of 20 hrslyear as the reliabilitystandardfor planningsystem development;and (c) a plantingprogramthat meetselectricitysupply requirementsin the short term through the upgradingof Kariba South, rehabilitationof Hwangeand of the municipal thermalplants, continuationof electricityimportsfrom Zambia, and active load management;and over the medium to longer term, through the HCB Interconnectionby 1995 and supplies from HCB until Batoka is commissioned,continuedimports from Zambia, and Batoka I by 2005 at the latest. The Govermnentshould give high priority to attaiuingan agreementwith Zambia on the Batoka project as soonas feasible. The inclusionof gas turbinesshouldbe reviewedin the mid-1990sto confirmtheir need in the light of then updateddemandprojections. Any additionaluse of distillatefuels for gas turbines either for capacityor for peak period energywouldbe small and would probablynot exceed 70,000 me (1989US$1.5mn)/year. Hwangem probablywouldnot be requiredbefore2010. The net presentvalue of the cost savingsover a programbased on unmanageddemandgrowth and a reliabilitystandardof five hrs/year would total 1989 Z$674 mn for the 1990-2010period. Nevertheless,ZESA's generation expansion program is bound to exert considerable claims on the entity's finances and project implementationcapabilities,as well as on the availabilityof foreignexchangeto the rest of the economy, especiallyif KSEwere to be includedin the program(whichwouldinvo'vepursuingthree majorprojects more or less simultaneously). 12. Transmissionand Distribution. For the consumersto benefit from any strengtening of the electricitysupply position,the transmissionand distributionsystemsneed to be extended and their reliability improved. The common transmission and substation network is in urgent need of reinforcement,upgrading,and extension,but projectsneedto be carefullyprioritized. Shortlyafter 1993, new 330 kV lines need to be constructedto form part of a future ring around Harare and to supply increased transmission capacity to the Midlands industrial area. At the subtransmission level, considerabieupgrading of the existing system as well as expansionare needed. In Harare, further developmentneeds to be dove-tailedwith the expansionof the 132 kV system to cope with anticipated load growth. Reinforcementof the 33 kV systemis neededin manyareas. In the longerrun, the system voltagesof 66 and 88 kV commonlyused shouldbe replacedby 132 kV voltage, which would provide standardizationadvantages, relatively low-cost upgrading, and considerableloss reduction. At the distributionlevel, ZESA plans to tackle the back-logof connectionsestimatedat 50,000 nation-wideat the rate of 10,000-12,000p.a. over the next five years. Beforethe investmentprogram is finalized, detailed electricity demand forecasts for the areas to be supplied need to be prepared and regularly - vii - updated. Distributionmasterplans for the Harre and Bulawayoareas are especiallyimportantso that additionalconnectionsare carried out systematically. Cost-effectiveconstructionmethods should be applied for transmissionand distributionworks. 13. Rural Electrification. In Zimbabwe, mral elecrification has been designedto act as a catalyst for economic developmentand improve the quality of life in rural areas. However, the dispersionand relativelylow incomesof the mral populationrenders mral electrificationa high-costand slowprocess,but the economicsof theseschemestend to improveas additionalconsumersare connected. The Governmentattachesimportanceto continuingthis program. Funding is expectedto be obtained from AFDB, Spain, and Scandinaviandonors to continuethe program. Internal problems related to financingare in the process of being resolvedwith a view to the Governmentpassingon external funds obtained at low interestrates whereas ZESA absorbsthe maintenancecosts. Future schemesshould be basedon a clear rankingof economicprioritiesand on evaluatingalternativesto extendingthe electricity grid for the areas under consideration, including local generation and energy sources other than electricity. Cross-subsidizationof rural by urban consumerswill perhaps also in future be neededbut should be limited to capital costs of the relevant schemes. Blanket subsidizationto large areas and consumergroupsshouldbe avoided. 'he economicsof rural electrificationshouldbe improvedthrough applyingcost-effectiveconstructionstandards,increasingthe participationof local residentsin works and administration,and promotingthe productiveuse of electricityin small businesses. Optionsshould be evaluatedto increase the number of consumersto be connectedat early stages through term payment schemesfor connectionand equipmentpurchases. ZESA needs to strengthenthe coordinationwith the other instiutions relevantfor rural electrification. 14. Electrical Efficiency. While transmissionand distribution losses are relatively low, additionalpotential exists for reducingnon-technicallosses through dealing with electricitytheft more vigorously, as is planned by ZESA. The scope for improving ZESA's capabilitiesfor materials procurementand load management,and for direct measuresto economizeelectricity consumptionin major end-usessuch as for motivepower and lightingshouldbe fully utilized, in view of its importance for makingthe least-costgenerationexpansionfeasible. To be successful,direct meisuresaimed at more efficientelectricityend-useneed to be urgentlycomplementedby appropriateelectricitypricing, as well as legislativeand regulatorymeasures,technicalassistance,and, possibly,fiscal and financialincentives to facilitatethe necessaryinvestments. C:oalSubsector 15. Aggregate demand for coal will be largely determined by requirementsfor thermal electricitygeneration. At WCC, Zimbabwe's main coal producer, the issues are primarilyrelated to market prospects for HPS coal, which is mined together with WC coal. The principal and complex planningproblemover the mediumto longerterm is to achievethe outputmix of HPS and WC coals as deternnuedby the HPS coal requirementsfor electricitygeneration,whileminimizingthe combinedcosts of coal miningand electricitysupplies. The developmentstrategyfor Wankiethus dependson the scope for optimizingcoal miningon the one hand and electricitygeneration,on the other. Acquiringadditional hydro electricityfrom HCBand later, Batoka,wouldconsiderablyreducethermalpower generationand - viii the associatedHPS coal requirements. Since WC coal output has to be maintainedor even increased irrespectiveof HPS coal demand, significantvolumes of HPS coal would have to be discarded as overburden,adverselyaffectingWCC's economicviability. In contrast,expandingelectricitygeneratioh at the existingHwange station or constructingHwangeIII would increase requirementsfor HPS coal, which wouldra:se its LRMC. IncreasedHPS coal requirementsfor power generationeventuallywould make it necessaryto open a second surface mineto provideoperationalflexibility. The environmental implicationsof any increase in miningWC coal have to be consideredas well since this - under the scenarioof decliningHPS coal demand- would increasethe volumesof HPS coal as overburdenthat needs to be safelydisposed. As part of an optimalstrategy, the output of the undergroundmine (which producesWC coal only) shouldbe maintainedat its present level and changesin demand for HPS coal be met through varyingthe outputfrom the surface mines. The long-termimpactof the recommended least-costelectricityinvestmentprogramon WCC's surfacecoaloperationsshouldbe evaluatedand a plan preparedfor adjustingits productionand investmentstrategy, based on flexiblemine openings/closings. If the cost of these adjustmentsis substantial, the electricity investmentprogram might need to be reoptimized. At the new mine at Seabecauseof market limitations,full-timeopetationis not likely to be justified so that contractorsshould be engagedon a campaignbasis. A sustainedimprovementin A tranXspgrtation can only be achievedthrough rehabilitatingthe National Railways of Zimbabwe (RZ), which is in progress as part of a World Bank financedproject. The eliminationin early 1990 of subsidiesand continuedtariff increasesfor coal transportshould improve NRZ's financialposition. 16. Coal Conversion. Given the lack of known hydrocarbonresources in Zimbabwe, the Government is considering to use coal as feedstock for the production of ammonia replacing electrolyticallyproducedhydrogen,and of liquidfuels. However,the productioncostsof ammoniafrom coal are likely to be about 1.5 times as high as its import costs, in part because the limited size of tne domesticmarket predeterminesa small-sized,uneconomicoperation, even though associatedelectricity savings in the order of 40 MW would reduce somewhatthe requirementsfor expandingthe electricity generating capacity. Blue water gas generators may be a potentiallyfeasible option for producing hydrogenas feedstockfor ammonia. Surpluscokecouldbe used at relativelylow cost and the equipment requiredfor this optioncouldprobablybe locallyproduced,but the need for high-purityfeedstockgases may imposetechnical and economicconstraints. Coal liquefactioninvolvescomplextechnologiesand very high investmentcosts. Productioncosts are estimatedto be in the range of US$60-90/Bof crude oil equivalent, which would make such schemes uneconomicat current and projected international petroleumprices. By-productswouldnot improvethe economicssufficientlyto make coal liquefaction viable. The Evaluationteam recommendsthat (a) a detailedstudy on the feasibilityof the blue water gas schemebe carried out, and (b) no further preinvestmentschemeson coal liquefactionbe undertakenat the presenttime but that the situationbe periodicallyreviewedin the light of future energy marketsand technologicaldevelopments. Liguid Fuels 17. Prcurement and Storage. Given Zimbabwe's lar4-locked location, relatively small volumesshipped, and deficienciesfor overlandtransport, the procurementcosts of petroleumproducts have been high, equivalentto about25% of supplycosts CIF Feruka, at internationalprices prevailing - ix - up to mid-1990. The main need at present is to continueto supportthe Beiraport improvementsand the securityof the Beirasupplyroute, improveoperationalefficiency,and obtaina reductionin the port and pipdine charges in Mozambique. Within Zimbabwe, msures to improve the supply eonomics and securityshould focus on a reductionof transportcosts and a judicious increase in storage capacityand stratic reservesbased on an evaluationof the risks to be protectedagainstand of feasible alternatives to epading storage and stocks, such as additionalsupply routes and contingencyrationing programs. In particular, the Government'splans to increasestrategicreservesto six monthsof suppliesand to build undergroundstoragewould entail additionalcosts totallingnearly 1989Z$530 mn (in NPV terms) for the 1990-2010period over lesser-costsolutions, such as three snonthsof supplies and above-ground storage. The Evaluationteam recommendsthat the lesser-costoption be chosen. Some researchshould be carried out on the productspecificationswith a view to identifyingpossiblesavings. 18. Feruka-HararePipeline. Highaost and low reliabilityof rail and road transporthavebeen major impedimentsfor supplying petroleumproducts to the centers of consumption. NOCZIM has decidedto construct and operate a pipelineto transportpetroleumproducts to Harare, in joint venture with LONHRO. External loans have been committedby IFC and other foreign lenders, totallingUS$ 50.0 mn and equivalentto 75% of projectcosts. Pipelinetransport is moreeconomicthan the combined road/rail transport. It is also more secure, involvingless productloss, fewer operationalproblems,and has fewer adverse impactson the enviromaent. Even with the pipeline in place, the rail system will remainthe optimumtransportmodefor pointssouth and west of Harare, and road transportwill continue to supply areas tributary to railheads. Cost savings on the pipeline project should be applied to the feasibleextent, and operationsshould be properly regulated,so as to avoidany potentialfor conflictof interest on LONRHO's part. In the meantime, NOCZIM should aim at obtaining lower tariffs for petroleumproducts from NRZ. 19. PetroleumRefin . Mostoptionsto recommissionthe existing refinery entail (a) high investmentcosts in the order of 1989Z$lSOmn; (b) difficultiesin balancingthe refmery's productslate with domesticdemand; (c) dependenceon very light crudes which in future may be subject to supply shortagesand disproportionatelyhigherprice increases; (d) a need for hydrocrackingto reduce fuel oil and petroleum coke surpluses or alternatively,(e) a need for finding fuel oil markets, e.g. through substitutingfuel oil for coaldomesticallyand/orreexportingit at distressprices. Refiningeconomicsalso are very sensitiveto unexpectedcost increases. In addition, refining operations in Zimbabwe would require expandingthe Port of Beira's capacityto handle larger (i.e. around 60,000 dwt) ships, which is not assured. A new refinery would requirea considerablyhigher investment(1989Z$350-450mn) and would face the same constraintsas a recommissionedrefinery. Taking into considerationthe technical risks and requirementsfor expatriatestaff at least in initialphases, refiningin Zimbabweappearsto be neither more economicnor more secure than importingpetroleumproducts, the possibilityof using byproductsfor chemicalprocessesnotwithstanding.Importingpetroleumproducts, therefore, is and is likely to remain the least-cost supply option. As an alternativeto operating the entire refinery, its reformingunit only couldbe recommissionedat comparativelylow cost for naphthatreatmentto produce gasolineand LPG, with associatedsavingsin LPG transport. The Evaluationteam recommendsthat this option be assessedin more detail. - x - 20. Eahno. The Government's objectiveto increaseethanol'ssharein petrolblendto 20% wouldmakeit necessaryto naly doublethe capacityof the existingplant. Whilethe productiore of ethanolis ecoomicallyviablefromsurplusmolasses(whoseoppornity costis closeto zero), it is not viablefromsugarcaneat presentandprojectedinternational sugarandpetroleumprices,andits costsof productionfrom purchasedmolassesare very close to that of importedgasolineeven under due consideration of shadow-priced importsand sunk costsof ethanolproductioninstallations.The use of maizecrop residuescould providean alternativeraw materialsourcewhich, however,may entail significantinvestmentrequirementsand productioncosts abovethe currentimportcost of gasoline. Ethanolproductionshouldbe maintainedandexpandedonlyas far as this is competitivewithgasoline imports,but ethanol'senvironmental valueas a cleanfuel shouldbe takeninto considerationas well. Shoulda stagnationor reductionof ethanolproductioncreatesupplyshortages,its admixturewith gasolineshouldbe limitedto thosegeographicareascloseto ethanolproduction. Energy-Environmnental Linkages 21. Zimbabwe'smostseriousenvironmental problemis relaed to deforestation, attributable to heavyfuelwooddemandand agriculturalactivities. Pollutionlevelscountry-wide are still relatively low buthigh sulphuremissionsoccurat Hwangethroughcoalminingand coal-based powergeneration and at Sable Chemicalsas a result of ammoniaproduction. Becauseof the age and inadequate maintenance of the transportfleet,thereareexcessiveif localizedemissionswhichare likelyto become moreseriouswithfuturetransportgrowthandurbanization.TheGovernment has madethe maintenance of a sustainablebalancebetweenenvironment andsocio-economic development a majorobjectiveof its ongoingFive-YearDevelopment Plan. To achievethis, environmental planningandpoliciesneedto be improved.Environmental impactassessments shouldbe mademandatory on criticalregionsandon major energyprojects,especiallythe Sengwacoa9lminingoperationsand, potentially,the Upper Zambezi hydropower scheme.A well-coordinated emissionmonitoringandcontrolprogramforthemostseriously affectedareas shouldbe initiated. Energy installationsshouldbe equippedwith pollutioncontrol equipmentto theeconomically feasibledegree. However,thecostsofenvironmental abatementespecially costsin foreignexchangeshouldbear a reasonablerelationshipwiththe benefitsof eliminated/reduced environmenaldamage,and least-costsolutionsto dealingwith environmentalproblemsshouldbe identified.Anyexpansion of ethanolproductionneedsto be carefullycontrolledbecauseof effluentsand the impacton localwaterrequirements.The Ministryof NaturalResourcesandEnvironment shouldbe givencomprehensive regulatoryandmonitoringresponsibilities.Localgovernmenalauthoritiesshould shareenvironmental protectionresponsibilities. Environmental expertiseshouldbe developedat DOERD, otherenergy-related institutions, andthe NationalPlanningAgency.Environmental coststo the feasible extentshouldbe incorporated intothe pricesof thedifferentformsof energy,andbe properlyconsidered in evaluatingenergyprojects. Usercharges,fees, andfinesshouldbe used for fundingenergy-related environmental investment. Imestment ad TechnicalAssistanceRequirements 22. TheEvaluationteamproject that investmentrequirementsin the electricity,coal, and liquidfuelssubsectorsover the 1990-2010periodcouldtotalZ$7.2bn in the BaseCase/Policy-active - xi - Scenarioand Z$7.6 bn in the Trend Case, but Z$9.S bn in the Base Case/Policy-neutralScenario(1989 prie and exchangerates).11 About Z$1.7-2.3 bn of projeced investmentwould already materialize during 1990-93,dependingon the sc io chosen. The electricity subsector is likely to accountfor nearly 85% of energy investment. Electricity-relatedinvestmentrequirementswouldbe 1989Z$150mnu higher in case of Zambia suppliesterminatingin 1999than in case of their continuationthrough 2010. Maintainingthe productive capacity of the coal subsector will require major refurbishment of the processing and coking plants and of loading facilities, mechanizationof underground mining, and, possibly,major investmentfor additionaloverburdenstrippingplant. Improvingthe supplyand storage of liquid fuels may entailexpenditureof Z$100-150mn, withoutconsideringany recommissioningof the petroleum refinery or expansionof ethanol production. Expenditureson energy efficiency and on environment-relatedprojectsneed to be increasedabovetheir currentnegligiblelevelsto at leastZ$15-20 mn p.a. to address inadequaciesin energy efficiencyand in energy-relatedenvironmentalmanagement. 23. An investmentprogram of this size puts considerablestrain on public finances, the balanceof payments,and externaldebt. It will also tax the implementationcapacityof the responsible institutions,espec.allyin the electricitysubsector. A programin the upper levels of the indicatedrange is not financeableand thus, infeasible. Given the large scale, complexnature, and long gestationof most energyprojects, it is imperativethat a least-costinvestment/importsequencebe followedthat provides adequatereliabilityof energysupplies,and uneconomicschemesbe avoidedthat wouldpreemptresources required in other priorityareas in the economy. It is therefore recommendedthat the Governmentadopt a core investmentprogram comprisingonly projects that are absolutelynecessaryand totalling about Z$5.2 bn during 1990-2010. Sufficientflexibilityneeds to be incorporatedinto this program so that additionalhigh-priorityprojects can be included,should additionalfunding become available and the Implementingcapacity of the operating agencies improves. The energy supply strategy should be regularly reappraised and adjusted, in view of the high degree of uncertaintysurrounding important decisionparamneters. Projected Investment in the Energy Sector, Total1990-2010 (1989Z$ billions) Trend ---Base Case--------Case Policy-NeutralPolicy-Active Core Scenario Scenario Investment LMa L-6 9.5 La 5 2 Electricity Coat Liquid Fuels Energy Efficiency en Envirorment 6.5 0.4 0.4 0.3 8.3 0.4 0.5 0.3 6.1 0.4 0.4 0.3 4.3 0.3 0.3 0.3 the T7endCaseassunes3%annal GDPgrowth1990-2010ad noaactive energydemandmanagement. TheBase CasePoPy-neutralScenarloaswnues4.5%annual ODPgrowth andno changeinenergydemandmanagementpoicies eiher, whiled*eBoe CaselPoliy-activeScenario assuwnes4.5% annual GDP growth and activeenergydemand managementthroughbothprking and non-priceInterventions. - xii - 24. Even with the core program, the energy sector will continueto absorb a large share of investment and externalfinancingand be responsiblefor a growingshare of foreign debt. It both total will be a mj challengeto securethe financingof energy-relatedinvestmentwhile maintainingpnrdent externalborrowinglimits. The bulk of fundingwill have to be providedfrom externalmultilateraland bllateral donors, but contrioutionsby the private sector will be importantin the coal and liquid fuels subsectors and for energy efficiency-relatedinvestments. Assumingthat the energy sector's retained earningsavailable for investmentfinancingdouble during 1990-95to reach 1.9% of GDP, the energy sector debt would neverthelessincreasefrom 7.3% of GDP in 1990to exceed22% in 2001-03. About one-third of it would be foreign debt, assumingthat the entire foreign exchange componentof new Investmentis financedby externalborrowing. In addition, energyimportsmainlyof petroleumproducts but aso of electricitywill preempt a growingshare of export earningsunlessthe export capacityof the economygrows faster than energy imports. The future foreign exchangerequirementsof the energy sector could pose a problem if the exports of the economycannot be increased as planned, causing importsin other activitiesto be compressed,especiallythose relatedto the private sector. In that case, GDP growth and future energy requirementsinevitablywould be lower than originallyprojected, in which case energy investmentwould have been in excess of requirements. Given the magnitudeof funding requirements,it will be essentialto obtain optimalconditionsthrougha mixture of nationaland externalsources,public and privatesectorsources, and loan and equityfunding. The latter couldinclude private shareholdingsin ZESAand NOCZIM,whichwouldprovideadditionalsourcesof fundingas well as other developmentalsupport. Continuedtechnical assistancewill be necessaryto implement the proposed energy 25. strategyand investmentprogram. This is especiallyurgent in the case of DOERD as the key entity for sector planning and policy coordination, thus complementingthe planning and project preparation assistanceto be exttendedto the operatinigagencies. The donor communityshouldconsiderthe following areas for specializedtechnicalassistancewhosecosts are preliminarilyestimatedat about US$10 mn: I/ (a) electricity subsector: power system planning and management, including for load forecasting, corporate financing strategies, and rural electrification; evaluatirng institutionalissuesrelatedto the Batokaproject; (b) petroleumsubstor: Jomestic market evaluation; a feasibility study on the naphtha processingoption; pipelineand productstoragemanagement; (c) coal subsector: computerizationof investment and operational planning; market evaluation;evaluationof the blue v iter gas optionfor coal-basedammoniaproduction; (d) energy efficiency:preparationof a NationalEnergy EfficiencyProgram; staff training and provisionof equipment; organizationof energyaudits and follow-upmeasures;Z/ 7hs is underconsideradonat a SADCC-widekvel wi**fwndingto be provided y CIDA. - xiii - (e) energy and environment:preparationof a ptogram to monitor and control the impacts *romenergyoperations;assessmentof the links betweenpollutionand humanhealth, and preparationof abateent programs;training of environmentalspecialists;and (1) energy planning and policy coordination: energy demand forecasting; economic evaluation of investmentprojects and programs, including the joint optimizationof investmentin the electricityand coal subsectors;and promotionof private investmentin the energy sectOr. - xiv- SUMMARY OF ISSUESANDREWOMMEDAONS Specaic Ploms bon M r Recommeanded 1. ?' c_cv Eae Priq E DemaMan4mt aVW (a) t Pre of electricty melquidfiebdonot cover econoeic coa whm coalpduc n e rtnts for moaopoliic prducer,w guing eict mets allocatioffecting enetgy efficiency, and weakening ZESA and tOCZJMf _na,bace of payments, and pubic financel (b) S ecxJflgidl_u (a) E pricig basd ao economiccosts to ikprv economicW efficiency, genera finci mpkas at theoperatingeis, N stn publi fican andth balanceof paymen (b) Ener efficienyIprommns of at least20% throug eoomicly viabl conervatioanod subutio efrient enery use Expson Supe of E iity ~ capa imediats (b) Easblish paces of co lin e wit theitURMC (for domsl use)and wi itaional pre (for expoat) Shorttwor (e) Sbot o mediummm BEh racimeypr. bas on auditsof in- dusra and transport finm and publc buildigs and auendat fehasIby abdics; ke legobrsVtoy and institutions n _m e In uppoct of ene efficecy mesres; facilitatefinng suppouot Governme's powerexpan don prgm is based On srig citeria regarding arat (a) Increae prie of liquidfkl! andesetcicityso tha ey cover thei scoc no ca" realignrelative prices grn caused by (a) bw enery prices, (b) outmoded equtpmen and tchnlo (c) lacking awarens of efficbicy opportunities, (d) complexity of enery effaciecy projec (e) barie to co_mption and to tutu dcnge, and (t) lack of polcy and inatit- tio~~ PrirAy instaled (a) Le-at expanson compatible with optm qsem ediabilty In Ztmbabws, LOP, and ectci Impors. Paning prgram with KSE eanty proje in exansion soquece do not mcet leases criteia (a) Review and adyt if necas ZESA's develop. m pln, p basd on saive load mangement,20 hrW yEa LOLP, contiuaion of imports from ZAmbia, nrebiliti of municipl thml plnb, ecticity puhsu han HCB, ga tuis for peaiDg as appropriate or XSE, and Raoks. lhe need for s tbin dbe mviewed around 1995 Sbot to meomutem (0) Conclude power purchase _reet wbb HCB T'n butio fm and Dwri, System urgedynyneedsr f moemeand upgradig. B"klog of distribution cnctIONs esied at 50,000 tion-wide kaproved nd exanded tmiion and dtributon system to provide moae reliablesrvice (a) n nall now 300 kV (b) Replace exiing 66 kV cad 88 kV voltge by 132kV voblge Mediumtm Mediumto longer tenm -xv -base Prboblm Pirt ObsetvaRcomne (c) Reio syAM;inafu e dusbuo to 10,000 Sot to mebm Wm ew connectionsp.s. ovwr w nmuOv yamuorso Rbrl_Uhetlk P*cw ecoomc o no bed an prio ; pm. _an ialed for lack of bnellq ZESAbas8t absobf Grada sa economically Yrpa viable expanson of dheonfcqaeatn ual Sram; viabb RE. pro. rgdn ZESA's ao to -"-n torm apabDiia;secr eatel banse of rnning rua aye- MI. cad Coad MTsiat (i taRicwd mfrkes (a) LAIIIIeoe1 ou4pt an andoccasional defticincis rime wish inrke eqsuseIn sailtranportaffecopera- meats limwonefficiency (b) Substhusuion of coal 0b) Complex probblmof Import to theeconoumicly acblevinopsmloutputsit feasible emumn of HPS andWC coalsdepending onifutu HIPScoa requirment for themal power Coald Conversion -oei Momat ptiomfor cool-based Eoonomically souaddciusio production of ammonia wad on oal asificationand klqud fUelar netviable liquefaction, basedon ceo. nomice costaof petoleum imporla.sad other bsebath. tic options TV.L Pronuremenand Storage ulo (a) Mobilize efficeny reser ve at WankieColliery Co. (WCC)and imrve" railwaytrnsportof coa Ziwut stadium,andloge tor 0b) 1Pispar fexble siln- Short modium, andlonge Wem (0) OPerate SeMIM&~ on5 campaign basisIineU wit mrkrtrequirements 10%WDM tem tng p for WCC,determinedby fuftu HP$ coa saquistemntfor themal pwetgeeatdion W100 (a) Pre-4nveamemn evsalu Mediumtr satonof blue wate gas option for sammneiepro4ducton Medium to longe"eM 0b) DIscontinueactive evaluaio of coalliqueaclionoptionbutreviewthem occasinalyin theliht of market and uotecng*e Jgul Fc High coats due to bmpr ovefficienyof proZimbabwe's land-locked eurnusrasdawnecr edequa pousosr andnreatieysmaU cya(of etrg voluames dripped (a) SuppontBomspost Ismpsovements andtheseety ofd the elampplyrous but aistt rduct ioIn purt cbmwg Sbrt tomedlmtwm 0b) Increase storap capacitysad wetegic stock Srad6tlly, bmWase n teomcoa soltions Shortto medium tem -xvi ium Specifcts.u ~~~Probeme Cbows Recommended (c) Cotatet FeonkaNarr poleum prodcts pil bad gf Sot to mediumtem on ha-cost solaion, and ensurepmper PetroeumRevining Ethno Producto of esn efietry coanactbn of ew rfiney are unoatm- Economysenddecio covitatwit hast and liabe supples of lquid i, exceptpehspsthefomer for liited aha treme toFrodue gsolin ad LPG Abid Poducon at proet inttionl pries is economic only from rplus mls. us sagnatio of reduction wM ict efthno admixte with $O- Economiyaounddesio on scop of anolpodction (a) Peeinvetm evshuation Ofnaphh processng option Shostto meim tm DisO iluatc of odherrfii opuo but review situation in lN Wit aute refuinngeconomics Mediumto loe (a) Efthol produto t the ecnomicaly feale axent only Shot, medium and looge tM ) n cases of shoa, limitadixtewithgsoe to arusdo to ethanolpro- Shora, medium, and longe tenm (a) Review and revion of famewok, and of allocadon of tasks and rtaoum to vans tiona Sboutto mediumterm (b) Incorporate envimenal cost and beefits in project app ad mdmterm teM duction V. apgregulatory/mstloal aad policy f&ameok (a) Lack of modem famwork and of environmena experts Ob) EnvionmeaI cosa are nter asesd nor consde in policy dcc- E (a) Modernized srngthened framerk and (b) Enegy policies sise withbsuained cavironmentalnAageniem eey EnVirmal Eirclsted Impact of Activities Deforston relted to woodfuls use; emisdon from dten power plants, ca minn, ndusi, and urban vehic trpot pricin Environmentallysusiable (a) Reductin of ergene sector m _nagementrelted deforesation through diseminaton of morotefant moves,improvedcharcol productionondmnksting, reforestation and ataiaoc-yild&resrydevedopmaw (b) Pollution meaur- maul programfor Wankie, Sable,and majr muicipal caMe; nvn sod inys tassessmentfor all mW3orencEry prjiees control of vhicle emio Short to mediumterm Sbort to mediumtem - viiMeami Recottmanded Speific beua p .- Im 04=6 VI. slZnuga.XEd Medium- to loagr bw.strnspropam em (a) IVestmenquie- mesprojeedtobeate ZS7.2 b are rgescA latie to aboiv capai ty and flnUmncblsouresof theeconomy and ay antbe PANy g4bI Ioa*eou/cplund reliabit (a) lwVAm dtae pogm teat wi ficl oaa- equii um of the economy and sustainedenvironmental M*Oktuen Cournbcenave aid devlopM exmn diure planfor d nextfive ye (A indicatively,the fblwing fifeen yen) cove the overalleny Shot tem (regU upda requed) sct d pNWciAl ebac tam, includi energy eM. ciewny and eaVrAonMent elad emanae 1asibu (b) LAck of compreenalveatmn progrm for enery so aNd pncpal _aecto that is lbuoot andenu oupimalupply Ob) Rlistt fiunncig pln to aUfe t JWc4t W&d- reliability ie at ptiml condios. inciudiagthouh en e p sector patdipton Tech l Ausc (a) T.A.is uncoordiad and is often focused on allvitiw emeogencies, at the Agleat of addressn cM nee of Instio1a *_ (b) lmd seco agencies abo T.A. neds awarees of dte TA. prormin appost of Reaiew and fin TA. sin on buing and the pgmpoposedbyEnergy pepon andimplement- SUtegy Evaluation, nd tionof enegy wetor rate- appoch sutble donors gm$, poies, ad iNmvest- ~~~~~~meat mhmdiate to borttem I. INTRODUCTION Objectivesand Definitions 1.1 The objective of the Integrated Energy Strategy Evaluation is to formulate in collaborationwith the Governmentof Zimbabwea developmentstrategy for the electricity, coal, and liquid fuels sub-sectors, with due regard to the country's resources, macroeconomicobjectives and constraints,and opportunitiesfor enhancedregionalcooperation.The specificaimsof the Evaluationare to (a) identifyoptionsto meet the economy'smediumto long-termenergyrequirementsat least cost and at an optimal degreeof reliability;and (b) recommendpolicies, institutionallAegallregulatry measures, and investmentsto meet this goal, withinan integratedstrategicframework.The results of the analysis are to provide an input into the Government's 1991-95EconomicDevelopmentPlan. In order to facititate a government-wideconsensuson the proposed energy policies and investmentstrategy, the Evaluationwas prepared in close coordinationwith the Ministriesof Energy and Water Resourcesand Development;Finance,EconomicPlanningand Development;Mines; and Industryand Commerce,and with the major parastatalsin the energysector. 1.2 'Integrated Energy Strategy"is definedas a consistentset of Governmentactions- i.e. policies, legal/regulatory/institutionalmeasures, and investmentprograms - designed to achievethe developmentobjectivesin the energy sectorand to supportthe developmentobjectivesfor the economy at large. This strategyencompassesthe followingelements: (a) energysupply - demandmanagement; (b) measuresfocusedon the principalsubsectorsand their integration; (c) macroeconomicpolicies (relatedto incomeand employment;fiscal; monetary;balance of paymentsand externaldebt); and (d) sustainablemanagementof the environment. 1.3 In order to integratethe individualelementsof this strategy, the links betweenall, or at least the more important,of these elementsneedto be strengthenedso as to ensurethat they will reinforce each other and bring aboutoptimalresults in terms of economic,environmental,and socialnet benefits. In addition, the measures need to be consistentover time, so that short-term measures facilitatethe implementationof medium-to longer-termmeasures,and vice versa. -2 1.4 There are two main conceptsof integrationin relationto the energy strategyfor Zimbabwe,i.e. (a) Macroeconomic-energy sectorintegration:Eachcomponentof the strategyhas to be consistentwiththe overalleconomicobjectivesandtargets. This is becausethe sizeof the energysector'sclaimson resourcesis suchthat the othersectorsmay be squeezed, resultingin lowergrowthoverall,whereastoolowan allocationof resourcescouldresult in inadequatesuppliesof energyto the economy,withthe sameresultof lowergrowth. Onlywithproperintegrationof macroeconomic goalsand a least-costenergystrategy relativeto acceptablereliabilitywillthe rightbalancebe achieved.The EvaluationwUi focusprimarilyon the integrationbetweenthe energysectorandthe macroeconomy. (b) Intra-energysector(technological) integration:The approachadoptedin past energy studieswas to examineeachof the majorcommercialenergysub-sectorsin isolation.J/ In theintegratedapproach,linkagesbetweenthevariousenergysub-sectorsareexamined in detail,suchas theimplications on coaloutputofvaryingthermalelectricitygeneration, as well as newtechnologies witha majorimpacton the energysectorandbeyond(e.g. productionof liquidfuelsfromcoal). Theoptimalmixof technologies is determinedby economicviabilityand least-ost requirementswithin the frameworkof the agreed macroeconomic strategy. Scopeof the Evaluation 1.5 The Evaluationfocuseson the commercialenergysector as an integratedentityand presents the analysisof the least-costintegratedenergy strategy for Zimbabwe.2/It analyzes Zimbabwe'senergysupplyand investment requirements throughthe year 2010,andfocuseson the key policyand investmentdecisionsto be madeduringthe next five to ten years. The mainoutputsof the Evaluationare: (a) an analysisof 1980-1990trendsin energydemand,supply,and investmentsin the electricity,coalandliquidfuelssub-sectors; (b) projectionsof energydemandfor 1991-95and indicatively,for 1996-2010,based on realisticand consistentscenariosof macroeconomic and sectoralgrowth,population trends,demandmanagement, andregionalcooperation; (c) an analysisof the mediumto longer-termimpactof energydevelopmenton the I/ See. for eaayle, reportsby Merz & McLella and Gilben Commnwealth lc. on the eectricity subsector; by A.D. LIteSo yogeti and Beip on liqidfJiels, and Montan Consulton coaL 2/ A separateESMAPactivityon energyforlow-incomeandruralconsmmersdealswithissuesrelatedto nonco,nmercial energy. macoeconomyandthe environment; (d) identification of the least-costinvestmentprogramto meetenergyrequirements under eachecononicgrowthandpolicyscenario; (e) an assessmentof the costs, benefits,and risks of proposedenergy investmentand importationprojectsand an evaluationof policy measures,and of the institutional framework; (f) a priorityrankingof investmentand policy measures,consistentwith (i) least-cost expansionof energysuppliesand (ii)optimalreliabilityof supplies; (g) assistanceto DOERDandotherpublicinstitutions in energyplanningandpolicyanalysis to enablethemto applyin futurethe analyticaltoolsofthe Evaluationfor similartasks; and (h) assistanceto the relevant institutionsin monitoringthe implementation of policy measures. that emergethus relateto energypolicy,an investmentprogram 1.6 The recommendations over the periodto 2010 coveringeachof the sub-sectors,and optionsfor institutionalstrengthening. Theserecommendations constitutethe specificelementsof the strategythat is beingadvancedat this point. However,in thecontextin whichenergyplanningis carriedout,keyparameterswillchangeover time, withpotentially majorimplications for policydecisions.For thisreason,boththe overalldirection of thestrategyandthespecificsof thestrategywillneedto be constantlyreviewed,modified,andupdated in responseto changingcircumste. 1.7 Throughsummarizing the mainguidingprinciplesof the IntegratedEnergyStrategy,and describingthe stepsfollowedin its elaboration,it is intendedto facilitateany futureup-datingof the strategy, as well as the understanding of the economicconceptsunderlyingthe approach. The significance of thestrategicprinciplesandof thestepsrequiredfortheanalysisshouldthusbe highlighted to the decisionmakersand plannerswithinthe Governmentand the energyparastatalswho will be primarilyresponsiblefor futureworkin thisarea. 1.8 Becausecomprehensive energyplanningis complex,theprocessof elaboratinga strategy is an iterativeone: it is necessaryat certainstagesto examinewhetherthe inter-related assumptions to be made are still consistentwithone another,and if not, to return to earlier stepsto modifythose assumptions,and to continuewithsuch cyclesuntil consistencyis achieved. An analogousdifficulty arisesin this Evaluation,in that the mainelementsof the strategyare boththe outcomeof the overall objecivesandof the implications of tryingto fulfilthoseobjectives. -4II. ENERGY AND THE ECONOMY EconomicBackground pon of the Economy 2.1 With a 1989per capita GDP of about US$640,Zimbabweis one of the highest-income coutries of Sub-SaharanAfrica. Agricultureand miningaccountfor 16%and 6% of GDP, respectively, while manufacturingat 28% of GDP is 3 points above the benchmarkoften cited for a countryto be considered"industrialized". Importantfor a small economyhighlydependenton foreigntrade (around 30% of GDP), exportsare fairly diversified:gold and tobaccoeach contributeabout 18%, ferrochrome, 10%; cotton, 5%; and sugar, beef, nickel, iron/steel, and asbestos,3-4% each. Within its regional setting, Zimbabwe'seconomyis relativelydiversifiedand complex. Its comparativeadvantagesare: (a) Diversified natural resource base: i.e. minerals, agricultural land, and wildlife. In energy, considerablehydropower and coal potential exists, but there are no proven hydrocarbonreserves; (b) Human resources: a relatively high level of managerial and technical skills, which allowedthe countryto use technicalassistanceto only a limiteddegree; (c) Establishedinfrastructureand institutionalbase: this facilitatesthe implementationof investmentand the adaptionof policy to changedconditions. In the energy sector, key institutionshave a long history: the forerunnersof the Wankie Colliery Companyand the ZimbabweElectricitySupplyAuthoritywere formedin 1899and 1936, respectively. 2.2 Despiteits diversification,the formaleconomyremainsvulnerableto externalshocksto a degree which makessmooth, uninterruptedgrowth difficultto achieve. The main adverseinfluences are as follows: (a) Drought: this is a recurrent feature and has a significantimpacton economicgrowth becauseof the strong productionlinkagesbetweenagricultureand industry, and demand linkagesthrough direct and indirect incomedependenceon agriculture; (b) Import dependence: this exposes the economy to fluctuations in export earnings, internationalprices, and foreigndebtservice. To meet debt servicecommitmentsarising to a significantdegree from the energy sector, importsin the second half of the 1980s were suppressed, with adverse consequencesfor capacity utilization, investment,and outputand employmentgrowti throughoutthe economy; (c) Low and declininginvestment:this may carrythe risk of futuredisruptionsin the supply -3 (c) Low and declininginvestment: this maycarry the risk of futuredisruptios in the supply of essentialgoodsand services. In particular,transport problemshave largely resulted from chronic under-investm . Transportbottleneckshave had an adverse impacton the energy sector causingserious shortagesof coal in 1989; (d) Interruptionsin energysupplies: these havebeenlargely the resultof exogenousfactors, exacerbatedby domesticproblems(see box overleaf3. Their costs in terms of lost output elsewherein the economyhavebeen high; and (e) Inequalityand unemployment: despite the Government'satempts to change inherited paterns, income and wealth inequalitiespose a social problem as well as a drag on economicdevelopment. Poverty is wide-spread, especiallyin rural communalareas whereover-rowding and environmentaldegradationthreatenthe agriculturalproduction base, causingsubstantialmigrationto urban areas. However, formal employmentin the economyhas stagnatedover the last decadewhilethe labor force is growing rapidly. In the event of an economicdownturn in urban areas, rural migrants may be forced to return to the communallands. The failure of the economyto generatethe investment needed for urban employmentgrowth has exacerbatedconditionsin the communaland other marginalareasas well. Tbis illustratesthe needfor policiesto facilitateinvestment and employmentand to supportboth the sustainedexpansionof peasant agricultureand growth in the informalsectors of the rural and urban economy. 2.3 Zimbabwe's geographicallocationhas an importantbearing on the economicposition. The countryis locatedin the center of a regionwhere there is demand for the type and range of goods that Zimbabwe produces, and where surplus of electrical energy exists in neighbouringcountries for whicb Zimbabwe is a logical market. Offsettingthis advantage, Zimbabwe has been subjected to geopolitical disturbances which have had major negative impacts during the 1980s. Even with geopoliticalstabilityrestored, the problemsassociatedwith the country's landlockedposition,especially elevatedtransport costs, will remain. EconomicPe rm 1980-1990 2.4 Real GDP growthduring 198089 averaged3.4% p.a., similar to populationgrowth. Exportsduring the 1980sgrew at just about4% p.a. whereasimportsdeclinedin the mid-1980sand only regainedtheir 1980level in 1989. Traditionalagriculturaland miningexportshavebeen mixed, affected by depressedinternationalprices but also by weakenedproductivecapacity. Followingthe introduction of export promotion policies in the mid-1980s (which was supported by the World Bank-financed ManufacturingExport PromotionProject), the growth of non-traditionalexports has been considerable for textiles and clothing, leather and footwear, and railway rolling stock, indicatinga high degree of responsivenessto changing incentivesand domestic conditions, including a depreciation of the real exchangerate by at least 30% during 1989-91. -6 - THE COSTSOF INTERRUPTIONSTO ENER.GYSUPPLIES From the viewpointof the Integrated Energy Stategy, the consequencesof disuption form an important part of the framework within whicb Zimbabwean policy-makers have to operate. Disruptionshaveservedto underscore the highly interdependent nature of the economy, its resultant vulnerability,and the considerable eeonomic costs consequent on energy shortfalls. Some examples may serve to bring the main issues into focus. tecommissionthe municipalthermal plants at Harare, Munyati,and Bulawayo,even though these stations need major rehabilitation. This required additional high-grade coal to be moved to these stations. While Wankie Colliery can readily meet additional coal requirements, past deficiencies in transport planning and equipment have resulted in the railways not being able to provide sufficient transport. LiquidFuels: An attackon the tankfarmat the headof the pipelinein Beirain December 1982 made Zimbabwetotally dependent on South Africafor fuel importsand the authoritiesthere kept down the deliveriesto such an extentthat by end-1982there was an acute shortagewhich almost brought Zimbabwe to a standstill. Transport services were severely disrupted. The direct economiccostsof this incidenthave been estimated at Z$40 mn. With the agreement between Mozambique and Zimbabwethat the ZimbabweNationalArmy should take responsibility for guarding the pipelineand the rail and road links of the Beira Corridor, there has also been an ongoing financialandhumancommitmentto the defence of this supply route. The direct costs of this have been reported at Z$80 inn p.a. but the indirect costs are probably higher, as the Zimbabwe's involvementin Mozambiquehas been the basic rationale for continued expansion of the defence componentof the national budget at a time when the size of the budget deficit has adversely affected the economy. Even with the old thermalsin operationagain, loadsheddingbecamenecessary. This resulted in considerableeconomiclosses, especiallyat ZISCO on an embryonic market which had taken years to procure. Because of the necessityto shedboth industrialand residential electricity loads, priority in coal distribution had to be given to supplying the power stations, with the further result that other coal users were undersupplied. Again, the cost implications were high: the Zimbabwe TobaccoAssociationcalculatedthe size of the coal shortfall as being 24% of what was required in agriculture and stated that if the problem had not been rectifiedover the period September 1989 to March 1990 through a number of contingency measures, the lost foreignexchangeeamings to the country, due to foregone tobacco exports, could have reacliedZ$235mn. Events in 1989 Electricity and Coal: highlighted the interdependence of the electricity, coal, and transport sectors. Mechanicalproblemsat HwangePowerStation put about 260 MW out of commissionjust whenan accidentat the KafuePower Stationin Zambia removed900 MW from the interconnectedsystem. As a result, ZESA had to Implications: The total impact of such disruptions over the relatively short period since Independencecould well be of the same order as the cost of new generation facilities (Kariba South Extension:300 MW at Z$462 mn; HwangeIII: 420 MW at Z$754 ma, 1989 prices). Adding this perception to the possibility of continuing attacks on the fuel pipeline makes it understandable that the ZimbabweGovernmentplaces high priorityon independenceand security in the supply of energy. -72.5 Unemploymenthas increased, especiallyamong young people. Tle unemployment crisis and income inequalitieshave become key issues which the Government is seeking to address through changes in economicpolicy. While the energy sector is highly capital-intensiveand cannot directly contributeto employmentcreation, reliable energy supplies are a preconditionto output and employmentgrowth. The economy, while potentially dynamic, has been affected by investment restrictions, foreign exchangescarcitiesat least partly attributableto slow export growth, accelerating inflationdespiterigidprice and wagecontrols,aiid a large publicsectordeficitequivalentto 10%of GDP since the mid-1980s. Althoughthere were difficult circumstancesoutside the Government's control, economicpolicies also have adversely affected investmentand employmentcreation. Low levels of investmentwere causedby three basic factors, i.e. (i) risks associatedwith high fiscal deficits and the possibilityof macroeconomicdeterioration;CiH) limitedaccessto importedinvestmentand intermediate goods, and high non-financialcosts associatedwith importingthrough the foreign exchange allocation system;and (iii) the cost of doingbusinessin Zimbabwe'shighlyregulatedenvironment,includingprice controls, labor rmarketrestrictions, and investmentsanctioning. In particular, the policy of import compressionduring 1982-87,while slashingthe current accountdeficit of the balanceof paymentsand reducingthe externaldebt service during 1987-91from 35% to less than 20% of exports of goods and non-factorservices, resulted in low investmentthroughoutthe economy,including its export-intensive sectors. Notwithstandingthat Zimbabwe has made substantial advances in social services and in smallholderagriculture,the low level of investmenthas been a major causefor the depressedeconomic growth and inadequateemploymentgeneration. 2.6 Change in EconomicStrategy- Structural AdjustmentProgram. The Governmentbas come to recognize that the present path of economic developmentwill not meet the population's aspirations. Policyreform is neededto revitalizethe economy,particularlyto consolidateand extendthe exportbase so as eventuallyto overcomethe foreignexchangeconstraint,stimulateinvestment,and create employment. To counteract the problems resulting from low economic growth and inadequate employment opportunities, the Government has begun to implement a comprehensiveprogram of structural adjustment,as part of its "Frameworkfor EconomicReform 1991-95". Initial steps have included aggressiveexchangerate management,a package of measuresto encourageforeign and local investment(notablya change in investmentregulationsand procedures,some guaranteesfor investors, and a foreign exchangeretentionsystem), movementaway from governmentinterventiontowards free collectivebargaining,and a relaxationof price controls. The relationshipbetweenthe Governmentand thQparastatalshas undergoneimportantchangesas managerialautonomyand accountabilitywasenhanced and requests for changesin administeredprices are handled more expeditiously. The Government's program aims at moving from a tightly controlledto a market-basedeconomy, in order to enhance competition, efficiency, and output and employment growth. This is to lead to increased private investmentin the productivesectorsand expansionof exports, whilea manageableexternaldebt position is to be maintained. At the same time, steps are to be taken to alleviatetransitionalsocial hardships. The Structural AdjustmentProgram, which is being supportedthrough lending from the World Bank Group (US$125 mn IBRD loan; SDR 35.9 mn IDA credit), the InternationalMonetaryFund (US$485 mn ExternalFund Facility) committedin early 1992, and regional and bilateral donors, addressesthe followingfour main areas: -8(a) Macroeconomicstabilization: reducingthe budget deficitand containingthe balanceof paymentsand domesticinflationthroughtight flscal and monetarypolicies. Subsidiesto paratatals are to be reduced as a result of programs to (i) improvethe autonomyand efficiencyof parastatals, (ii) improvepricing policies, and (iii) reduce the size of the parastatal sector. Public expendituresare to be reduced mainly through eliminating entepise deficitsand rationalizingpublic sectoremployment. Inflationis to be lowered from 16% throughoutthe 1980sto 8-10% p.a. by 1995 through appropriatedemand management,monetarypolicy, and efforts to bolster aggregatesupply; (b) Foreign trade liberalization:in order to supporta resource shift towards exportsectors, the foreign exchange allocationsystem will be gradually replaced by a market-based system through expandingthe 'Open General Import Licence" categoryof goods and eventually, freeing of all but a small number of imports, tariff reform, supportive exchangerate policies, and improvedexportincentives. Customsduties will be reduced to the range of 10-30%to provide modestprotectionfor domesticproducers, and the current importsurtax will be phased out; (c) Deregulation,especiallyof prices, labor, and transport services: The Governmenthas recognizedthat the benefits of fiscal reform and foreign trade liberalizationcannot be reaped if controls continue to constrain domestic economicactivity. Its adjustment program therefore includesreform of the regulatory system to enable entrepreneursto respondto emergingmarketopportunitiesand pressures. Particularmeasuresencompass the simplificationand further liberalizationof (i) investmentapprovals, (ii) exchange controlson profit remittances,(iii) prices and distributioncontrols, and (iv) labor and wage regulationsthrough establishingcollectivebargaining;and (d) Social safeguards:the Governmentrecognizesthat large segmentsof the populationare likely to suffer short-term economichardship through (i) inflation and relative price increases, (ii) increasedfrictionalunemployment,and (iii) social service cut-backsand increasedcost recovery for public sector goods and services.3/ The Governmentaims at shielding,to the extent feasible,vulnerableor disadvantagedgroupsfrom transitional declines in welfare. It expects to provide compensationin the form of commuted pensionsto retrenchedcivil servants and seeks to minimizethe effects of inflationon selecteditemsfor targetedgroups. A SocialDevelopmentFund has been establishedto support welfaremeasuresand employmentcreation. 2.7 The accelerationof economicgrowth through the Structural Adjustment Program, especily the emphasisgivento agriculture,will serve to reducethe pressureson the communalareas, whileat the same timegeneratingthe fiscalresourcesneededto effect landreform. This will involveboth resetting part of the communalpopulationsto under-utilizedcommercialfarnland, and makingsignificant I/ 4bowt25% of the 100,000 Governmene-empnlyed workers(excludingthe educationseaor) are to be consideredfor rernicmendu. -9 investmens of productivecapitalin the communalareasthemselves. As part of the StructuralAdjustment Program, a new Five-YearPlan is under preparation,which aims at progressinglyacceleratingGDP growtb to about 5% p.a. towards 1995. To sustain this level of growth, investmentneeds to be raised from about 20% at presentto at least 25% of GDP. Private investmentin particularneeds to be raised above 16% of GCDP,comparedto 8-10% at present, to stimulateoutput and employmentgrowth, To make such a programpossible,during the 1991-95period, increasesin real importsof about8% p.a. at the beginningof the period and of 4-6.5% p.a. later on and capital inflows totalling US$3.5 bn are required, includingsome commercialborrowing. Assumingthat gradual but decisivestructuralreforms take place, the external debt outstandingand disbursed is expectedto peak at 75% of GDP by 1995 before fallingto about59% by the end of the decade. The service on it would fall from about22% of exportsof goods and non-factorservicesduring the 1992-95period to 15% by the year 2000. 2.8 The Structural AdjustmentProgram addresses primarily Zimbabwe's macroeconomic concerns. In order to attain the desired supply response to macroeconomicmeasures, the productive infrastructureneeds to be in place, and reliable infrastructureservices need to be provided. Energy is one of the most importantinputs into the productionprocess. Unreliableor insuflicientenergy supplies carry the risk that the Structural Adjustment Program is slowed down and its goals are not or incompletelyattained. Therefore, a viable energysector is a key conditionfor fuirthereconomicgrowth and development. nergy in the Economy 2.9 Zimbabwe'senergysector is amongthe most developedin Sub-SaharanAfrica in terms of its scope, techwlogicalsophistication,and integrationwiththe rest of the economy. The energysector accounts for 8-9% of GDP and public revenue, mainly from excise duties on liquid fuels, but it contributes only 1% to formal employment (Table 1). More significant is its share in aggregate Investment,foreignborrowing, and debt. Energy investmentduring 198049 totalled around Z$1.3 bn (equivalentto aboutZ$2 bn in 1989prices), or about 12%of Gross DomesticCapitalFormation. About three-quarters of energy investmentwas in electricity. The sector is capital and foreign-exchange intensive and its requirementstend to strongly influenceeconomicpolicy decisions. While Zimbabwe is 84% self-sufficientin energy includingbiomasssupplies, petroleumproducts need to be importedin their entirety, at a cost of aboutUS$ 210 mn in 1989, providingabout 13% of energy supplies. Most of the investmenthas been financedthrough debt rather than retainedearningsas net financialsavings in the public sector are generallynegative. 2.10 In the wake of substantialinvestmentand scant generationof financialsurpluses, energy sector debt during the 1980sincreasedconsiderably,reaching Z$874 mn in 1988, equivalentto 10.5% of that year's GDP. Externalelectricity-relateddebt alone in 1988 was Z$513 mn, or 6.2% of GDP. The implicationshave been critical, given that foreign exchange has been the binding constraint to economicgrowth. - 10- Table 1: ENERGY SECTOR CONTRIBUTION TO NATIONAL AGCREGATES, 1988 (US millions unless otheriise indicated) Etectricity (ZESA) Liquid Fuels (NOCZIN/Oil companies) Coal & Coke (1CC) Total Share In National Aggregates (Percent) Contribution to GoP 328 301 79 708 8.5 Etployment ('000) 6.6 1.8 4.9 13.3 1.0 PublicRevenue -- 313 -- 313 8.3 DomesticDebt 277 _/ 35 312 4.7 Foreign Debt 513 a/ 49 562 10.8 DirectEnergyImports 17 200 -7 h/ 210 7.5 -Foreign Debt Service 233 16 249 24.9 Note Directimports and debt servicetogether constituted over 16X of exportsin 1988. AV bt Debt data for the liquidfuelssub-sector not availeble, but are assunedto be negtigible. Net exports Soure: Ministryof Finance; ZESA;KOCZIM;WCC 2.11 Energy either has a high import content in domesticproductionusing largely imported technologies(electricityand coal) or is directly imported (most liquid fuels, and some electricityand coal). Since Independence,the combinationof energydebt service and importsof petroleumproducts and electricity,offset only to a smallextent by net exports of coal and coke, has burdenedthe economy considerably, The energy cost as a proportionof export earnings ("energy service ratio") has varied between 16% and 22% throughoutthe 1990s,constitutinga major claimon foreignexchangeresources. This mighthavebeen one reasonwhy the economyhas operatedat less than full capacityand at very low levelsof investment. In the wakeof the increasesin internationalpetroleumprices in 1990, Zimbabwe's energy imports in that year rose to Z$583 mn, equivalentto 11.7% of foreign exchangeearnings. As an indicationof the impactof internationalpetroleumprices on the balanceof payments, at importsof about 1 mn tpy of petroleumproducts, each US$1.-/B increase in the internationalprice of petroleum raises Zimbabwe's importbill by Z$22 mn. Table 2: ENERGY ANDFOREIGN EXCHANGE REQWIREMENTS, 1980; 1985; 1987-90; AND1991 (PROJECTED) (ZSmillions) 1980 (1) Net EnergyImports A/ (2) Exportsof Goodsand NFS (3) lports of Goodsand NFS t1)as X of (2) (1)as X of (3) M/ 171.7 1,043 1,146 16.5 15.0 1985 299.7 1,981.0 1,943.0 15.1 15.4 1987 1988 1989 197.4 2,668 2,297 7.4 8.6 209.0 3,384 2,765 6.3 7.6 450.0 3,983 3,675 11.3 12.2 Imports of petroleum products, electricity, and coal,lessexportsof coal. Source:NOCZIN;ZESA;UCC;WorldBank; Evaluation teamestimates. Estimated Projected 1990 1991 583.0 4,972 4,664 11.7 12.5 507.8 6,560 6,507 7.7 7.8 - EnMy-w 11- Linkages 2.12 For developingan integratedenergystrategyconsistentwithmacroeconomic objectives, it is importantto identifythe linkagesbetweenthe sectorandthe macroeconomy throughwhichenergy investmentsand policiesmay foster or retard economicgrowth. Beingpart of the basic economic infrastructure, the energysectorprovidesessentialinputsto allothereconomic sectors,whereasthe state of themacroeconomy is criticalfor energydevelopment.Ofparticularimportancearefinanciallinkages, throughthe sector'simpacton publicfinancesandthebalanceof paymentsandexternaldebt.Shouldthe energysectorpreemptan inordinateshareofforeignexchangereserves,thereistherisk thattheresultant lack for other sectorsof foreignexchangeand capacityto borrow abroadwill restrictnon-energy investmentandoperationsandhence,willdepressoveralleconomicgrowth. 2.13 Direct Linkages. The energy sector has limitedscope for stimulatingeconomic developmentthrough backwardIinkaM, such as engineeringand related services,productionof sugarcanefor ethanol,andlimitedproductionof solarenergyequipment.However,the sectoris itself reliantontransportation, especiallythe railways,for deliveryof coalandpetroleumproducts.Likewise, there is only limitedscopefor forwardlinkages,suchas the productionof petrochemicals.Energyintensiveindustrieswere established in an earlierperiodwhenenergywascheapandabundant(i.e. when butthat comparativeadvantageno longerpertains. the Karibahydropower schemewascommissioned), and WhileZimbabwe'scoalis low-costbyworldstandards,coalprocessingprojects(i.e. for gasification and marketsin Zimbabweand the SADCC liquefaction)are highlycapital-and technology-intensive, regionare notlargeenoughto attainthe requiredeconomiesof scale. 2.14 Zimbabwe'stransportsystem,especiallythe NationalRailwaysof Zimbabwe(NRZ),is importanfor both backwardand forwardlinkagesof the energysectorto materialize.Transportation accountsfor the consumption of some 10%of coaland76%of liquidfuelsin the economybutfor less than 0.5% of electricity. In turn, the railwaysand road haulageto a lesser extentare importantfor transportingenergy. NRZis moving70%of liquidfuelsand mostcoalconsumedoutsidethe Hwange powerstation,whereascoaland liquidfuels combinedaccountedfor 35%of NRZ's transportservices (as measuredin ton-km)in 1988-. Becauseof the lackof sparecapacityon the railwaysystem,and the largevolumesof coalandliquidfuelsto be carried,changesin demandfor energyproductscanhave significantrepercussionson transportoperations. (Thishappenedin 1989when the upturnin coal demandfor the municipalpowerstationscoincided witha breakdownin rail services.)Prior to its tariff increasein early1990,NRZwas incurringsubstantial losseson coaltransport,estimatedat Z$15-20mn in 1989,as tariffs coveredonly approximately 70% of costs. In contrast,the transportof petroleum productshas beenprofitable.In thefuture,pipelinetransmission of petroleumproductswill providean importantservice. A pipelineto transportpetroleumproductsfrom Feruka to Harare is being implemented which,by divertingprofitabletransportactivities,initiallywouldhave adversefinancial repercussionson NRZ 1I but wouldfree up transportcapacity,to the benefitof all other traffic / NRZ incurreda net defcit of nearlyZ$228 mn in FY 1990whichis expectedto be reducedto aboutZ$1O00 mn in FY 1991. Railwaytarifs in 1990of transportingliquidfuelsfrom Ferukato Harare-Z$40M.T.-were nearlydoxble the economiccost. Basedon a transportvobwneofO.6 innM.T. in 1989, NRZstandsto loseannualnet revenuesof about Z$16 mn, as resultof divertingthe transportof petroleumproductsto the pipeline. - 12includingthe movementof coal. NOCZIMwould benefit financiallyas its transport chargeswould be loweredas result of the pipeline. Finanial linkage operate through (a) the sector's contributionto fiscal revenues; (b) 2.15 savings by the energy enterprises; (c) the investmentand borrowing requirementsof the sector; (d) foreign exchangeoutflows through the servicing of the sector's foreign debt, profit remittances, and imports; and (e) the impact of the foregoing on the balance of payments. Indirect taxes on energy consumptionare 1wviedon petroleumproducts only and in recent years have contributedsome 8% of Governmentrevenues. At present, net financialsavingsof the energyparastatalsare negative. ZESA in FY 1989has a positive cash flow of aboutZ$l 10 mn 1I but made a loss of Z$120 mn in FY 1990. NOCZIMincurreda financialloss of the order of Z$150 mn in 1990but expectsto break even in 1991. The partiallyGovernment-ownedWankieColliery CompanyLtd. (WCC)had a financialsurplusof about Z$30 mn in 1990. The private oil companiesreport "modest' financialsurpluses. The costs of energy importshave amountedto 11.7% of exportsof goods and non-factorservicesin 1990. Energy-related external borrowing requirementshave been considerableand have increased at a fast pace: for the electricity subsector alone, the external debt service amounts to over 6% of net foreign exchange earnings,the second-highestratio amnongdevelopingcountriesfollowingColombia. Mostdirect linkagesemanatingfrom the energysector have second2.16 IndirectLinks. roundimpactson the macroeconomy.Onthe supplyside, energy-relatedforeignexchangerequirements have contributedto a compressionof importsin other sectors, as policy responsesto reduce the balance of paymentsdeficit have tended to adverselyaffect domestic capacityutilizationand investmentin the non-energysectorsof the economy. Thus, the energy sector, through its foreignborrowing and import requirements, may have inadvertently slowed down economic growth during the past decade, notwithstandingthe needfor adequateenergysuppliesto provideeconomicgrowth. On the demandside, the sector may stimulate income generationand hence consumptionand investment. These effects, however, tend to be short-termand normally involveconsiderableimport leakages. 1ntra-EnergySector Linkages 2.17 Comparedto the linkagesbetweenthe energysector and the rest of the economy,intrasector links are less important. Direct linkage withinthe energy sector are relativelyweak except for the use of coal in electricitygeneration. Ethanolproducedfrom molassesserves to blend with gasoline for use in transport. Bagasse-basedco-generationprovidessmallamountsof electricity. Coke production has the by-productsof benzol,used as an additivein gasolineblending;coal tar, used as fuel in industry; and cokeoven gas, whichis consideredfor use as a start-upfuel in thermalpower generation. Petroleum productsimportationleadsto subsequentactivitiesin storageand distribution. More importantly,energy pricing and non-pricemeasuresproduce critical indirectlinkages within the energy sector as well as betweenthe energysector and the rest of the economy. Energypricesthat fail to reflecteconomiccosts will lead to uneconomicinvestmentdecisionsin energy-intensivesectors. Substitutionprocesses have been stimulatedin agricultureas tobaccoproducersshiftedfrom fuelwoodto coal, and in transportwhere the use of dieselhas grown relativeto gasoline,and where limitedelectrificationof the railwaynetwork took place. The Governmentis consideringthe possibilityof switchingfrom electricityto coal in the productionof ammonia. I/ DepreciauIon(on assetsat historiccost)accountedforZ$90 mn; thefinancia surplus was Z$20 mu. - 13- m. ENERGY SECTOR INSrlTUr IONS AND STRATEGIES InstitutionalFrmxework OvQxiew 3.1 A numberof Governmentinstitutionsare involvedin the energysector, first and foremost the Ministry of Energy and Water Resources and Development(MEWRD) with responsibility for electricityand downstreampetroleumoperations. MEWRDsupervisestwo parastatals, the Zimbabwe Electricity Supply Authority (ZESA) and the National Oil Companyof Zimbabwe (NOCZIM). The Ministry's Departmentof EnergyResourcesand Development(DOERD), which was created in 1981to coordinateall energy-relatedmatters, is i 'sponsiblefor planningand policy coordinationin the electricity and liquid fuels subsectors. This includesthe preparationof the frameworkfor investmentprogramsin cooperationwith the operating agencies, and assistingthese agenciesin securingGovernmentapproval for their pricing and investmentproposals. The Ministryof Mines is charged with matters pertainingto coal mining and hydrocarbons exploration.It representsthe Governmentin the Wankie Coal Colliery (WCC), the country's largest coal producer, and administersthe mining regulationsthrough the Chief GovernmentMiningEngineer's Office. MEWRDmonitorsthe domesticutilizationof coal as an energy source,whereasexportsof mineralproducts includingcoal are controlledthroughthe MineralsMarketing Corporation. Decisions on the pricing of electricity, petroleum products, and coal are taken by the DevelopmentCommitteeof the full Cabinet. The NationalPlanningAgencyof the Ministryof Finance, EconomicPlanning and Development(MFEPD) is responsiblefor macroeconomicand public sector investmentplanning, and for decisionson investmentand pricingproposalsforwardedby the parastatals through their respectivesupervisoryministries. MFEPD's InvestmentCenter participatesin decisions on projectssponsoredby the private sector, whereas the Ministryproper is responsiblefor contracting external loans for funding investmentprojects in the energy sector and the economy at large. The Ministry of Industry and Commerce, through its Industrial DevelopmentCorporation, is promoting schemesfor coal-basedchemical industries. The government-ownedNationalRailwaysof Zimbabwe (NRZ)transportspetroleumproductsto regionaldepotsand all coal consumedoutsidethe Hwangepower station. 3.2 The Forestry Commission is in charge of fuelwood-relatedmatters. There is no Governmentcontrol over woodfuelprices, which are market determined. While market mechanisms exist, the transferof fuelwoodresourcesfrom areas of excess suppliesto areas of unsatisfieddemandis hamperedby low profitabilityof operations. 3.3 A numberof joint venturesand privatecompaniesoperate in the energysector. The more importantones are: PetrozimLine (a joint venturebetweenNOCZIMand LONRHOfor constructionand operationof the liquid fuels pipelinefrom Feruka to Harare); six liquid fuels distributioncompanies;6/ SENCOL,a Rio Tinto Ltd subsidiaryfor operatingthe Sengwacoal mine, in whichthe Governmentmay 61 SBP/ShelU Marketig, Mobil, Caitex, Total, Ximex, CastroL - 14 - participate;Trianglefor ethanolproduction;and some industrialfirms beingelectricityself-producers.2/ Finally, at the regionWllevel, the Zambezi River Authority has responsibility for developing the hydrologicalpotential in the countries of the Zambezi River basin, whereas the SADCC Technical AssistanceUnit undertakesSADCC-wideenergy efficiencyprograms in which Zimbabweparticipates. 3.4 The Governmentexercisescontrolover the energysectorthrough its influenceon pricing and investment,besides its full or partial ownershipof the principal energy enterprises. Decisions on energypricing are made by the full Cabinet, on the advice of the MinisterialEconomicCoordinating Committeeconsistingof the key economicministries(for electricityand coal)or of a reduced committee of the sameministries(for liquidfuels), whodeliberateon proposalsforwardedby the enterprisesthrough theirsupervisingministries.Likewise,investmentproposalsare preparedby the enterprisesand forwarded to their respectiveministries for evaluation (in the light of energy sector considerationsand overall economicpolicies) and clearance. The line ministries in turn forward them to MFEPDINPAand the InvestmentCentre for their evaluation and approval and subsequentlyto the Cabinet Committeeon Developmentfor its approval and inclusionin the PublicSectorInvestmentProgramme,so as to source funding. Activit ResnonsibleInstitutions Project preparation;subsectoral planning(technical;financial) Energyenterprises Sectoralevaluationand planning (technical;economic) Line Ministries Nationalplanning Economic NationalPlanningAgency Political; economic CabinetConimitteeon Development MaJorIssues 3.5 Giventhe complexityand wide repercussionsof strategicand operationaldecisionsin the energy sector and the high costs of energy investmentprojects, close coordination and efficient implementationof decisionsand monitoringof results are essential for effective sector management. Energy policies have been conducted based on the principle of collectiveresponsibility in decision making. However, effectiveenergysupplyand demandpolicieshave been adverselyaffected by (a) the Z/ MaVk. Hq,po.ZISCO. - IS - lack of effective coordinationbetweenthe sector institutions,which is not commensuratewith the high degreeof Govenment controlover the sector; (b) lack of adequatepolicyanalysisand project evaluation; and (c) weak links betweenenergy planningand macroeconomicplanning. There is no lead institution within the Goverment for preparing decisionson energy pricing, regulation,and investment,to the detriment of the speed and quality of the decisionmaking process. Planning and project evaluation capabilitiesare weak at the sectoral level (theyare more adequateat the subsectorallevel) largely due to organizational shortcomings and the absence of experienced staff. Managerial autonomy and accountabilityat the subsectoragenciesis limited,which is bound to affect the efficiencyof operations. As a result, sector strategies lack clear priorities, resources are divertedto pursue uneconomicoptions, energy pricing and efficiencyoptions are not effectivelyaddressed, and investmentdecisions can be unduly influencedby donor considerations. Requirementsand Recommendations 3.6 Policy Level. In order to meet the challengesposed by economicreform and structural adjustment,the energy institutions at the sectoral and subsectoral levels need to be reinforced and streamlinedand their professionalcompetencestrengthened.Institutionalinter-relationshipsneed to be rationalized. Coordinationshouldbe improvedbetweenMEWRDand MWEPDespeciallyNPA, so that policyand investmentdecisionsfor each subsectortake full accountof developmentsand plans throughout the energysector and the economyat large, eneigy sectormanagementis made more effective,financial surplusescan be generatedat the energy enterprises,and energy investmentrequirementsare properly evaluated.MEWRDshould emphasizemore stronglyits guidingrole in the energysector, with the aim to (a) play a greater part in developinga consistenteconomicpolicy framework; (b) coordinateenergy sector strategyand policieswith other Ministries;(c) take the lead in implementingenergy policies;(d) promoteprivate participationin sector development;(f) ensure the applicationof a consistentplanning methodology;and (g) provide informationalsupportneededfor energyproducers and consumersto take economicallyand financiallysounddecisions. 3.7 DOERD needs to liaise more effectivelywith NPA, ZESA, NOCZIM, and the Ministry of Mines. While subsectorplanning should continueto be the primary responsibilityof the operative agencies, DOERD should be upgradedto integratethese subsectoralplans and policies, and ensurethat they are consistent with economicdevelopmentobjectives. DOERD should enhance its capacity to evaluate project proposals, monitorthe implementationof projects and policies, and undertake sector regulation, assisted as appropriateby outside specialists. This should be mirrored by developingthe relevant expertise in sector and project analysisat NFA, as the final arbiter in preparing the public investmentprogram, includinga basic understandingof the principal technical issues at the concerned institutions. Furthermore, the institutionaland legal/regulatoryframework for promoting end-use efficiency and environmentalprotection in the energy sector should be developed, possibly under the guidanceof NPA, but in active collaborationwith DOERDand a muchstrengthenedMinistryof Natral Resources and Environment. In order to facilitatea consensuson strategies, the Governmentshould consider establishing an Advisory Committee on energy with representationof consumers, private investors, and environmentalinterests,as well as the parastatalentitiesin the energy sector. -163.8 QgffaWnal Level. Authorityshould be given to the enterprisesto enact energy price changes, within an agreed franework for price regulation. Througb strengthening their planning departments,the enterprisess)ould improvetheir capabilitiesto prepare projects, especiallyin regard to economic/financialevaluation, and should contribute more actively to planning subsector strategies. Project planningand preparationshould be done more systematicallyand in-housecapabilitydeveloped for the analysisof demandprospects and identificationof new marketsespeciallyin the coal subsector. This makes it necessary to build up economic/financial analytical capabilities, as well as technical/engineeringcapabilities in the enterprises. Planning and operating departments need to cooperate their respective activities more closely. The selective use of consultantsfor policy and institutionalanalysisas well as for project preparationwouldprovide additionalanalyticalresources to improvedecisionmaking. GovernmentEnergyObjectivesand Strategy General 3.9 Becauseof the need to ensurethe availabilityof sufficientenergyto accommodatefuture economicgrowthand becauseof the massiveresourcerequirementswhichthis entails, the energy sector formsa key componentof the Government'seconomicdevelopmentstrategy. Duringthe next five years, when the Structural AdjustmentProgram will be implemented,there is particular concern about the adequacyof electricity supply.B/ Over the entire planning horizon to 2010, pressures on resources, particularlyforeignexchange,are likely to be such that the energystrategymust seek to minimizecosts, but at the sametime ensure the securityof supply. Achievingboth least-ost and secure suppliesrequires diversifyingenergy supply sources and transport routes, which implies that the strategy should look carefullyat the potentialto importenergy from Zimbabwe's neighbors. Past Objectives.Strategies. and Main Projects 3.10 Traditionally,the Governmenthas aimed at ensuring adequateand secure supplies of energy to all economicsectors and consumergroups, at prices which support its basic objectivesof economicgrowth, regionaldevelopment,and equity. Its energydevelopmentobjectiveswere indicated in the First Five-YearDevelopmentPlan 1986-90,as follows: (a) 8/ to achieve, as far as possible, self-sufficiencyand security in energy supply through increased use of energy from indigenous commercial sources such as coal and hydropower,thus reducingthe growth of demandfor importedenergy; Thereis atreaaya backtog of connectionsto the ZESA grid, estimatedby the Evaluationteam to amoontto about 6oOMW or around one-third of present system demand,because of shortagesof transmdssionand distribution materi. ZESA is cautiousin connectingconsumersalso becauseof projectedsupply shorffals before the next significantproject is commissioned (ie. the interconnectionwith Cahora Bassa in Mozambiquewhose eariest avaabiiy is in 1995). - 17 (b) to increasethe use of coal and electricityby low-incomeurban and rural populations,as a means to briv¢ them into the mainstreamof economicdevelopmentand at the same time to reduce the degradationof the environmentcausedby deforestation; (c) to developnew and renewableenergy resources;and (d) to increasethe efficiencyof energyuse. 3.11 Throughits policiesand projectsin the erergy sector,the Governmenthas beenconsistent in pursuing self-sufficiency,security, and utilizationof indigenousresources, in line with its import substitutionobjectives. These policies have also aimed at supporting the Government's objectivesof developingnationalresources and industies, creatingemployment,and saving foreign exchange. The policyon electricityimports(i.e. ensuringsuffilcientinternalgeneratingcapacityto meet maximumpower and energy demands)is consistentwith this strategy. The Govermmentalso has tried to stimulatethe substitutionof cokeoven gas and coal tar fuel for importeddiesel. This consistencyof purposehas been less in the case of energypricing, especiallythe policy of keepingthe price of diesel much lower than thatof gasolineso as to cross-stbsidizeindustry,commercialtransportation,and commercialagriculture. This policy may have impede. the use of woalin industryand agriculture. Equityobjectivesare being pursued through subsidizin- cesidentialelectricityconsumptionin low-incomeurban and rural areas. Rural electrificationis tO ontribute to promoting rural development,supported by the Government through studiesto identifyeconomicand socialpriorities, but is not in itselfseen as a meansof arresting deforestation. 3.12 Among the major energy projects, the developmentof the coal-fired power stations Hwange I and II has had by far the largest impact, changing dramaticallythe supply balance for electricityand the demandfor coal. In the coal subsector, the developmentof the Sengwadepositwas promptedby a desire to reduce the dependenceon South Africa for importsof low-phosphorus,lowsulphur coal needed in the ferrochromeindustry. More recently, in the contextof changingeconomic policies in Zimbabweand the changesin the geopoliticalsituationin Southern Africa, the Government has modified somewhat its strict adherence to self-sufficiencyin electricity supply, both because of economicpressures and becauseof stronger interest in regional coordination. Fuller account is being takenof the hydropowerpotentialin neighbouringSADCCcountriesand of the scope for interconnecting the nationalelectricitysystem. While the Governmentis consideringthe Kariba SouthExtension(KSE) hydropowerproject, the debate continuesas to the optimalsupply expansionfor ZESA in the periodto 2010. The decisionhingeson the alternativesof increasingelectricityimportsor investingin generation projects in Zimbabwe. The Governmentappearsto favour hydro over thermalgenerationprojectsbut at the same time, has relaxed its limits on electricity imports as it is actively consideringelectricity purchasesfrom Hidroelectricade CahoraBassa (HCB)in Mozambique. - 18. SUMMAY OF MAJOR DEVELOPMENTS IN THE COMMCIAL b ENERGY SRSTORS, Pbinrm Polic _eam I980-199 InAluioAnal I ELECnu HwangeStageI (480 MW - 1983;Z$439 mn) Succesive aiff inesas HwangeStag 1 (400 MW - 1987;ZS564ma) Unified (1988) Nsional Contro Z831Me) Cetre since 1982 onuitariffbsd on LRMC 1985; lectricityAct of 1915. ZESAformed in 1986,SnwlganotingESC,muicipal spply authorities, nd Zimbabwepart of CAPCO CAPCO dissolved and repaced by ZambeziRiver Authrty in 1987 Technied training schools esablished by ZESA RuralEketrification (ongoing) PowerII Pogram, includingup-rating of Karibahydrosets (ongoing) 11 Wankieop-ca mining(dragle) to supplyHwangePowerStation(1983; ZS120mnn) COAL Maintenance of the Coal Price Agreement(CPA) Substantialincrease in coal prices in 1985 Governmentacquiredcont"roling40% share in WankieColiety CompanyLtd (1982) Coke oven rehabilitation (1988:ZS31.5inn) SengswaCoalfielddevelopment(198890; Z$12mn) SENCOL,a wholly ownedsubsidiaty of Rio rnto (Zmbabwe), formed to exploitSengwacoaldeposit(1990) ml UQUID FUELS Ethano plant at Trinage (1980; Z54 mn) Frst nujor increasesine 1980in 1983 by about39% on weightedaverage GENTA replaeed by ZOPCO (1980 and NOCZVM(1983) Pipeline in Mozambique (1982) No price changesfor major products duringMarch 1986- September1990, when prices were increaed by 42% and by 44% in Febtary 1991 (both weightedaverage). Prices of diesel and gasoline blend wete reduced in April 1991 (by 7.5% and 7.9%, respectively),to give an effective35% inreaeu (Seighted average) for all products over the Septenber 1990 Apri 1991period Improvement of Management InformationSystemat NOCZIM,with ESMAPcoopeation (1988) gestored Petroleumproductspipelineextension (ongoing;Z107 mn) Securitystorge (ongoing;2130 mn) Sout: DOERD;CAPCO;EC; ZESA;WCC; NOCZIM;privateoi companies. PEFROZII Ooirt venture between NOCZIM and LONRHO) fored to operatepipeline - 19 - 3.13 In the liquid fuels subsector,the Governmentwould like to expandethanol production so as to maintin a 13% mix with gasoline and, possibly, increasingthis share to 20%. NOCZIM has formed a joint venture with LONRHO to extend the Beira pipeline from Feruka to Harare. The Governmentalso plans a major expansionof product storagecapacityfor enhancingsupplysecurityand is consideringto recomnimssion the existingpetroleumrefinery or to build a new refinery to serve the local market. Projectssuchas petroleumrefiningand liquidfuels from coal are stronglyorientedtowards self-sufficiencyand resourceutilization,but they are likelyto be uneconomic.(TheGovernmenthas been evaluatingtwo coal-basedimport substitutionptojects, i.e. (a) a coal-to-amnreonia project which would reducefertilizer importsand free up about 100MW electricitysuppliesthroughdiscontinuingthe existing electrolytic-basedproductionat Sable Chemicals;and (b) a project for producingcalcium carbide, as a feedstockfor productionof PVC). A petroleumexplorationagreementhas recentlybeen concludedwith Mobil, which is clearly consistentwith a self-reliantenergy strategy. Given the potential benefitsthat even a small discoverywould provideto Zimbabwe, it is essentialthat the potentialfor hydrocarbonsis properly assessed. Finally, on the demandside, in the wake of supply shortagesfor electricityand of substitutionalrises in internationalpetroleum prices associated with the 1990-91 Gulf crisis, the Governmentnow is aining at settingpricesof energybasedon their economiccosts. It has raisedprices of liquid fuels by substantialmargins,and has initiatedenergysavingscampaigns. 3.14 The Government'senergy developmentobjectivesand strategies raise importantissues. These are as follows: (a) Costsof self-sufficiency:The objectiveof maximumself-sufficiency(and the associated higher investmentrequirements)was pursued with comparativelyless attention to cost considerations,whichmay haveinadvertentlyaffectedthe overall cost of energysupplies and thus, their availabilityto lower incomegroups. Adheringto the objectivesof energy self-sufficiencywould not necessarilylead to a least-costenergysupply strategy in the first place. Rather, it would implythe appropriationby the energy sector of economic resourcesrequiredelsewhere,leadingto reducedeconomicgrowth overall. Developing nationalsupply systemswhen cheaper import options exist will adverselyaffect public and private investmentelsewherein the economy. iBecauseof the high import content of investmentand recurrent costs, this will also have an adverse impacton the balance of payments. Over the life of a project, the impact of external debt service on the balance of payments may well exceed the costs of imports. The foreig;ncosts of a committedproject, includingdebt service, has to be met whetheror not demandin fact rises sufficientlyfor full use to be made of that investment,whereas imports within certainlimits can be varied to match demand. (b) Risk of supply interruptions: Becauseof costly interruptionsof energy supplies, the Governmenthas become aware of the importanceof ensuring supply reliability. The objective of increasing reliability has tended to be equated, however, with that of reducingimportdependence. Securityof supply shouldnot be taken to be synonymous with self-sufficiency.Whereopportunitiesexistto share supplysystemsamonga number of countries, supply security may actually be enhanced through import agreements. -20Interconetg nationalelectricitygridsallowsfor sharingof reservecapacity,enhancing system reliabilityat lower cost than would be the case in nationallyIsolatednetworks. Thus, if decisin are to be consistentwith maximizingthe economicgrowth potental, then energyprojectsneedto be assessedin teamsof their impacton supplyreliabilityand costs combinedand not simplyin tems of their physica location. (c) Target level of reliabilityfor planning purposes: Minimizingthe costs of supplies by combiningimportand domesticsupplyoptionsleaves open the questionof what level of reliabilityshouldbe aimed for. There is a trade-off betweenthe objectiveof achieving maximumsupplysecurityand the needto ensureenergysuppliesat leastcost. Achieving the former is boundto imposesubstantialcostson the economyand tie up fundsthat are required for investmentelsewhere,reducingoverallgrowth, whereas providingtoo low a standard of reliability will impair the operations of enterprises subject to frequent energycuts, which also will lead to lower investmentand growth. In the electricitysubsector, restricting imports to not more than 25% of supplies and applying a strict reliability criterion of five hrs/year loss-of-loadprobability(LOLP) would require a costly accelerationof investmentto build up domesticgenerationcapacity. Compared to a LOLP criterion of 20 hrs/year, the additionalcost is at least 1989Z$674 mn over the 1990-2010period. For liquid fuels, plans to raise strategicstocks to six monthsof consumptionto be stored undergroundwould entail additionalcosts of Z$350 mn and would be higher as internationalpetroleumprices increase.The costs of upgradingthe existingrefineryat Ferukaor buildinga new refinerywould rangefrom Z$150-450mn, and domesticrefiningwouldbe more costlyand less securein most casesthan the supply of petroleumproductsprocuredunder co:dractas at present. lTus, this project would not relate well with stated developmentpriorities. The Government's program of increasingthe ethanol-gasolineblendratio to 20% (up from about 12%at present)would entailinvestnent costsof approximatelyZ$120 mn, and be uneconomicevenat relatively high internationalpetroleumprices if ethanolproductionwere to be based on sugar as raw material. Whle the break-evenprice for ethanol wouldhave to be just about 85% of the present import costs of gasoline,the option would be only ecnomic if surplus molassesare used. Domesticethanolproductiondependscriticallyon the availabilityof agricultural raw materials and would therefore improvethe supply security for liquid fuels only marginally. (d) Costs and risks of new technologies: To the extent that the naional options under considerationinvolvecomplextechnologieshitherto untried in Zimbabwe, there is the risk of operationalcomplicationswhich would increasecosts and reduce the reliability of energy supplies, rather than enhancing them. Coal liquefaction as a means to substitutefor importedfuels wouldinvolveproductioncostsof at least US$450-500/toe, and investmentcosts would be about Z$1.2 bn for a 0.2 mn tpy plant which would satisfy only about 25% of the domesticdemand for liquid fuels. Coal-basedammonia productionwould entail initial capital costs of Z$250-500mn and production costs of about US$500/M.T, i.e. 50% more than the cost of imported ammonia. Local -21 producionof ammoniaand of liquidfuelswouldenlancesupplysecurityonlyto the extentthatthe plantsaremadetooperatewitout majorinterruptions.However,naphta refiningand the use of blue water gas and/or coalbedmethanegas for ammonia productionare recommended for furtherstudy. Otheroptionsmaybecomeviableunder differentpriceconditionsandfuturetechnological advancement. COSTS OF PLANING APPROACH INVOLVINGSTRICT RELIABILITY& SELF-SUFFICIENCYCRITERIA Program or Proiect Key Cost Paramueers (1989 ZS mn) Commentsand Rccommendations 1. ELECTRICITy Generation planning Fiw hrslyear LOLP 674 Cost is the additionalamountneededas comparedwith a 20 hrs/year LOLP criterion. 11. COAL Ammonia:Retrofit existing Sable plant or new plant 300 tpd plant capacity Liquefaction 0.2 mn tpy plant capacity 200-500 1,200 Productioncostaof aboutUS$500/M.T.,50% more than importedammonia,with hightoctmologicalrisks. Study of blue watergas generadonto produceammoniafrom synthesisgas recommended. Plant wouldsatisfyonly 25% of domesticdemand for liquidfuels at a cost of USS60-701B of oil equivalent. High technologicalrisk. Not recommended. Ill. LIIUID FUELS Strategic Storage Six months storage Recomimissioned 20,000 BD or new Ferka pant Xcflnery capacity Ethanol Expansion 20% blnd into gasoline 350 Rather than six months,storagefor three monthsis recommended.Costscouldbe reducedbyZ$530an over 20 yeats. 150-450 Product supply less rather than more secure, as pipeline stillneededtosupplycrudeasweilasperoleum products, which wouldadd to productdeliveryuncertinty. Importationof refinedproducts shouldbe continued. Optionof naphthaprocesing could be invesgated. 120 Btanolproductionuneconomicifderivedfromsugarcane ratherthan molsses. Recommendedethanolbleodto be markdeted only in areas close to produetion. - 22 3.15 All told, because of higher-costdomestic energy supplies, a considerableeconomic sacrificewas incurred, estimatedto have totalledalmostZ$1 bn during 1985-89. Giventhat part of the funds associatedwith excess costs of energy would have contributedto investment, it is not just a questionof foregoingimmediateGDP but also of reducingthe futurerate of growth. While importsfrom neighboringcointries wouldhavecarried (andstill carry)the risk of supplyinterruptions,the cost of selfsufficiencymay have evenbeen higher if allowanceis made for the foregonetrade that couldhave been generatedthrough Zimbabwe's energy imp rts. This illustratesthat self-sufficiencyhas a price, which is not necessarilyoffset by improvedsupplysecurity,especiallyif the operationalproblemsencountered with domestic energyproductionwere to be brought into account.2/ 3.16 While the Government'sobjectiveremains to attain both high technical reliabilityand strategic securityof energysupplies through maximumuse of local energy resources, a proper balance needsto be struck betweencostsand supplysecurity,basedon an assessmentof acceptablerisk and costs of supply interruptions. This is importantfor designing a strategy where different options can be explored and a decisionmade on the basis of cost-benefitanalysis. For electricity,the Government's priorityto restrict importsto not more than25% of total suppliesand to applya strict reliabilitycriterion of five hrs/year LOLP would require an accelerated investmentpattern and build-up of generating capacity, in particular the developmentof KSE at a cost of approximatelyZS$440 mn.l0/ Compared to a LOLP criterionof 20 hrs/year, the additionalcost is at leastZ$674 mn over the 1990-2010period. Pursuingsupplyoptionsthat are not least-costsimplybecausethey reducedependenceon foreign energy supplieswill adverselyaffect other public and private investment,and becauseof high foreign costs of investmentand current operations,they will ultimatelyeffect the balanceof paymentsas well. RegionalCooperationOptions 3.17 The costsof energysuppliesto Zimbabwecanbe considerablyreducedthrougha strategy based on well-chosenprojects of regional supplies, as a meansto capture comparativeadvantagesand economiesof scale. Energysuppliesfrom neighboringcountrieshavebeenobtainedin the past and offer scope for further increases,often at lower cost than could be domesticallyproduced. Electricityfrom Zambia has been obtained sincethe late 1970sand will be availableto Zimbabweover the foreseeable future. In addition, up to 500 MW of firm supplies are planned to be contracted from HCB in Mozambique. The interconnectionwith CahoraBassa could also justify the conjunctiveoperationwith Kariba, materializinga gain of possiblyas high as 100 MW and 600 GWhnet p.a., which would allow postponing significantelectricity investmentin Zimbabwe. Over the longer term, once the Batoka hydropowerscheme is completed, electricityexports at a substantialscale could become feasible to Botswanaand, possibly, South Africa. In turn, a high-voltagelink with South Africa would open the 2/ OIQ Al SheHwangepower station,therewereproblemsrightfromthe start: the commnWissioning of Stage I hadto be delayed when a boUerexplodedin 1984. A transforneraccidentin 1989 reducedavailablecapacityby 260MW,just at the tine when ekectrir.y suppliesfron Zambia were discontinued. However, whie Hwangedid not make total selfsufficiencypossible, it strengthenedZlnbabwe's bargainingpositioninsubsequentnegotiationsover electrity bports with Zambia and Mozambique. Unlessstatedotherwise,costs in this Reportare in 1989prices and exchangerates. 23 possibilityto aquire electricityfrom that countryon an emergencyor permanentbasis and eventually, wheel electricityfrom HCB throughZimbabweand South Africaback to Mozambiqueat a lower tariff than for purchases of electricityby Mozambiquefroa South Africadirectly. Tle Batokascheme will require an agreementwith Zambia(as it will affectthe riparian rights of that country)whP-3aswheeling Zambian electricityacross Zimbabweto Botswanadepends on Zimbabwe's cooperationin making its transmissionsystem available. 3.18 In the liquid fuels subsector,poolingthe processingof petroleumproducts in accessible refineries in the Region(Maputo, Ndola, Durban,and possibly,Dar Es Salaam)may offer region-wide economic advantages over the importation of some petroleum products from outside the Region. Likewise, importingfertilizers produced in Mozambiqueand Tanzania from local natural gas may be lesser-costthanproductionin Zimbabwebasedon coal gasification. Indeed, regionalenergycooperation is an objectivein its own right, as it would facilitatea neededexpansionin trade, besides enhancingthe reliability of energy supplies. Energy purchases by Zimbabwe would provide its SADCC partner countrieswith export outlets that would hardly exist elsewhere, assistingthese countriesin generating much-neededforeign exchange which would increase their capacityto import Zimbabweangoods.ll/ Exports of Zimbabweancoal to Zamnbiaand Zaire offer only minor sales outlets but by facing internationalcompetition,they might add dynamnism to economicdevelopmentand assist in institutional strengtheningin the coal subsector. REirements andRecommendatio 3.19 In view of the Government'snew economicpolicy directions, the objectivesfor the energy sector have a different impactthan in the 1980s,and need to be re-considered. The dominant objective of economic efficiency and growth implies that sufficient energy should be supplied to accommodateeconomicgrowth, but at minimumcost so as not to crowd out investmentin the other sectors of the economy. Sustainableenvironmentalmanagementalso needsto be ensured. To makethis feasible, the strategymust focus on (a) limitingenergydemandto the extent consistentwidthmaintaining growth through pricing based on economiccosts and more efficient use of energy; (b) choosingan appropriatelevel of reliabilityof supply; and (c) exploitingregionalco-operationopportunitiesto reduce costsand improvesupplysecurity. The objectiveof the energystrategyenhancingrural developmentalso remains important. 3.20 The basic issue is whetherthe Government'senergydevelopmentstrategy is consistent with the overall objectiveof enhancingthe efficiencyand resilienceof the economy,through supplying energyreliablyand at least cost. Therefore, it needs to be determinedwhetherspecificproposalsin the individualsubsectorsare economicallyviable as well as conduciveto. enhancingthe securityof energy supplies. The Governmentis cautiousin acceptingthe risk of supply failure which it perceives to be associatedwith increasedenergyimports.However,sincesecurityof supplyis not synonymouswith self1LI Even if theproportionof thieforeigncurrencyreturnedprovesto be small, vtrengthening zhe econmy ofMoJblqae shold be an inporrantobjectiveforZbnbabwe. Thedirectcostsof mdiary Inuerventon insuppor of the Government ofMozambique,the xcesscostsof using Southw Afican transportroutes,pis theindirect costsofsvusalg apotential tradingparner impoverisheabycivil war, have been very high toZinbabwe. -24 sufftciency,it Is impora to assessprojectsin termsof their impacton supplyreliabilityinsteadof teir physicallocaion. The additionalexpendituresrequiredto achievemaximumsecurityare justified only if the risk of supply iiRterruptions and the asswciatedcosts are high. Energy supplyoptions involving regionalcoopeatin may be lower-costand more reliablethan some nationalalternatives. For regional energy cooperationto be successful, well-definedpolicies, programs, and projects are essential, to be prepared and implementedby effective institutionswith clearly defined responsibilitiesin planning, implementation,and operationof regionaloptions. The followingprinciplesshouldguidethe integratedenergy strategyfor Zimbabwe: 3.21 1t (a) Acceleratedeconomicdevelopment: Energy choicesshouldbe made so as to enhance economicgrowth and development,whileensuring that resourcesare exploitedin such a way as to minimizepossible negativeeffects on production, consumption,and the environment,and that non-renewableresources are used at a rate consistentwith longterm nationalneeds and goals. (b) Balancedenergymanagement:Meetingunfetteredgrowth of energydemandparticularly electricity would be costly. Investmentelsewhere in the economy would have to be curtailedto makethe resourcesavailablethat are requiredby the energysectorto achieve supply at that level. The reduced investmentwould imply lower economicgrowth and lower energydemand,callinginto questionthe very needfor the projectedenergysupply investment.Therefore,futureenergydemandshouldbe held withinlimitsconsistentwith economicgrowth, to be achievedprimarilythroughhigher energyefficiency. Measures to improvethe efficiencyof energyproduction,transformation,marketing,and end-use throughprice and non-pricemeasuresare importantoptionsconsistentwithboth least-cost supplies and supply reliability. In circumstanceswhere the same level of output could be achibvedwith lesser energyinputs, the impliedwastageincreaseseconomiccosts and prejudicesthe primaryobjectiveof acceleratingeconomicgrowth. (c) Reliabilityof supply: Basedon an assessmentof risk, the target level of reliabilityto be chosenfor planningpurposesshouldbalancethe requirementfor adequateenergysupplies with minimizingthe costsof supply,therebyfreeingup resourcesfor investmentin other sectors. The actual reliability achieved will depend to a large extent on how uncontrollableuncertaintiesresolvethemselvesover time. Theplanningcriterionshould be reviewedperiodicallyin the light of changingcircumstances.I12 (d) Regionaldevelopment:Opportunitiesfor regionalco-operationin energyshouldbe fully utilized. This appliesto regionalsupplyoptionswhich are lower-costand morereliable than nationalalternatives. The indirectbenefits to neighboringcountriesof importing For electriity, in viewof the sizeablesavingsto be made,and thejudgementthat the riskofsap interrsUonswrill not therebybe signicantly increased,tie strategyreconmendedbytheEvaluaon team incorporatesthe higherinport optil -25energy (such as increased capacity to import, more stable economies, and improved securityon their part) shouldthereby be givendue consideration. (e) Rural development: The Governmentwants to increase energysuppliesto rural areas, especiallycoal and electricity,in order both to promotenrualdevelopmentand to arrest environmentaldegradationcausedby deforestation. Besidestacklingthe fuelwoodissue directlywith woodlot programsand imptovedstoves, energy substitutesmay also have a role to play. In the longer term, rural electrificationwill be importantfor spatially balanceddevelopment,but at present, they need to be targeted at rural centers with economicpotential. Electrificationof small urban centers can alleviatethe fitelwood situationonly marginally,but its growth-supportingimpactmaybe considerablethrough quantum rises in productivityin small-scale industrial production or in agriculte through irrigation. Therefore, the strategyshould includecost-effectivemeasuresthat increase energy supplies, allow more diversified end-uses, and reduce the rate of deforestationin the rural areas. - 26 IV. ENERGY RESOURCES, SUPPLY,AND DEMAND CurrentPosition Energy Resource 4.1 To underpinthe Government'sstrategyof economicdevelopment,Zimbabwecommands substantialenergyresourcesconsistingof large-scalereservesof coal, hydropowerand, to a lesser extent, biomass. Probable reservesof gga locatedin 21 fields are estimatedat about 10.6 bn M.T. in lb, of which some 2 bn M.T. are consideredmineableby cheap open-cast methods. Proven reserves are approximately302 mn M.T. at Wankie,Zimbabwe'slargestoperatingmine (i.e. 185mn M.T. of steam coal and 117 mn M.T. of coking coal) and at least 200 mn M.T. at Sengwa, 13/ equivalentto more than 60 years of consumptionat 1989levels. At Wankie,coal at the lower seams is of higb quality, with an energy contentof 7,410 kcal/kg and ash contentof less than 18% whereas the lower-qualitycoal at the top of the seams (about 6,000 kcal/kg) is exclusivelyused for electricity generation. Abundant hydroelectricnotential along the Zambezi River is shared betweenZambia and Zimbabwe. The total potentialin that region is estimatedat 37 TWh p.a., of which 10.6 TWh has been developedat Kariba and Victoria Falls. Installed capacity on the Kariba South bank, 666 MW, equals about 40% of Zimbabwe'spower generatingcapacity. (anaddition,600 MW are installedat KaribaNorth in Zambia.) KaribaSouth's capacityis being increasedto 750 MW under the WorldBank-financedPower n project (ProjectNo. 2900ZIM). Additionalprojectson the Zambeziare beingconsidered,notablyKaribaSouth Extension and Batoka Gorge. The remaininghydropower potential within Zimbabwe is small by comparison,i.e., about2 TWh p.a.: most of the rivers other thanthe Zambezihave low flows and small storage sites (the Sabi and LimpopoRivers in southernZimbabwebeing the most important)although their potentialhas not been filly investigated. Aboutfifty dams have been built for irrigationand water supplypurposes,some of whichcouldbe equippedto generateelectricitytotallingabout2 GWhannually. Severalother schemesare under study.lA/ 4.2 Biomassresourceare locatedon approximately7.5 mn ha, i.e. the area of survivingand accessiblewoodlandsamountingto about 20% of Zimbabwe'slani area. The total accessiblegrowing stock of wood is estimatedat 320 mn M.T., with a sustainableyield of 13 inn M.T. p.a. (both airdried).I5/ On the nationallevel, the use of woodfuelsis approximatelyequal to the sustainableyield but there are serious regional imbalancesof resources and demand mainly caused by over-cuttingon JI BRased on a maximum strippingratio of 7:1 and an ash contentof 20%. Provenreservesat Se&gwaare not entiely delineated. 240 mn M.T. of reservesat Wankieand the enire reservesat Sengwaare opence.stabk 14/ The dischargesof smalt rivers in Zimbabweare highly seasonal and variablefrom year to year, so substal reservois wouldhave to be constructedto obtaina guaranteedflowthroughoutthe year. Mii hydroschentesatsch sites are unlikelyto be economicand competitivewith the largehydropowersources. ISt Accordingto the 1987forestrysurvey. -27communallands. Theseproblemsneedto be addressed rough acceleratedtree planting,sustainedforest management,improvedefficiencyof woodfuelproduction,conversion,and end-use, and to the feasible degree, substitutionof otherfuels for woodfuels. The Governmt is in the processof carryingout these measuresthroughstrengtheningthe forestryinstitutions. Amongagriculturalresiduesused as fuel, sugar cane molasses which are processedto ethanol are the most important. Small quantitiesof bagasse are used to generate electricity in sugar mills. Other residues are too scattered or have higher-value alternativeuses to be economicfor fuel use. 4.3 No byAdrocj deposits have been discove-ed, and no explorationwells have been drilled, even though sedimentary areas in the Zambezi basin amount to about 100,000 km2 . An explorationagreementconcludedwith MobilCo. in 1990covers3 inn ha on the Zimbabweanside of this basin. Drilling may take place by 1993followingthe evaluationof seismicresults. 'he Sar 12al is relativelyhigh (daily radiationis estimatedat about2 kJIcm2 ; most parts of Zimbabwereceiveabout 3,000 hrslyear of sunshine). The Universityof Zimbabweis activelyinvolvedin solar energyresearch. Solar 'mergyis used for waterheating in some hotelsand hospitalsand for tobacco curing, but current technologyhas only limitedcommercialprospectsexcept for specifiedlocal use. Finally, wind energy is not likely to be a major contributor to meeting energy requirementseconomicallyother than to supplementdiesel-generatedpower(e.g., for small-scalewaterpumping)in remoteareas, notwithstanding good wind regimes in the centraland southernpans of Zimbabwe. EnergySupplies 4.4 Coal is the most importantindigenoussource of primary energy, contributingabout44% of total suppliesin 1988,followedby fuelwood(34%), hydropower(4%), and ethanoland bagasse(3%). The remainder is provided by energy imports, i.e. petroleumproducts (13%) and electricity (2%). Generationof hydropower(2,663 GWh in 1988)and domesticproductionof ethanol (some 30,000 a3) are minor comparedto other sourcesof energy supplies. Requirementsfor petroleumproducts are met entirely through imports whose cost in 1989 was about US$210 mn (without counting the cost of safeguardingthe petroleumproducts pipeline in Mozambique),equivalentto 11.9% of merchatolise imports. Electricityimportsin 1988 were US$10.8 mn for 1,347 GWh or 14% of electricitysupplies in that year, mainlyfrom Zambia,with intermittentminorsupplies from South Africa. Enev Co io 4.5 Energy conversionconsists of (a) transformationof coal into thermal electricity,coke, and small amountsof benzol; (b) generationof steamnand electricityfrom bagasse; (c) productionof ethanol from molasses; and (d) production of small amounts of charcoal from fuelwood. Energy conversionincreasedfrom 3% of final energyconsumptionin 1980to 21% in 1988becauseof the large increase in coal-basedelectricitygeneration. Transformationof 2.4 mn M.T. of coal into electricity accountedfor approximately90% of primaryenergyconversionin 1988,most of it at the HwangePower Station. Processingof coal into coke absorbed approximately5% of national coal supplies in 1988. There is no petroleumrefiningin Zimbabwe. In the electricitysubsector,transmissionand distribution lossesare equivalentto about9% of supplies,which is relativelylow for a system like Zimbabwe's. -28Table3: 1980; 1988 PRIKARY ENERGY SUPPLIES ANDFINALENERGY CO#SUNPtION, (Tons of Oil Equivatent and Percent) A/ TOE'000 Percent TOE'000 Percent Percent p.a. 1. PRIMARYENERGYSUPPLIES Output Hydro CoaltNet of Exports) h/ Fueltood Ethanol & Sagasse 322 1,481 1,645 150 7.7 35.6 39.7 3.6 229 2,702 2,084 190 3.7 44.1 34.1 3.1 -4.3 7.8 3.0 3.0 558 13,4 116 804 1.9 13.1 n.s. 4.7 4,156 100.0 6,125 100.0 Imports Electricity Petroleum Products Totat 11. FINALENERGYCONSUPTION Fuetwood Electricity Coal Coke 68 Petroleum Products Ethanol Total 1,637 597 1,164 1.7 597 5 40.2 14.7 28.6 97 14.7 0.1 2,084 731 1,101 2.0 804 _1 43.0 15.1 22.8 4.5 16.7 0.41 3.1 2.6 -0.7 4,068 100.0 4,832 100.0 2.2 3.8 p/ Grossinputs, withoutreftecting coversion efficiency. bi emorandumItem: Net Coal and CokeExports CoalExports Coke Exports Coal Imports Coke Imports 1980 TOE'OO 216 (132) (84) (-) t-) 1988 TOE'OOO 38 (46) (59) (25) (42) Source: DOERD;ZESA;NOCZIN;WCC; Evaluation teamestimates Energy Demand Compositionand Growth 4.6 Reflecting the availabilityof indigenousenergy resources and the size of the rural population,fuelwoodprovides the largest share of final energy consumption(37%), followedby coal (23%), petroleumproducts (17%) and electricity(15%). However,becauseof relativelyhigh income levels, advanced industrialization,and the importanceof coal for total energy supplies, commercial energy consumptionper capita (512 kgoe in 1987) is relatively high for Sub-SaharanAfrica, being approximatelyfive and fifteentimes the equivalentlevelsof Kenya and Tanzania,respectively. -29Growthin energydemandduring 1981-88,2.2% on annualaverage,generallywas in line 4.7 with economicgrowth. The demand-stimulatingimpactof low energy prices, which were not changed over extendedperiods, waslargelyneutrized by supplyrestrictions. Coaldemandwas largelysustained by commissioningof the HwangePower Stationwhereas the consumptionin all other sectors and coal exportsdeclinedsharply. Liquid fuels and electricitydemandgrew in 1981-89at 3.8% and 2.8% p.a., respectively. Final EnergyConsumptionby Fuel Type _oa. Three majortypesof coalare consumed,i.e. relativelyhigh-qualityWankiecoking 4.8 (WC) coal, Hwange power station (HPS) coal (a 25% ash, non-cokingcoal exclusivelyused at the Hwangepower station), and Sengwacoal (a low-sulphur,non-phosphorus,non-cokingcoal suitablefor the ferrochrome industry, available from 1991 onwards). Besides power generation, coal is predominantlyused in manufacturingwhich accountsfor 56% of final consumption(i.e. excluding consumptionin electricitygeneration)whileagricultureaccountsfor 18%, services, 12%,transport, 11%, and mining, 3%. Liguid Fuels. These are largelyused in transportation(78%)and to a muchlesser extent 4.9 in agriculture(9%), industry(6%), services,and households(about4% each). Consumptionincreases were spurred by low prices which were unchangedin nominal terms during 1986-90. Diesel is the dominantfuel, increasingat 5.3% p.a., in 1981-89and accountingfor about53% of petroleumproducts consumption. Diesel as boiler fuel in some industriesprobably could be economicallyreplaced by domesticcoal, which wouldresult in significantimportsavings. Consumptionof gasolineblendincreased at only 2.1 % p.a. over the period whileaccountingfor 30% of liquid fuels demand in 1989. Ethanol is used exclusivelyas a gasoline extender. No fuel oil is consumedin Zimbabwe. Electricit. Consumptionof electricityis concentratedin manufacturing(47%), followed 4.10 by mining(18%), the residentialsector(16%), agriculture,services(9% each), and transport(1%). This reflectsthe effectof low preferentialtariffsfor someenergy-intensiveindustriesand residentialconsumers and the restrictedextensionof the distributionnetworkto pern-urbanand rural areas. The three largest users - Sable Chemicals, ZIMASCO, and ZIMALLOYS- account for over one-half of industrial electricitydemand,whereas in mining, three companiesaccountfor about40% of sectoral consumption. A significant componentof agricultural demand is for irrigation. (Electricityconsumptionincreases sharply in years of drought). Electricitygrowth in the past has been stifled by shortagesof funds and materialsfor distributioninvestmentespeciallyfor new connections. Electricityconsumptiongrowth since 1980was less than during the 1970s,whichlargely reflectsthe slow-downin industrialand mining activity. However,residentialconsumptionof electricityincreasedsteadilyat 4.8% p.a. during 1981-88, as deliveriesto residential consumerswere given preference at the time of shortages. Nevertheless, restrictionsin new connectionsprobablydepressedactualelectricitygrowth below its potential. - 30 Tabte 4: ENERGY INDICATORS, 1980; 1988 (Tons af Oil Equivalent and Percent) Composite EerMrSuppty/DeEmaSBalance (TOE OandiPercent) TOE I00 Primary Supplies Production Net lmports Percent 3 939 (3 814) (125) SecondaryEnergy Inports Conversion and Distribution Losses Net Supply SecondaryExports Final Consamption 100.0 (96.8) (3.2) SS8 14.2 389 9.9 4,108 104.3 84 2.1 4,024 102.2 Distribution of Final Consumption (Percent) FuelwoodCoal Coke CharcoalEthanolAv.Gas LPG Jet KeroseneGasotineDiesel Electr.Total Final Consumption 40.5 28.9 1.7 0.1 0.0 0.1 0.2 0.9 0.5 4.5 7.6 14.8 100.0 Residential Transport Agriculture Industry/4ining Commercial/Other 35.0 0.0 4.3 1.1 0.0 0.0 3.7 3.1 18.8 3.3 0.0 0.0 0.0 1.6 0.1 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.9 0.0 0.0 0.0 0.4 0.0 0.0 0.1 0.0 0.0 4.5 0.0 0.0 0.0 0.0 5.4 1.6 0.6 0.0 2.0 0.0 1.1 10.3 1.S 37.5 14.? 10.2 32.8 4.9 19M8 CompositeEnergy Supply/Demand Balance (TOE'OOO and Percent) TOE/1000 Percent 5 338 (5*243) (95) 100.0 (98.2) (1.8) PrimarySupplies Production Net Imports SecondaryEnergy Imports 846 15.8 Conversion andDistribution Losses 1,303 24.4 met Supply 4,881 91.4 59 1.1 4,822 90.5 SecondaryExports Final Consumption Distribution of Final Consumpticn (Percent) Fueld Coal Coke Charcoal Ethanol Av.Gas LPG Jet Kerosene Gasoline Dits Etectr.Total FinalConsumptIon 42.8 22.8 2.0 0.2 0.3 0.1 0.1 1.5 0.8 4.4 9.7 15.2 100.0 Residential Transport Agriculture Industry/Mining Coamercial/Other 37.0 0.0 4.6 1.2 0.0 0.0 2.4 4.1 13.5 2.8 0.0 0.0 0.0 1.8 0.1 0.0 0.0 0.0 0.1 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.1 O.G 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 1.5 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 4.4 0.0 0.0 0.0 0.0 6.9 1.5 0.7 0.6 2.4 0.1 1.4 9.9 1.4 40.4 1S.8 11.6 27.6 4.8 Source: DOERD; ZESA;NOCZIN;WCC;Evaluation teamestimates. - 31Consumption 5y EconomicActivity 4.11 The resWdnialse accountsfor 40% of final energyconsumption. Its demnand during 1981-89increasedrapidlyfor liquidfuels especiallykerosene(9.3% p.a.) and for electricity(4.8% p.a.). However,electricityand liquidfuels combinedstill meet lessthan 10%of residentialenergyconsumption whilebiomass accountsfor virtuallyall rural energy use. 4.12 In industryincludingmining (28% of final energy consumption),coal and coke by far are the most importantenergy sources, accountingfor 55% of sectoral consumptionin 1989, while electricity,biomass, and liquidfuels accountfor 36%, 6%, and 3%, respectively. Consumptionincreases during 1981-88were fas: for liquid fuels (5.1% p.a.) but less than 2% p.a. for electricitywhereas coal consumptiondecreasedby 6.6% p.a. in mining. 4.13 Energyconsumptionin transort is composedof diesel, 44%; gasolineblend, 30%; coal, 16%; jet fuel, 10%, and electricity,less than 1%. Consumptionof liquidfuels increasedby 4.3% p.a., primarilythat of diesel (5.6% p.a.). Coaldemand,on theother hand, declinedconsiderablysince NRZ replacedsteam locomotiveswith diesel and electric locomotives.(Only about 483 km of the 4,304 km railway networkare electrified.) 4.14 In agriculture, biomass meets 40% of energydemand, followedby coal (35%), liquid fuels (13%), and electricity(12%). Relativelylow consumptionof liquid fuels was at least in part due to increased electricityuse for irrigationpumping. Finally, in the commercialseoxr, coal and coke accountfor 60% of energyconsumption,electricity,28%, and liquid fuels, 12%. Energyconsumption increasedfairly slowly, i.e. just over 1% p.a. for all fuels. Table5: INCREASES IN CONSUMPTION OF COAL,LIQUIDFUELS,AND ELECTRICITY, 1981-1989 (Percent p.8.) Coal Total Uses Agriculture Electricity Generation Industry Mining Transport Residential Other Exports pj 4.1 6.1 25.2 2.6 -6.6 -3.6 1.9 0.9 -30.6 LiquidFuels Electricity 4.4 1.3 n.a. ) 5.1 ) 4.3 9.1 1.5 n.a Undefined sincetherewas no railwayuse of electricity in 1980. Source:DOERD;ZESA;NOCZIM;WCC; Evaluation team estimates. 2.3 3.8 n.a 1.9 1.6 na 4.8 1.4 1.9 - 32 - Eneg DemandOutlook. 1990-2010 Overview 4.15 The Evaluationteam has developedalternativedemand scenariosfor electricity, liquid fuels, and coal for the 1990-2010period. These scenariosare based on (a) alternativeassumptionsof GDP growth, i.e. 3% p.a.-Trend Case- and 4.5% p.a.-Base Cases- respectively,and (b) observed elasticitiesof energydemandto changesin GDP and sectoralvalue-addedand to changesin energyprices (Annexes17; 18). 4.16 Two distinct scenarioshave been developed for the Base Case. The Policy-neutral Scenariois predicatedon the assumptionthat little if any energydemand managementis practiced. In contrast,for the BaseCase/Policy-activeScenario,it is assumedthatdemandmanagementthroughpricing and non-pricingmeasuresto improveenergyefficiencyis givenhigh priority. The Base Case and Trend Case forecastsgenerallyaccordto the historicalpatternsof relativegrowthbetweenthe energysector and the economy. With higher GDP growth projected to be sustained during 1990-20'0, in the Base Case/Policy-activeScenariothe increase in electricitydemand would accelerateto 3.9% p.a., whereas the demandgrowthof liquid fuels woulddeclinefrom its 1981-89annual rate of 4.4% to 4.1% p.a., and coal demandwouldincreaseless than2% annualaverageunlessadditionalunits are installedat Hwange. The Trend Case and Base Case/Policy-neutralScenarioindicate similar relative patterns(Table 6). Electcity 4.17 The Evaluation teamnassumes that the material and financial constraintsto system expansionare alleviatedso that the numberof connectionscan be increasedto about 10,000p.a. during 1990-95,comparedto 3,000-4,000p.a. in recent years. This would be reflectedin a higher elasticity of electricitydemand to GDP growth and consequently,under all Scenarios, in acceleratedelectricity consumptiongrowth, especiallyin industry (4.9% p.a. under the Policy-activeScenario, comparedto 2.3% p.a. in 1981-89).Industry is assumedto be the driving force of future electricitygrowth as well as of GDP growth, predicated on relatively high growth of industrial value-addedand further high electricityintensityof industrialproduction.The share of miningin electricityconsumptionis projected to declineand that of the residentialsectorto remainunchangedat about 17%. All told, annualincreases in electricitydemand during 1990-2010are projectedto average 3.9% p.a. under the Base Case/Policyactive Scenariobut 5.1% under the Base Case/Policy-activeScenarioand 3.6% under the Trend Case. 4.18 Future coal demandis more sensitiveto requirementsof the electricitysubsectorthan to GDP growth. Demandof HPS coal for thermalelectricitygenerationwould be subjectto considerable swings dependingon the mix of electricitysupplies (para 6.87). Electricity-relateduse apart, demand for HPS coal in both Base Cases is projectedto be relativelystatic and that of WC and Sengwacoals to grow at only 2% p.a. during the 1990-2010period. The installationof HwangeIII under the Policyneutral-Scenariowould increase the requirements for HPS ccal by as much as 1.1 mn tpy, and PROJECTED ENERGY 0E9n, 1995; 2000; 2010 (Physical Units anw Percent) Tabte 6: Estimated 1989 Change 1981-89 (Percent p.a.) 1995 TRENDCASE 2010 2000 8.551 2.3 10,685 12,687 Liquid Fuels t.#?000) 1,034 4.4 1,21? 1,376 coal (n.T. '000) A/ 4,503 4.1 3,229 4, 14 10,833 2.6 12,935 14,995 Electricity tGWh) GDP (1989 ZS n) Urban Population (mn) A/ 2.9 17.965 1.757 Change 1990-2010 (Percent p.O.) BOSEU SEPoICY-ACTtVE SCMUQlo Change 1995 2S00 2010 1990-2010 (Percent p.a.) 3.6 t1t9a 14,658 24,125 3.1 11,169 2.6 1,34? 1.679 2,648 4.6 1,311 1 613 4,448 3,321 3,499 4,643 14,107 17.580 14.107 17,S80 (4,368) -0.1 (5,S56) 1.0 20,152 3.0 S.7 SCENARIO BASECASEIPOLICY-NEUTRA, 2010 Change 1995 2000 1990-2010 (Percent p.a) 4.7 (6,1391 t.4 (7,287) 2.3 27,301 4.S 4.t tt,396 19,79 3.9 2.41t 4.1 (5,408) 0.9 (6,S56) 1.8 27,301 4.3 4.1 Cosldead Is projected to the output of WCCcoat has been dectining but Increased dm and for RPS coal more than offset this decline. 7 & 8 requiring atpproxiatety 1.1 en tpy of BPS coat; thse increase only moderately untless a further stage NwangeIs comissioned (i.e. NwangeIIIfunits alternatives are indicated in brackets for the year 2010). Source: DOCRD;SPA; ZESA; UOCZIN;MCC;Evaluation tem estfmates. 1 -34ob-to 2: PROJECTED ELECTRICITY DEMAND,1995;2000;2010 (GVh and Percent) EstimatedChangep.a. t989 Changep.s. 198189 t995__m2000 2011 1990-2010 (Percent) (G6d)(Percent)(GWII)(Percent) (GUh)(Percent) (Percent) TREND CASE Agriculture 698 3.8 827 7.7 953 Mining 1,499 1.6 1,611 15.1 1,768 Irdustry 4,150 1.9 5,280 Residential Sector 1,420 4.8 2,050 784 1.4 917 Services Total 8,551 2.3 10,685 7.5 1,265 7.0 2.9 13.9 2,129 11.9 1.7 49.4 6,417 50.6 9,479 52.8 4.0 19.2 2,504 19.7 3,737 20.8 4.7 8j6 1.045 100.0 12,687 1.355 8.3 100.0 17,965 7..5 ?A 100.0 3.6 6.3 3.8 BASECASE/POLICY-NEUTRAL SCENARIO Agriculture 698 3.8 879 7.6 1,059 7.2 1,537 Mining 1,499 1.6 1,692 14.7 1,915 13.0 2,450 10.2 2.4 Industry 4,150 1.9 5,901 51.4 7,972 54.4 14,549 60.3 6.2 Residential Sector 1,420 4.8 2,050 17.8 2,530 17.3 3,854 16.0 4.9 Services _ 784 1A 976 8.5 1.182 f 8.1 1735 7.2 3.9 Total 8,551 2.3 11,498 100.0 24,125 100.0 5.1 100.0 14,658 BASECASE/POLICY-ACTIVE SCENARIO Agriculture 698 3.8 857 7.7 978 Mining 1,499 1.6 1,641 14.7 Industry 4,150 1.9 5.722 Residential Sector 1,420 4.8 784 8,551 Serviees Total 7.3 1,257 6.6 2.8 1,741 13.0 1,925 10.0 1.2 51.2 7,248 54.1 11,427 59.6 4.9 1,998 17.9 2,337 17.4 3,152 16.4 3.9 1.4 951 8.5 1.092 812 1.418 2.3 11,169 Source: Evaluation team estimates. 100.0 13,396 100.0 19,179 7.4 100.0 L2. 3.9 - 35- increasesin coalconsumption by theelectricitysectorwouldaccelerateto 2.7% p.a. during1990-2010. In contrast,wihout Hwangem, coaldemandforeectricity 2010 in isprojectedto be 10%lessthanin 1990. Sinceduringthefirstyearsfbllowingthe completion of the CahoraBassainterconnection andthe Batokahydropowerscheme,electricitygenerationat Hwangewill decline,the offtakeof HPS coal is boundto declinealso (the outputof HPScoalwouldthen be determinedby the requirementsfor WC coal). Table 8 PRWECTED COALDENWAD, 1995; 2000; 2010 CN.TO00and Percent) Estimated Changep.s. Change p.e. 1989 1981-89 1995 2000 2010 1990-2010 (M.l'000) (Percent) (W.T.'000) (Percent) (M.T.'006) (Percent) (Percent) TRENDCASE Agriculture Etectricity Industry mining Transport other Exports Total 360 2,204 1,427 72 180 240 6.1 25.2 2.6 -6.6 -3.6 0.9 *30.6 395 607 1.684 50 205 278 tO 10 12.2 18.8 52.2 1.6 6.3 8.6 0.3 395 1,576 1.783 50 10 323 10 9.6 38.0 43.0 1.2 0.2 7.8 0.2 4,503 4.1 3,229 100.0 4,147 100.0 395 1,441g/ 2,029 50 10 433 10 9.0 33.0 46.5 1.2 0.2 9.9 _2 0.4 -2.0 1.7 -1.7 -12.9 2.9 -3_2 4,368A/ 100.0 -0.1 BASECASE/POLICY-NEUTRAL SCENARIO Agricultjre Electricity Industry Mining Transport Other Exports 360 2,204 , ."7 72 180 240 20 6.1 25.2 2.6 -6.6 -3.6 0.9 -30.6 395 1,760 1,729 50 205 299 _ 10 8.9 39.6 38.9 1.1 4.6 6.7 395 592 1,891 50 10 373 10 11.9 17.8 57.0 0.3 11.2 0.3 1.5 395 5.4 3,895 k/ 53.5 2,348 32.2 50 0.7 10 0.1 579 8.0 10 0.1 Total 4,503 4.1 4,448 100.0 3,321 100.0 7,287hW 100.0 0.4 2.7 2.4 -1.7 -12.9 4.3 -. 2.3 BASE CASE/POLICY-ACTIVE SCENARIO Agriculture Electricity Industry Mining Transport Other Exports Total Wy 360 6.1 2,204 25.2 1,427 2.6 72 -6.6 180 -3.6 240 0.9 20 -30.6 395 811 1,729 50 205 299 _ 10 11.3 23.2 43.4 1.4 5.9 8.5 _.3 395 1,914 1,891 50 10 373 10 8.5 41.3 40.7 1.1 0.2 8.0 4.503 3,499 100.0 4,643 100.0 4.1 Not allowing for Hwang Il/Junits 7 & 8. Allowingfor HiangeIII/units 7 & 8. Sggtc: DOERD;WCC; Evaluation teamestimates. 395 2,016q/ 2,348 50 10 579 0.2 1.U 7.3 0.4 37.3 -0.4 43.4 2.4 0.9 -1.7 0.2 -12.9 10.7 4.3 5,408g/ 100.0 0.9 - 36 Amongnon-electricitymarkets, coal requirementsfor base metal processingwill likely 4.19 decline, and for rail urnport virtuallydisappear. Nevertheless,there may be additionalmarkets in the industrialand commercialsectorswhich shouldbe evaluatedin more detail. In agriculture,consumption in sugar refiningand tobaccocuringmay increasedependingon substitutionprocesses. The use of coal as residentialfuel in rural areaswouldrequire majordisseminationeffortsand improvementsin transport infrastructure, both of which are difficult and costly. Exports are likely to be constrained by the contractionof the Zambiancopperindustry,limitedother regionalmarkets, and lackingcompetitiveness on international markets. (The cost of delivering Zimbabwean coal to any port exceeds current internationalcoal prices.) However,productionfrom Sengwawill replaceimportsof 0.1-0.2 mn tpy of low-sulphurllow-phosphorus coal. Requirementsfor cok also are likely to grow in line with industrial activity especiallyin metalprocessing. A shift in ammoniaproductionfrom electrolysis-basedto coalbased technologywouldresultin additionaldemandof 0. 1-0.2 mn tpy (whileelectricityrequirementsmay be reducedby 40MW). 4.20 In sum, if HwangeIII were to be commissionedby 2010, demandfor all coal types and uses is projectedto rise from 4.5 mn M.T. in 1989to 7.3 mn M.T. in 2010, equivalentto an annual demandgrowth of 2.3%. WithoutHwangeI1, coal demandby 2010 wouldbe just about5.4 mn M.T., equivalentto an average annualgrowth of 1%. There would be substantialand rapid swings in coal consumptionin the intermediateyears and a sharp declinearound 1995, in line with changesin thermal power generation(Table 9). Liquid Fuels 4.21 In the Trend Case, consumptionof all liquidfuels during 1990-2010would increaseless than during 1981-89. In contrast, under the Base Case/ Policy-neutralScenario, longer-termdemand growth would acceleratesomewhatto 4.6% p.a. (5.9% p.a. for diesel, 1.7% p.a. for gasoline blend). The share of diesel in liquid fuels consumptionwouldreach nearly 70% by 2010, which would lead to extreme vulnerabilityto rises of middle distillate prices on internationalmarkets, and which could be counteractedthrough procurementarrangementsonly with difficulty. This demonstratesthe need for price measures,especiallyin regard to diesel and other middledistillates. Under the Base Case/PolicyactiveScenario,thesemeasuresare assumedto be taken, resultingin lower overalldemandgrowth (4.3% p.a.) and for diesel in particular(5%). Ethanol consumptionis assumedto remain at present levels in all three Cases, so that its share woulddecline from 3% to 1-1.5% of liquid fuels consumptionduring 1990-2010. -37- Tabte 9: Estimated 1989 PROJECTED LIQUID FUELSDEMaND,1995; 2000; 2010 (m3 '000 and Percent) Change p.a. 1981-89 1995 Cml'000) (Percent) 2000 D3'000)(Percent) 2010 (m3'000) (Percent) Change p.s. 1990-2010 (Percent) TRENDCASE Diesel Gasoline Blend Jet Fuel Kerosene Aviation Gasoline LPG Total 566 315 85 53 5.3 2.1 7.2 9.7 701 328 92 78 57.6 26.9 7.6 6.4 824 338 96 99 59.9 24.S 7.0 7.2 1,119 362 100 153 63.7 S 11 -4.5 1. 5 13 0.4 1.1 5 14 0.4 1.0 5 18 JAQ 0.1 2.6 1,034 4.4 1,217 100.0 1,376 100.0 1,757 100.0 2.6 1,868 452 143 153 70.5 17.1 5.4 5.8 5.9 1.7 2.5 5.2 20.6 5.7 8.7 0.3 3.3 0.7 0.8 5.2 BASE CASEtPOLICY-NEUTRAL SCENARIO Diesel Gasotine Blend jet Fuel Kerosene Aviation Gasoline LPG Total 566 315 85 53 5.3 2.1 7.2 9.7 804 34? 100 78 59.7 25.8 7.4 5.8 1,068 375 114 99 63.6 22.3 6.8 5.9 5 11 -4.5 1.5 5 14 0.3 1.0 5 18 0.3 _.1 5 0.2 _27 tO 0.1 4.7 1,034 4.4 1,347 100.0 1,679 100.0 2,648 100.0 4.6 1,589 520 134 139 65.9 21.5 5.6 5.8 5.0 2.4 2.2 4.7 BASECASE/POLICY-ACTIVE SCENARIO Diesel GasolineOlend JJetFuel Kerosere AViation Gasoline LPG Total Scrme: 566 315 85 53 5.3 2.1 7.2 9.7 766 355 96 76 58.4 27.1 7.3 5.8 983 407 108 94 61.0 25.2 6.7 5.8 5 11 .4.5 5 0.4 1.0 5 16 .0 1,034 4.4 100.0 1,613 A13 1,311 DOERD; NOC£IM; Evaluationteam estimates. 0.3 5 24 0.2 1.0 100.0 2,411 100.0 -0.1 8LI 4.3 - 38 V. ENERGYDEMANDMANAGEMENT Enrgy icing Overview 5.1 Energy demand managementthrough pricing and non-pricing measures remains a principalpolicy issue whichhas rot yet been fully incorporatedinto the Government'senergystrategy. Energypricingpursuesmultipleobjectives:First, through coveringeconomiccosts, it shouldensurethat energy resources throughoutthe economyare efficientlyallocated,the proper signals to consumersare extended, and efficiencyin energysupply and consumptionis stimulated. Second, it should contribute to generating adequatefinancial surpluses at the operating entities needed to secure future supplies. Tlbird,it should address external costs causedby energy use, e.g. road user costs and environmental costs. Finally, erergy pricing may be appliedto providegeneral fiscal revenuethroughtaxationand to support equityobjectives. Economiccosts as the basis for efficiencypricing commonlyare deflned as CIF importcostsplus domesticmarketingcostsfor internationallytraded commoditiessuch as retroleum products, adjusted by the shadow exchange rate where appropriate, and as long-run marginal costs (LRMC) for electricity, coal, and woodfuels. The use of LRMC in particular is a forward-looking conceptas i emphasizesfuture rather than currentor historicalcosts as the basis for energypricing. 5.2 In Zimbabwe, prices of petroleumproducts ('liquid fuels'), electricity, and coal are controlledby the Governmert. Energypricingposescomplexproblemsbecauseof (a) the closelinkages betweenenergy subsectors,(b) the availabilityof choicesbetweenfuels for particularapplications,and (c) the importanceof internationaltrade in energyproducts. Traditionally,the level and structure of energy prices have not closelyreflected the relative economiccosts of meetingenergy demandor the financial needs of the energy suppliers. The Governmenthas not yet adequatelyfocused on energy pricing as a means to support economicefficiency, and has not taken full cognizanceof options for demandmanagementand of the needthat the energy sector shouldgeneraterather than draw on public savings. Only some energyprices cover economiccosts (i.e. for WC coal, diesel, gasolineblend, LPG, and jet fuel)whereasall others arebelow economiccosts. Subsidieson energyconsumptionin 1989were Z$364 mn, equivalentto 3% of GDP in that year, but they were sharply curtailedin 1990when prices of liquid fuels and of electricity were increased. Energy conservationhas been hampered by the prevalenceof relativelylow pricesover extendedperiodsand thus far has only been encouragedat timnes of supplyshortages. Liquid Fuels 5.3 Petroleumproducts pricing is critical to energydemand managementas well as overall economicmanagement. It involvesissues that relate directy to economicdevelopment,i.e. (a) the efficiencyof fuel use, especiallyin the transportsector; (b) the financialviabilityof NOCZIM;(c) fuel taxesand subsidieswhich impacton publicsectorsavings; and (d) considerableclaimson the balanceof payments. -39 Table 10: PETROLEU PRODUCTS PRICINGSTRUCTURE. HARAREg. 99-291 2cIl iteri Seotember 199 DiEg£t Gasotine el Ethanolt asot Jet Fuet Kerosene AvGas Ji,fj/ International FOBPrice International Transport Cost Transit Cost 56.2 7.5 6.8 74.0 6.4 6.5 n.a. n.s. n.a. n.a. n.e. n.a. 65.8 7.1 6.6 65.8 7.1 6.6 67.7 25.0 7.5 CIF Cost, ZinmabweBorder Producer Price Internal Marketing Cost 70.4 n.s. 5.2 87.0 n.s. 6.5 n.s. 67.0 9.4 n.a. n.e. n.e. 79.5 n.s. 5.8 79.5 n.s. 5.4 100.2 n.a. 9.3 101.4 n.a. 14.2 LandedCost Harare Excise Duty 7S.7 16.8 93.5 72.5 76.4 91._ 65.3 853 - 84.9 7.5 10 1957 166.0 154.9 -11.1 8.0 -19.1 76.4 78.5 2.1 157.1 147.3 -9.8 7.2 -17.0 85.3 119.0 33.7 6.7 27.0 -31.8 109.5 111.0 1.5 4.0 -2.5 135.9 110.8 -25.1 3.0 -28.1 , 0.6 6.7 1.0 9.0 0.9 3.2 0.9 10.5 54.6 . 154.6 11.4 129.0 n.s. 64.7 6.3 122.4 n.a. ,1 24.9 - 166.0 n.a. Surtax .- Duty-paid LandedCost, Harare MOCZ11q Selling Price Apparent Profit/Loss C-) NOCZI1Special Levy MOCZIM Profit/Loss After Levy 92.5 78.9 -13.6 4.0 -17.6 Zone O1 Transport Adjustment Distribution Margin 0.6 5.4 * Distributor Setting Price Retail Margin 2 6.5 . Retail Selling Price - 2.1 - 91.4 92.4 60.6 -31.8 71.Q C 88.7 (12.7 1.2 n.a. ,9A March 1991 international FOBPrice International Transport Cost Transit Cost 47.7 8.7 12.5 68.1 9.0 12.0 n.s. n.a. n.e. n.a. n.a. n.e. 65.8 9.3 12.5 65.8 9.3 12.5 119.3 34.4 11.8 CIF Cost, Zimbabwe$order Producer Price Internal Marketing Cost 68.9 n.s. ,.3 89.1 n.s. 8.1 n.a. 76.0 17.1 n.a. n.a. n.a. 87.6 n.a. 8.4 87.6 n.s. 8.1 165.5 n.a. 10.7 LandedCost Harare Excise Duty 76.2 11.8 97.2 62.5 93.1 124.6 56.3 960 9.7 176.2 7.6 - 187-8 Duty-paid LandedCost, Herare NOCZIMSellingPrice ApparentProfit/Loss C-) MOCZIMSpecialLevy MOCZINProfit/Loss AfterLevy 88.0 111.5 23.5 4.0 19.5 159.7 228.0 68.3 8.0 60.3 180.9 215.3 34.4 7.6 26.8 96.0 161.0 65.0 6.7 58.3 103.3 176.2 60.6 175.6 -42.7 -0.6 4.0 -42.7 -4.6 221.0 207.1 -13.9 3.0 -16.9 Zone 0' Transport Adjustment Distribution Margin 0.6 5.4 - - - - 0.6 6.7 1.0 8.0 Distributor Setling Price Retail MargIn 117.5 - - . 6.5 - - 11.4 RetailSellingPrice 124..0- Surtax / 87 RON / 87:13blendingratio. ( ZC/Ik Source:NOCZIM - - - - 93.1 101.0 7.9 4.0 3.9 0.9 3.2 04J 0.9 10.5 18t.0 ( '40.8 (25.4 166.2 n.s. 21.6 33 2 58.9 266 n.a. 6.3 n.e. 24.9 n.a. 71.0 n.s. 291.0 -40Petroleumproductsprices are fixed at three levels, i.e. general marketing(NOCZIMto 5.4 distributioncompanies),wholesale(distributioncompaniesto service outlets), and retail (serviceoutlets to consumers). Landedcosts and prices are reviewedeverysix monthsby NOCZIM, for submissionto DOERDwhich in turn recommendsany price changesto the full Cabinetfor approval. The cost build-up for deliveryto Harare is the basis to establishNOCZIM's sellingprices. Besidesthe FOB cost, ocean freight, and port charges, NOCZIM'sinterestchargeson a foreignloan to finance its fuel purchasesand demurrage cost also are included in the offshore cost build-up. To cover transport costs within Zimbabwe,retailprices and marginsincreasewith distancefrom the main rail depots, i.e. aboutZcO.1/1 in the 13 more distant locationalgrids. However, NOCZIM provides a "refund" to the distribution by grid. Thus, consumers in distant locations are effectively companies which rises by 0.O1ZCAI subsidizedas they sustainlessof a price increasethanwouldcorrespondto the increasein transportcosts. 5.5 Historically,petroleumproducts pricing has been inadequatein a numberof respects. First, for extendedperiods, prices were not fully adjusted in line with internationalprice changesand changesin the exchangerate. Nominalprices for all petroleumproducts were not changedduring 198689, despitea 27% devaluationof the Zimbabwedollar againstthe US dollar over that periodand a nm-up of internationalpetroleumprices since late 1988. As a result, inflation-adjustedprices of gasolineand diesel declinedby 31% and 25%, respectively,during 1984-89. Followingthe increasein landed costs of petroleumproductsin mid-1990of 66% (in Z$ terms)as result of the Gulf crisis, retailprices initially were raised only by 44% on weightedaverage, thus further aggravatingthe pricing deficiencies,but subsequentincreasescorrected most of thesedeficiencies. Second, relativepricesare distortedsincethe consumerprices of diesel and kerosenehave remainedat less than 60% of the price of gasolineblend during most of the 1980s,eventhoughthe CIF costsof dieseland kerosenehaveonly been slightlybelow those of gasoline.1.6/ Gasoline blend prices are kept high as a means of taxing private automobile owners, whereas diesel prices are kept low to assist public transport, industry, and commercial agriculture. Indeed, low prices of diesel may have spurred consumptionand may have resulted in inefficientlylow use of lighter gasoline-poweredvehicles and excessiveuse of heavy diesel-powered vehicles. If left unchecked,this would aggravatedistortionsin the future and might eventuallymake it necessaryto tighten the restrictionson the importationof diesel-poweredvehicles. By holding diesel prices low, the Governmentmay have also narrowed the scope for obtainingfiscal revenues. Third, domesticprices of petroleumproductsdo not reflectthe overvaluationof the Zimbabwedollar. When adjustedby an appropriateshadowexchangerate, the pricesof keroseneand aviationgasolinecovaronly 49% and 71%, respectivelyof their economiccosts. Fourth, NOCZIM's selling prices are below taxincludedlandedcostsfor kerosene,aviationgasoline,and LPG so that the companyhas to subsidizethese products. Becauseof these deficiencies,which were more serious prior to the 1991 price increases, NOCZIMsustainedlossesof aboutZ$140 r.n in 1989and Z$150 mn in 1990but expectsto breakeven in 1991. J6f IAs ofApril 1991(vhenpricesof gasolineblendand dieselaeceededtheirpre-September 1990pricesby 97%and 104%, respectivelywhereasprkcesof keroseneremainedunchanged), the price of kerosene amountsto only 30% of eventhoughthe dezerioratedfrom 1.13:)to 0.57:1, relationship thatof gasolinebknd. Thekerosene-dieselprice ladedcostCIFHarareof keroseneis 25%higherthanfordieset -41 Tabd 11: CHANGES IN PETROLEUM PRODUCT PRICES TO CONSUMERS, 1980-MARCH 1991 (Cunutzi ow pandFies) 1990 1980 aomlionBlend 1984 1989 (Sep) 1991 (Manh) 52.0 103.8 115.0 166.8 234.0 Disel 34.2 51.7 63.0 91.4 Kensene 29.0 35.6 71.0 71.0 104.4 111.8 157.1 190.0 100.0 185.2 313.0 380.8 LPG I/ 198144 1985-89 -1990 1991 99.6 10.8 44.3 40.3 124.0 51.2 21.9 45.1 35.7 71.0 22.8 99.4 - - 291.0 7.1 40.5 20.9 53.2 16.7 14.0 17.4 * Price conx bndex * Change p.a. (Penn) * Notavaiable. Ssurce: C)DOERD; NOCZtM; IMF, Internudioa Finauial Satisfics. 5.6 EhanW. Over extendedperiods, the price of ethanol- the sole liquidfuel producedin the country - has not adequately covered production and marketing costs. Since April 1991, the price paid to the ethanol producer amounts to ZC 76/1. Tbis price, plus internal marketing costs of Zc 17.1/1, is closeto the landedcost of gasolineCIF Harare as its opportunitycost, but it amountsto less than twothirds if the cost of importedgasolinewere to be shadow-priced.Thus, at present internationalpetroleum prices, ethanol is competitivewith gasoline imports, providedthat ethanol is producedfrom surplus molasses. The cost of ethanolproducedfrom molassespurchasedat aboutZ$ 140/M.T. would be very close to its opportunitycost of gasolineimportseven if the latter are shadow-priced. lectricity 5.7 The 1987 Merz and McLellantariff study calculatedthe economiccost of electricity supplybased on LRMC, which the Governmentacceptedas the basis for ZESA's tariff structure. The nationaluniformtariffs, subsequentlyadoptedin 1988to replacea systemof separatetariffs for different regions, were broadlyreflectiveof LRMC estimatedat that time (eventhough tariffs for residentialand some large industrial consumers were set below LRMC and those for medium- and low-voltage consumersin industry, commerce,miningand agriculturewere set above). However,tariffs sincethen have not been fully adjustedto reflect subsequentcost increases, currency devaluation, and domestic inflationaveraging 12-15%p.a. in the interveningyears. (Tariff increasesaveraging20% took effect in November 1990). While the average tariff in 1988 was about 20% above the then estimatedLRMC, presently all electricity consumers are subsidizedto varying degrees. ZESA's 1989 average tariff, ZC5.7IkWh,compares to the Evaluationteam's estimateof LRMC of generation alone (i.e. average -42inr _em costs) of about Z¢9.1 lkWh IV In addition, the tariff structure providescrosssubsidization of resid andprefereiW inustr consumers by otherconsumers. Generally,highvoltagetariffsare closestto LRMC,exceptfbr majoruserssuchas SableChemicals,ZIMASCO,and ZIMALLOYS whichreceivea preferentialtariffof aboutZc4/kWh,in part becauseof their highload factorandinterruptible supplyarrangements.'Melow-voltage industriallcommercial tariffsandthetariffs paid by agriculturaland residentialconsumersaverageaboutZ¢7/kWh(Table12). A tariffsurcharge wasinstitutedfollowingthe completionof HwangeII to contributeto financingthisplant. 5.8 Tariffinadequacies compound the effectsof otherdeficiencies on ZESA'sfinancessuch as depreciation basedon historicalratherthanrevaluedassets. ZESA'snet -evenuedid not makeany contribution to financinginvestment in FY '88; it coveredonly18%of investmentin FY '89; andZESA sustaineda netloss of Z$17 mn in FY '90. Tabte12: ELECTRICITY TARIFFS AND THEIRRATIOSTO LRNC,1988-90 ZI/kWh Ratio Ratio February 1990 October19884f February1990 ZeWkMh Noveober1990 Residentiai TariffbI 7.53 1.00 0.45-0.55 9.26 LowVoLtageTariff-Agriculture 6.92 1.22 0.65-0.75 8.20 Low VoltageTariff-Other Consuaers g/ 7.16 1.53 0.75-0.85 8.31 HighVoltageTariff-Alt Consumes 6.09 1.53 0.75-0.85 6.84 Specialtndustries' Tariff 3.70 1.00 Average 5.67 1.20 Note: Subsequenttarfff a/ Based on 1987Pricing Study Methodology. Domestic-mtered. Comuercial, industrial, and mining consumers. FromJanuary 1, 1991. Wt gy 0.44 0.60-0.65 6.43 increases in July and December1991averaged 20X and 15.7X, respectively. Source: ZESA;Evaluation team estimates. J.Z 3.92 V This is composedof capacitycosts of Z$ 3394OIkW/yearand energy cosusof Zc 0.7-1.2/M. -43 - 5.9 The Wankie Coal Pricing Agreementdeterminesthe pricing of HPS and WC coal from that company,based on a cost-plusformulathat guaranteesa 12.5% return on - non-revalued- assets for domesticsales, and an additional5% for exportsales. (Exportearningsin excessof 17.5% are to be creditedto a Surplus and DeficiencyAccountto offset shortfalls in the profits permitted on domestic sales.) Coal prices are differentiatedaccording to grade, offtake, and other parameters. They are periodicallyadjusted,but significantmodificationsmaybe requiredto attainthe stipulatedrate of return. Lnflation-adjusted prices of coal increasedby 8% p.a. in 198085 but fell by nearly 9% p.a. thereafter. They now range from Z$10.76/M.T. for HPS coal sold to ZESA (Z$31/M.T. for other steam coal consumers)to Z$57.50/M.T. for coking coal exported to Zaire. While this price mechanismoffers financialsecurityto WCC, it insulatesthat companyfrom cost pressures, and rail transporttariffs much below those for road transport insulateit from competition,which is significantas Sengwahas started operations. The Pricing Agreementalso gears selling prices towardshistorical investmentand current financialcosts rather than future economiccosts. 5.10 The costinz of the differenttypes of coal is complex. To the extent that HPS coal is a by-productof coking coal (it has to be removed, like overburden,to gain access to coking coal), as opposed to discarding it as waste, it is reasonable to attribute to the higher-valuecoking coal all overheadsand overburdenremovalcosts, and to attributeto HPS coal only its marginalcost of haulage, cnrshing, and delivery to Hwange, which is estimated at Z$ 3.-/M.T.. The quantity of HPS coal available as by-productvaries from year to year as the demand for WC coal varies. However, once demand for HPS coal exceedsthe volumesthat are mined as by-product(i.e. 1. Imn tpy out of a total HPS productionof 2.2 mn tpy at present, .ising to 1.8 mn tpy by around 2008), additionalHPS coal can only be produced through advanced stripping or opening up a new mine, both of which involve considerabi. investmentcosts. Whenonly relativelysmallvolumesof add ional HPS coal are needed, an alternativestrategywouldbe to lowerthe dividinglinedemarkingWC and HPS coals,thus increasing the proportionof HPS coal. This policywouldnot be tenablefor the high peaks in demandfor HPS coal envisagedin somescenarios. The LRMCof HPS coal in excessof the volumesconsideredas by-product are estimatedto be in the range of Z$14-20/M.T. dependingon the off-tdkeof HPS coal for thermal power generation. The costs of producingthe extra volumesof HPS coal would be representedby the differencebetween the total costs of the actual mining strategy and the total costs of the "least-cost strategy" (i.e. limitingHPS outputto 1.I - 1.8 mn tpy). This higher cost would have a clear impacton the economicsof thermalpower expansion.For WC coal, the LRMC remain fairly steady at around Z$ 40.-/M.T. irrespectiveof the scenariochosen. 5.11 Costs at Sengwa for a full-fledgedmining operation (Z$ 48-52/M.T.) would be considerablyhigher than at Wankiereflectingthe effectsof equipmentunder-utilizationas result of the low forecast demand. In fact, Sengwa will almost certainlybe worked by contractors on a campaign basis for a few months per year only, which wouldreduce miningcosts by nearly 50%. 5.12 The Evaluationteam has re-estimatedthe LRMC of coal production(definedas average incrementalcost) for the Trend and Base Casesbased on updatedprojectionsof expansionplans, output, -44and operatig costs over the 1990-2010period (Table 13). In regard to their LRMC, the incremental productionof HPS coal beyond its volumeas by-productappearsto be underpricedwhereas WC coal is overpriced. As a result, the rent from coal would accrue to WCC except for the "second-tranchea productionof HPS coal where the rent accruesto ZESA (the marginalproductioncostsof HPS coal are approxinaely Z$14-201M.T.for the second tranche). COSTS OF COAL LONG-RUN MARGINAL Table 13: ESTIMATED (1989 ZS/I.T.) Trend Case Deman Wankie - Power Station (HPS) Coat iankie--Coking (WC)Coal Sengwa-- FultOperation Sengue -- Campaign Basis Wy w Not: 8.20-10.90 41.90-44.00 52.26 28.12 see Case Demand 14.00-20.00 PftW A/ 39.90-40.60 48.10 27.13 the Cahora for implementing Therangedepends on the scopeandschedule Bassaand nationalhydro-etectricity schemes. Forvoltuesexceeding thoseminedas by-product of coking(WC)coal. Aboveestimates are basedon allocating totat production costsin to the outputof NPS and WC-typecoals. proportion Source:WCC; SENCOL;Evaluation team estimates. 5.13 Pricing gfCa. Since there are market limitationsfor coal produced in Zimbabwe, prices basedon LRMC are not likely to expandsales much:to the contrary, they couldresult in financial losses for the producers and may therefore not be practicable. On the other hand, prices based on average cost in regard to those volumesof HPS coal producedas by-productmay result in substantial gains accruing to WCC. For coal consumersoutside Hwange, transport costs have to be taken hto account, ranging from Z$ 18.27/M.T. for rail transport to Bulawayoto nearly Z$ 34/M.T. for rail transportto Harare. Railwaytariffsfor Hwangecoal until recentlywere heavilysubsidizedand covered only about70% of transportcosts. However,followingtheir increasein early 1990,thesetariffsare now close to their economiccosts. Transporttariffs on a ton-kmbasis declineslightly with distance. Requirementsand Recommendations Gener;d 5.14 As one of the most importanteconomicpolicymeasures,energyprices need to be raised to, and/or be maintainedat levels at which they cover economiccosts, as measuredfor liquid fuels and other tradeablesby their ClF importcosts convertedat a realisticexchangerate plus domesticmarketing costs, and for electricityand coal by their LRMC . This is essentialfor providingthe correct signals needed to enhance the efficiency of energy production, tansformation,and end-use; improving the allocationof energyresourcesthroughoutthe economy;and ensuringthat reliablesuppliesof energyare availablein future. In addition,priceschargedby the energyenterprisesshouldbe adequateto generate sufficientfinancialsurplusesfor expansion. Finally,taxes on energyconsumptionneed to cover external -45 costs associatedwith energyoperationsand to contributeto generatingnecessaryfiscal revenueto sustain economicdevelopment. 5.15 Notwithstandingthe requirementto raise energy prices to their efficiencylevels, there are powerfil economic,social, and institutionalobstaclesthat needto be taken into account in deciding on a course of action. This is especiallyso in cases where pricing deficienciesare of considerable magnitude,such as for electricityand some liquidfuels (i.e. diesel, kerosene). While it is preferableon economicgrounds to adjust energyprices in one step, it may be necessaryon social groundsto spread the adjustmentsover a period. In particular, subsidiesto low-incomegroups and, possibly, energyintensiveproducersmaybe justified as atransitory measure. However,the periodduring whichsubsidies are appliedshould not be longerthan two years or so, with a clear commitmentto phase-out. Subsidies also shouldbe well-targeted(for instance,through a couponsystem for low-incomeconsumers),have a clear time limit, and be madetransparentthroughtheir inclusioninto the budget, which is also to avoid that they are borne by the energyenterprises. 5.16 Energyprice increasesare sometimesconsideredto boost inflation. Also, in the context of Zimbabwe's StructuralAdjustmentProgram, other substantialcorrectiveprice increasesare likely to be necessary,which togetherwith energyprice increasesmay imposehardshipson low-incomeearners. Nevertheless,it has to be borne in mindthat subsidiesthrough their aggravatingeffecton the fiscaldeficit tend to have a more persistent inflationaryimpactthan a once-overcorrectionof pricing deficiencies. In addition, it has to be taken into account that prices based on economiccosts provide a spur to efficiencywhereassubsidizationperpetuatesinefficiencies. Liquid Fels 5.17 Prices of liquidfuels shouldbe set and maintainedat levelsthat covereconomiccosts and eliminateNOCZIM'slosses(to the extentthat these resultfrom pricingdeficiencies). For kerosene,this makes it necessaryto increasethe consumerprice by 34%. Marginsto NOCZIM should be sufficient to cover reasonableoperating costs and the costs of capital invested,even though operationalefficiency shouldbe the yardstickfor the decisionas to what portionof increasesin operatingcosts to cover through price increases. In the future, prices should be regularly reviewed to ensure that they fiully and expeditiouslyreflectmovementsof internationalpetroleumpricesas wellas changesin the exchangerate. This could be achievedthrough a mechanismtriggering automaticadjustmentsin wholesaleand retail prices, margins, and fuel taxes once changes in internationalprices, the exchange rate, and domestic inflationexceed certain limits. Taxes on fuel consumptioncould be used more activelyto cover user costs includingenvironmentalcosts and to reinforcethe incentiveto save energy. For instance, in any future situationsof declininginternationalpetroleumprices, a "conservationtax' could be considered which would be triggered once internationalprices fatl below a critical level. 5.18 Unwarranteddifferentialsin relativeprices needto be reducedand eventuallyeliminated, e.pecially those of gasoline blend versusdiesel and kerosene,to bring them as closelyas possible into line with relative prices prevailingon internationalmarkets. Movingthe price of diesel towards parity with gasoline blend - through higher taxes and margins on the former - would remove a major distortion, strengten NOCZIM's financial position, and generate significant fiscal revenue 18/. Highertaxeson dieselalso wouldprovidea mechanismto financeroad user costs more equitablyas these tend to be highest for diesel-poweredtrucks and buses. However, since diesel is extensivelyused in public transport, industry, and agriculture,raising its price by a substantialmargin could have adverse economicand social impacts. Also, the compositionof the the vehiclestock may limit the fuel-saving effect which higher prices otherwisewould produce. Therefore, as an alternativeto immediateparity pricing with gasolineblend, the price of diesel initially could be raised to 80% or so of the price of gasolineblend over the next two years. Also, the prices of gasolineblend and diesel could be aligned more closelyby maintainingthe current price of the former unchangedfor, say, two years, under due considerationto safeguardingfiscal revenues, while the price of diesel is being increased. Given that kerosenecan be substitutedfor diesel on the one hand and for jet fuel, on the other, its price also needs to be increasedas a matter of urgencyto avoiduneconomicsubstitution,to at least 90% of the diesel price, at which level it would cover economiccosts. The impacton low-incomegroups (e.g. public transportusers and kerosene-usinghouseholds)couldbe amelioratedby well-targetedsubsidies,financed throughthe augmentedtax revenue. The fiscal impactfrom the proposedchangesin fuel taxationwould be noticeable: these are projectedto generateadditionalrevenueraisingto Z$ 210 mn by 1995. Elewicity 5.19 Electricitytariffs should coverthe economiccostsof supply and reflect more closelythe variationsin these coststo different consumergroups. They should also generatesufficientrevenuefor ZESA to cover financialcosts and make a meaningfulcontributionto financingits investmentprogram, which would be at least in line with the local currency share of its projected investment. From the administrative/financialviewpoint,thetariff systemshouldensure(a) revenuestabilityand predictability, (b) fairnessin the apportionmentof total costsof service, and (c) feasibility/non-ambiguity of application. ZESA is preparing a cost-of-servicestudy as a basis for future tariff setting, which will also take the impactof demandmanagementon futurefinancialrequirementsinto account. As the economiccosts of new projects have risen since 1988, tariffs for all users are estimatedto be 35-40% below LRMC and shouldbe raised towards LRMC levels. To soften the impactof these increases, a lifeline tariff for small consumers(e.g. below 3 KVA at present)shouldbe considered. ZESA is envisagingsuch a tariff once the results of a cost-of-servicestudy becomeavailable. 5.20 In order to fully cover its operatingcost and financialchargesand to fund an adequate portionof its investment,ZESAwouldhave requiredan increasein averagetariffsof about23% already in early 1990(rangingfrom 15%for high-voltagecommercial,industrial/mining,agricultural,and special tariff consumersto 36% for load-limiteddomesticconsumers). In the event, a tariff increaseaveraging 20% for all consumergroups was enactedonly towardsend-1990 and again in mid-1991. Becauseof this delay, unexpectedlyrapid interimcost increases, and devaluation,ZESA requires a tariff increase in mid-1991averaging35% and beyondthat, increasesof 5% p.a. net of inflationover the next ten years to cover the costs of system operation and large-scaleexpansion,working capital, and debt service J8/ As of April 1991, thleexciseduty on diesel amountsto less than 20% tha of gasolineblend. 1VOCZIM's marginon diesel is about 70% of irs margin on gasoine blend. - 47 requirements. It may be preferableto raisetariffs to their LRMClevelsthrough one major increaseand maintain them at those levels through adjustmentsfor inflation and real increases in project costs. Mechanismsneed to be developedfor regular review and automaticadjustmentof tariffs to changes in the economiccost of electricitysupplies and to domestic inflatione.g. through a price index formula incorporatingproduction cost and fuel cost changes. (This is in addition to mechanismsneeded for regularly revaluingassetsto adjustthe rate base.) 5.21 To reflectthe high cost of meetingpeakdemandin a capacity-constrained system, greater use should be made of peak and off-peakpricing and of load managementtechniques,particularly of interruptibletariffs for major industrial users. Both would contributeto improvingthe reliability of supply, and, through dampening maximum demand, to containing future financing requirements. Applyingthese pricing techniqueswould make it necessaryto overcome current metering problems. ZESA should be givenmore autonomyin tariff setting, in the contextof a Framework Agreementwith the Governmentdefining the rights and responsibilitiesof both parties. The Governmentshould also considera tariff smoothingand project developmentfund, as a meansto avoidexcessivetariff swings in line with short-termfinancialrequirementsand to facilitatethe financingof large electricityprojects. coal 5.22 Coal prices should be re-examinedwith a view to ensuring that they (a) reflect the productionand marketingcostsof the differentcoal grades; (b) signalto consumersthe future economic costs of coal; and (c) providefor the financialviabilityof the coal producerswhileavoidingviolent price swings. Both absolute and relative coal prices should be conducive to enhancing the efficiencyof productionand use. However,in view of WCC's positionas an essentiallyprivate monopoly,someform of price regulationis called for, possiblythrough a countervailingroyalty.12/ 5.23 LRMC-basedpricing (a-,justedto meetWCC's financialrequirements)involvesfor li sai a two-tier pricingstructure: for the first tier, that portionof outputwhich is consideredto be waste from the miningof coking coal should be priced based on the marginalcost of treatment and delivery (estimatedby the Evaluationteam at aboutZ$3/M.T. in 1989)to be contractedby ZESAon a take-or-pay basis. Any additionaloutputshouldbe priced at its LRMCof mining,treatnent, and delivery(presently Z$14-20/M.T.). Likewise,higher-gradeWC coal should be priced to cover its LRMC and ensure a reasonablefinancialreturn on revalued assets to WCC. In this way, ex-mine prices would reflectthe costs of future mining operations rather than being entirely based on historical financial costs as at present. 5.24 As a consequence,the Coal Pricing AgreementdeterminingWCC's sales to domestic consumersshould be modifiedby relating prices to domestic consumersto regularly up-datedLRMC, duly adjustedin line with WCC's financialcosts includingits debt service. While prices for different types of coal should reflect LRMC differentials,these prices on average would be expectedto provide a2/ WCCs posiion as a monopolysupplieris reflectedin the WankieCoal PricingAgreementwhichprovidesfor a given rate of returnon the capitalemployed. -48 a regulatedreturn to the capitalemployed. Economicrents shouldlargely but not entirelybe passed on to the consumers so that incentivesto produceefficiently are maintained. The Agreementshould be concludedfor a minimumof three-fiveyears, and shouldbe sufficiendyflexibleto allowfor adjustments to unpredictablechangesin costs and other economicparameters. Exportprices shouldbe set in line with iternational prices of competingcoals. Non-PricingMeasuresto ImproveEnergy Efficiency Scope and Impediments 5.25 Increasingthe efficiencyof energy output, transformation,and end-usecan providethe economywith considerablebenefitsthrough a more rational allocationof investmentsbetweenenergy supplyand demand. In Zimbabwe,energyefficiencyoptionslargely relateto end-useefficiency,and can be undertakenquicklyand at relativelylow costs. Whilepricing based on economiccosts is essentialfor efficientenergyuse, non-pricingmeasuresare importantto overcome market rigiditiesand to facilitate the neededsectoral and macro-economicadjustment. Energyefficiencyimprovementstend to have high returns and often are more cost-effectivein terms of improvingthe energy supply/demandbalancethan the expansionof supplies. Their macroeconomicimpactcan be substantial,becausethey lead to higher productivityand growth and make it possible to postpone investmentin energy supplies and to save importedfuels. Throughreducingcombustionand emissionof exhaustgases, steam, and heat by energy producers and consumers, energy efficiency measures are essential for sustained environmental management. 5.26 Given the needfor replacingand expandinginfrastructureand productioninstallationsat a relativelyrapid pace, the scopefor introducingstate-of-the-artenergysaving equipmentmay be wider than in industrialcountrieswhere equipmentsaturationis high. Sincethe energyend-use in Zimbabwe generallyis inefficient,there is considerablescopefor savingsin industry,transport,and publicbuildings: based on internationalexperienceand a recent SADCCprogramof energyaudits, this potentialmay be at least 15-25%of currentenergyuse, aboutone-halfof whichprobablycouldbe mobilizedthroughlowcost/no-costmeasures.In industryalone, the savingspotentialis estimatedat 0.2-0.4 mn TOE p.a., and about0.1 mn TOE p.a. maybe saved in transportand publicbuildings.Total savingswouldbe equivalent to Z$104-165 mn p.a., requiring one-timeinvestments ;stimatedat about Z$140 mn (based on 1989 prices). -49Tit II4 POTENTIAL ENERGY END-USE SAVIRGS IN INDUSTRY, TRAISPRT AiD PUBLIC UILDINGS 1989 (Physical Units; TOE000; 1969 ZS mitllons) Typ. of E y Vnd Nassur( Physical Units tOE'00 ot1q.mentat2 a/ tion Rate (Percent) Investment (Z$ mn) Foreign Exchange Conpovint (Percent) INDUSTdY No/Lowcost Nediu. cost Nigh cost (.T. '000) 110-146 66-94 96-203 69-91 41-59 60-127 5.4-7.1 3.2-4.6 4.7-9.9 Subtotal 272-443 170-277 13.3-21.6 IS,e$trlcft No/Lowcost Radis cost High cost (GWh) 198-326 105-186 488-686 17-28 9-16 42-59 11.8-19.5 6.3-11.2 29.3-41.2 68-103 47.4-71.9 79.2-141.8 238-380 60.7-93. 96.8-173.6 Subtotal 791-1,198 Totat 90 75 55 2.4-3.2 4.9-7.0 10.3-21.8 40 17.6-32.0 90 75 55 5.3-8.8 9.4-16.8 64.5-116.2 RANSPtXRT Rail Road timl ~~~~(up"000) 9-13 29-46 8-11 25-38 6.6-8.6 20.0-30.4 4.0 Subtotat 38-57 33-49 26.6-39.0 4.0 Gasoline Olend Road 14-28 11-22 12.3-24.6 Total 52-85 44.71 38.9-63.6 100 (included in Diesel-Road) 6. PUBLICBUILDINGS 92dL No/Lowcost Nedi.u cost Subtotal (N.T.'000) 10-16 19-27 29-43 6-10 12-17 18-27 0.5-0.7 0.9-1.3 1.4-2.0 90 75 0.2-0.3 1.4-2.0 1.6-2.3 40 70 90 75 0.9-1.3 1.6-3.8 40 80 Electrii1 (CVlA) No/Lowcost Rodhumcost 35-46 23-46 3-4 2-4 2.0-2.9 1.1-2.5 Subtotal 58-92 5-8 3.1-5.4 2.5-5.1 Z2-35 4.5-7t4 4.1-7.4 Total GRANDTMATL I Q h/ 304-486 104.9-105.0 Basedon economiccost Naximu potentfat Sour.ce: DOERD; SADCC;CZI; Evaluation team estimates. -so 5.27 There have been major technical, economic/financial,and institutionalobstaclesat the govrmental and energyusers levelsto improvingenergyefficiency. They include: (a) low electricity and fuel prices over extended periods; (b) use of outmodedequipmentand technologies,and belowstandard repair and maintenance,largely caused by foreign exchangeshortages and by difficultiesto obtain import licensesfor more efficientequipment;(c) consumers' lack of awarenessand of technical knowledgeaboutenergy saving opportunitiesand difficultiesin obtaininginformationand in evaluating projectfeasibility,resulting in a wrongperceptionof risk associatedwith technologicalinnovations;(d) the complexityand low visibilityof energyefficiencyimprovementscomparedto outputexpansion;(e) lack of financingfor efficiencyimprovements,especiallyforeign financing; and (f) lack of consistent Governmentpoliciesand of experiencedinstitutionsto supportenergyefficiencydrives, which increases the risk to the energyusers of pursuingconservation. In addition, uncertaintiesin the businessclimate are impedingefficiencymeasures,in particularthose with relativelylong pay-backs. Equipmentusers often do not considerthe life-cyclecost of alternativeoptions, thus discardingthe use of more energyefficientyet higher-costequipment. Barriersto competitionand to structural change such as cost-plus practices, soft budget constraints,and import protection(which often affect the availabilityof foreign energy-efficientequipment)have muted the incentiveto higherefficiency,energyand otherwise. Taxes and dutiestend to exert a disincentiveto investmentin energyefficiencyimprovementsas they inflatethe cost of capital equipment,whereassome energyprices (notablyelectricity)remain subsidized. Energy conservationand substitutionoptions are not systematicallyreviewed, and little experience in energy efficiencymattershas been accumulatedto guidepolicy makers. 5.28 Accordingto Evaluationteam estimates,energyuse in industryis 40-80%above that in more developedeconomies. Electricityuse is excessivefor boilers and in the foundry industry where coalwouldbe more economic.Amongthe availableenergyefficiencyoptions, no-cost/low-costmeasures include improvedhousekeeping(repairs, insulationand steam traps, combustioncontrol on boilers), operationalchanges,and improvedproductionqualitycontrol.Theyoffer savingsestimatedto rangefrom 2% for brick and non-ferrousmetalproductionto 12%for iron and steel and fertilizer production,with pay-back periods estimated to average six months. Medium-costmeasures, including power factor correction,installationof high-efficiencyelectricmotors,and comprehensiveimprovemnents in combustion controland steam systems,may providecomparablesavingsbut pay-backsare in the order of one-three years. ight maures include process changes, recovery systemsfor waste heat and gases, and replacementof inefficientequipment.Attendantenergysavingsare estimatedat 5-10%for cement,glass, fertilizers,pulp and paper, and food products,and 30-40%for non-ferrousmetals. Requiredinvestments are in the range of Z$2-3 mn per project. These measuresmay find less acceptance,consideringthat their front-endoutlays are relativelyhigh and pay-backstend to be relativelylong, i.e. in the order of 2.5-5.5 years.2Q/ ;WQ/ Itshoadbe bornein mind,however, thatenergyrationalizionmeasures oftenare integralcomponents of indaw:rial rehabltaionlrationalraton projects.Dependingon the propordonof expendituresto be allocatedto energy rationazaon, thepay-backperiodsforthesemeasuresmaybe shorterthan*dicated. A comprehensiveanalysisl US-AID of 950 proposed energy effciencyprojects in eight developingcountriesshowed that of the implemented projets t. e. 86% oftheproposedprojects), 75%hadpay-backperiodsof less thanoneyear, and 88% had investment costs of kss than US$50,000each. -51 5.29 No-costllow-costmeasuresare likely to be paricularly iWortant in small and .nedium sized fims whiichare prevailing in Zimbabwe. However, because of the associated technological requirements,combinedwith the lack of technologicalsophisticationin most of these firms, even those measuresmay be difficultto be implemented. As an importantinitiative,energy auditsto identify the conservationpotential in medium-to-smallscale industrieshave been initiated under a CIDA-funded, SADCC-wideprogram from which Zimbabwehas benefited. SADCC is consideringto extend this program to include intensifiedtraining, data base development,and in-depth energy audits on larger energy-intensivefirms whose scope for energy savings is consideredsubstantialand whose experience is replicable. 5.30 Low energyefficiencyin transportis primarilyattributableto (a) the compositionof the vehiclefleet, over one-thirdof which is at least ten years old and outmoded; (b) the lack of measuring and control equipmentand of spare parts leading to below-standardmaintenance;and (c) the lack of training in vehiclemaintenanceand in energy efficientdriving. Becauseof its inefficientuse, fuel has becomea major cost item amountingto 25-30%for road freightand passengertransport. In rail traffic, energy efficiency also has deteriorated. The absence of a national transport masterplan is impeding optimalmodal choicesfrom the energyas well as other points of view. In line with deterioratingpublic transport,privatevehicleuse has expanded,thus furter increasingthe energyuse in the transportsector. Table 15: ENERGYCONSUMPTION IN RAILWAYTRANSPORT,1987-91 (Physical Voumes and Unit Conumption) SteamLocomotives Diwe Locomotives Electic Locomotives PY g M.T. '000 kg/engine-km M.T. 'C00 1987/88 186.9 52.4 73.3 4.9 52.1 21.3 1988/89 190.9 53.9 73.7 5.2 51.7 21.3 1989/90 198.2 50.2 46.4 5.3 55.1 21.4 1990191 (estimate) 171.4 61.6 46.8 4.8 43.8 21.8 Al 1: r/engine-km Gwh kwh/engine-lan July - June NRZ. 5.31 In view of the increasesin transportdemandthat are likelyto accrue in future, improving fuel efficiencyis an importantyet difficulttask. The potentialfor energy savings lies (a) in the short term, In fuel-efficientdriving, improvedmaintenance,rationalizingroutes and schedules,consolidating cargoes, fuel quality monitoring, and retrofittings to improve engine efficiency and aerodynamic performance:and (b) over the mediumto longerterm, in intermodalshifts, in particularshiftinga larger share of inter-regionaltransportfrom road back to rail, once the ongoing NRZ rehabilitationprogram achievesresults. Road maintenanceand upgradingof rural roads is likely to reduce fuel requirements -52 - by at least 10%. It is difficultto achieveand sustain energysavingsin road transportbecausethe large mmber of conumers can be influencedonly indirectly through policy measures. Availablepolicy instuments include vehicle and fuel taxes, fuel efficiency standards, traffic management, road maintenance,and driver educationwhich, however, have complexeffects on vehicle maintenanceand replacement. bblig Buildins 5.32 This heterogeneousgroup (includingoffice buildings, commercialestablishments,and schools and hospitals)accountsfor about 8.5% of final energy consumption,about 75% of it coal and 25% electricity.As theseestablishmentstend to be concentratedin urban areas, conditionsare favorable for implementingenergyefficieneymeasures. The savingspotentialin steam/hotwater systemsand the relatedelectricityand coal consumptionmay be in the order of 8-15%. The principalmeasuresto bring about improvementsin energy efficiencyare (a) more appropriatebuildingcodes and standardsfor new construction, especiallyfor lighting, water heating, and air conditioning,and (b) energy audits and retrofit for existingbuildings. The Evaluationteam estimatesthat total costs of low anidmedium-cost measures initially would be in the range of Z$4.5 - 7.4 mn, with a pay-back of about one year. However, there is no focal point for action as the Midistry of Public Housing and Constructionhas authorityover governmentalbuildingsonly and supervisionat the local level often is inadequate. The buildingcode does not contain any standards and regulations concerningenergy efficiency. Only a limitednumberof Harare hotels have adoptedenergymanagementsystems. Requirementsand RecoMmendations EPicLel 5.33 Energy EfficiencyStrategy. Consideringthe substantialimpedimentsto higher energy efficiency, the range of efficiencyoptions, and the complex links between energy use and economic activities,the Governmentfaces a difficultchallengein implementingsuccessfuldemand management. The Governmentis expectedto providesupportto improvingenergyefficiencythrough settingenergy prices based on economic costs, reducing risk and uncertainty, and removing of legal/regulatory obstacles. Appropriateprice mechanismsare particularlyimportantin view of the difficultiesin enforcing legal and regulatorystandards. Facilitatingmore efficienttechnologiesthrough technicaland financial support serviceswill also be significant. Therefore, a NationalEnergy EfficiencyProgram should be developedencompassingthe industrial, transportation,and public buildingssectors. It should address the major barriers to energy efficiencyand means to overcomethem. W. Initially, the focus should be on low-costmeasureswith relativelyshort pay-backs. Such a programshould include the following components: W Designing an energyefficienqprogramwouddtakeabout12-16months,and implnmenting housekeeping and other measuresnvolvinglw-cost nveshZent,aboutone year. mplemetting argewscale investmentswoUd tke correspodingy longer. -53 (a) energy prices based on economic costs, reinforced by market-basedincentives and regulationsuch as efficiencystandards; (b) policies to (i) correct fiscal disincentivese.g. through reducivj import duties on spare parts and measuringequipment;(ii) provideinformationto both energy consumersand equipmentsuppliers;and (iii) encourageprivate sector energyefficiencyservices; (c) institutionalback-upto ensure (i) promotingenergy efficiencyprograms and evaluating and disseminatingtheir results; (ii) maintainingdetailed and reliable data on energy consumption,and (iii) training energyauditors; (d) improvedt uding through (i) strengtheningfinancial intermediariesto appraise energy efficiencyprojects,and (ii) developingotherprivate sector sourcesof finance, especially for foreignexchangefinancing; (e) incorporatingenergy efficiencymeasuresinto energy supply and investmentplanning; and (f) promotingeconomicfuel substitution. 5.34 These initiatives must be viewed as part of overall sectoral and macroeconomic rehabilitationstrategies as these by themselvesare likely to enhance the efficiencyof energy-related operations. Energyefficiencyimprovementsshouldbe consideredas part of measuresto improveoverall sectoral efficiency,e.g. for industryand transport, as theyoften are a fall-outof productivitydrives and of improvementsin equipmentoperations. In a wider context, since energydemandis derivedfrom the structureof the economy,the energyimplicationsof alternativepoliciesshouldbe factoredintodecisions on economicdevelopment. While energycostsgenerallyare not the largest individualcomponentof operatingcosts, 5.35 close attentionshould be given to the impactof demandmanagementpolicies on energy end-use, with due regardto the uncertainconsumerresponsein view of prevailinginstitutionaland technicalconstraints. The effectsof energy pricing (includingtaxes and subsidies)need to be examinedwith a view towards removingdistortionsthat discourageefficiencyimprovements. In situationswhere it is not possible to removeall energvprice subsidies,regulationmay be an effectivewayto enhanceefficiencyto levelsthat are justified based on economiccosts. Suitabletechnologiesneed to be disseminated.and training and advice providedon how to evaluate,design, and implementenergyefficiencymeasures. In particular, operatorskills to applyenergy-savingtechnologiesneedto be developed. The Governmentshouldassist in demonstratingand monitoringthe performanceof energy-savingequipment,and in establishinga market for energy conservationequipmentand services. However, direct Governmentinterventions should be used as temporary expedientsrather than as substitutesfor market-basedinstruments. Nonprice measuresto improveenergy efficiencyneed to be carefullyevaluatedas they carry a distinctrisk that they may not be cost-effectiveand may introducemarket distortions. -54 5.36 IncentivePrograms. Incentivesmay be necessaryin situationswhere energyprices do not reflect economiccosts, or to overcomeinstitutionalbarriers to higher efficiency. In a number of countries,preferentialtaxpoliciesfor energy-efficientequipmenthavebeenapplied,e.g. exemptionsfrom import duties (Philippines)and accelerateddepreciationfor retrofits (Singapore). Financialsupport to energyefficiencyinvestmentsshouldfocuson those cases.vherethereis a large increasein front-endcost for a more efficientproduct. The use of interestsubsidies,if any, shoulddependon the extent to which market conditionsencourage investmentsin energy efficiency, consumers' willingnessto make such investments,and the cost of such subsidies. Also,the significanceof financingprogramsrelativeto other incentiveshas to be considered(suchas tax incentives,which tend to providemore immediatebenefits). In any case, financingprogramsshouldbe complementedby efficiencypricing, information,and technical assistance. 5.37 To overcome initial funding problems faced especially by small-volume energy consumers, equipment suppliers should be encouraged to finance energy efficiency investments. Financingbeyondwhat normallycan be expectedfrom suppliersshould be providedthrough the banking system. The potential contributionof energy service companies(which provide third-party financing and/or undertake efficiency improvementsfor a share in the savings) as well as the feasibility of establishingfinancing corporationsin support of energy efficiencymeasures should be evaluated.22/ Experiencewith revolving funds, leasing arrangements,performancecontracting,and other forms of private sectorfinancingshouldbe analyzed,with a view to its applicabilityto energyefficiencyprojects. However, contractualproblems in arrangementswith energy service companiesneed to be properly addressed. 5.38 The,Roleof the Governmentand of the PrivateSector. The Government'scontribution to enhancingenergy efficiencycan best be providedthrough a stable policy and regulatoryframework, especially in regard to energy pricing, and through disseminatinginformationto the consumers to facilitateenergy savingsmeasures,as part of a comprehensivestrategy. Public agenciesshould ensure that energy-efficientproductsand financingare available,that informationand training are provided,and that other policies (e.g. fiscal and import policies) do not discourage energy efficiency measures. Additionalpolicyaction(suchas efficiencyregulation)may be neededwhere institutionalobstaclesinhibit market responses. In a wider context,the public sector shouldimprovethe transportinfrastructureand deliverysystems for fuels and electricityto underpinenergy efficiencymeasures. The preparationand implementationof specificmeasuresshouldbe left to specializedfirms or to the energyusersthemselves, eventhough the Governmentand relevantparastatalsshouldcloselycoordinatewith the private sector in outliningprograms and monitoringtheir implementation. 5.39 A focal pointis neededwithinthe Government- as well as improvedcoordinationamong governmentalinstitutions- to promoteenergy efficiency,providelinks to the private sector, and ensure ,/ Energ servicecompaniesmnay be willing to leaseand operateequipment,or enter intoshared-savingsarrangements with the owner of the facility. They provide major advantagesgothe energy users, by means of (a) reducing transacfioncosts, throughpreparingand promotingthe project; (b) reducingtechnical risks, through supplyingthe expertiseand iaking responsibily for equipmentperformance;and (c) providingincrementalfunds either through equpent leasingor equityparticipation. that energy efficiencyactivities receivethe Government'scontinuedattentionand resources. DOERD presently has responsibilityfor energy efficiencymatters. The Governmentis consideringcreatinga NationalCommitteefor EnergyEfficiencyin which DOERRD would be play an importantpart. Such a committeewouldbe potentiallyuseful providedits specifictasks are focusedon (a) designingpromotion campaignsand research;(b) organizingand implementingsurveys;(c) facilitatingthe ransfer of technical kicow-howthrough channelingrelevant technical assistance; and (d) analyzinglaws, regulations, and standards with a view to ensuringthat soundenergy efficiencystandardsare observed. For improving energy efficiency in industry, the Confederationof Zimbabwe Industry can be expected to play an important role. While initial technical assistance will be necessary, it is important that national institutionsbecome the principalagents of an energy efficiencyprogram so that the program remains sustainable. Qpeional Level 5.40 Energy Audits. Energy auditsare an importantstep towards increasingequipmentand process efficiencies. They can be general ("walk-throughaudits') w.th limited measurementsin actual facilities,or in-depthrequiringa detailedanalysisof plant-wideenergyflows and their efficiencies. Indepthaudits often follow brief audits when the latter indicatea substantialsavingspotential. Thorough trainin'gof energyauditorsand the availabilityof financingfor implementingthe recommendedmeasures are critical to the successof auditingprograms. Energyefficiencyshould be encouragedby makingan energyaudit a preconditionfor energy users to receivefinancingfor energyefficiencyimprovements. 5.41 Specificmeasuresshould focus initiallyon relativelylarge-scale,energy-intensiveusers in industry where significanteconomicbenefits are identifiableand where measurestend to be costeffective,relying on their demonstrationeffect to disseminateenergy-efficienttechnologiesand to cause smaller energy consumersto follow suit. A major training effort is needed in all energy-consuming sectors, consideringthat the rate of implementationin large measure will depend on the availabilityof trained manpower. Improvedmaintenanceis crucial for adequateequipmentperformance, including settingup relevantprograms, training personnel,obtainingspare parts, and monitoringperformance. 5.42 In the industrialand pubic buildingssectors, measuresshould include(a) regular energy audits complementedby selecteddemonstrationprojects to evaluatethe potentialof economicenergy conservationand substitution;(b) equipment/appliancetesting and labelling; (c) incorporatingenergy efficiencystandards into technical codes; and (d) obligatory maintenanceof major energy-consuming equipment. The potentialfor third-partyauditsand financingthroughenergy service companiesshould be mobilizedto the feasible extent. In the trnr sect, fuel efficiencyshould be enhanced through improvingvehicle maintenance,renewingthe vehicle fleet, and training in energy-efficientdriving. Efforts should focus on road transport - which accountsfor nearly 60% of overall transport services- in particular freight transportand urban masstransit. Necessarycomponentsare: (a) monitoringof fuelconsumptionand fuel quality;(b) equipmentmaintenanceand modification;(c) technicalefficiencystandardsfor new vehicles; and (d) urban traffic management. Improvedroad maintenAnce-toenhanceboth fuel efficienceand road s543 -56safety-is particularly importantand could be financed from higher fuel taxes. Governmentvehicles should be regularly checked for maintenanceand fuel consumption. For the rail system, efficiency improvementson the giventractionpatternrequire improvedplanningto increaseload factors, minimize turn-aroundtimes, and maximizethe use of dedicatedliner trains for coal transport. The scope for developingback-haulfreighttraffic should be studiedand ways be identifiedof promotingit. Transport sectorplanningshouldemphasizethe optimizationof energyuse, in the contextof inter-modalcoherency, through the selectionof transportmodesand energy sources, possiblyincludingthe judiciousexpansion of railway electrification. Most recommendedmeasures are relatively low-cost (except for road improvementsand traffic flow reorganization).Tbey would mainlybe for (a) the purchaseof diagnostic equipmentfor vehicleinspectionand maintenance(Z$2 mn, essentiallyall in foreignexchange);(b) the establishmentof threetraining schools(Z$1.5 mn, mainlyin local currency)and, possibly,for consulting servicesto set up a training program(aboutZ$0.5 nn). 5.44 In view of the potentialbenefitsfrom energyefficiencymeasuresand the incipientnature of the required institutionaland policy framework in Zimbabwe, the Evaluation team recommends technicalassistancein preparinga comprehensiveNationalEnergy EfficiencyProgram (Annex 17). The Impact of EnergyPricing Actionon Energy Demand.Balanceof Payments. and Public Finances 5.45 Impact on Energy Demand. The Policy-activeScenarioof the Evaluationincorporates the recommendedenergypricing and market-basednon-pricingmeasuresto improveenergyefficiency. A comparisonof the Policy-activeand Policy-neutralScenariosindicatesthe effects of these policieson energydemand. Increasingreal electricityprices by 5% p.a. during 1990-2000and maintainingthem constantafterwardswould lower the annualgrowth of electricitydemandduring 1990-2010from 5.1% to 3.9%. Similarly,increasingprices of liquid fuels in real terms by approximately15%, on average, in 1991over their 1990levelsand subsequentlyadjustingthem in line with internationalprices dampens the annual growth of petroleum products demand over the same period from 4.6% to 4.1%. Both measureswould result in savingsof 4,950 GWhand 0.2 mn M.T. of liquid fuels by 2010. 5.46 The impact of pricing policies on energy demand growth is likely to become more significantin the outeryears. For elecricity, consumptionand maximumdemandunder the Policy-active Scenarioare projectedto be lower by 2% by 1995, 9% by 2000, and 20% by 2010 comparedto the Policy-neutralScenario. Althouighthe proportional tariff increases are the same for all consumer categories,their impactis differentsince somesectors are more responsiveto tariff changesthan others: electricityconsumptionin industry and mining would decline relativelymore (22% by 2010) than for other categoriessincethe formers' price elasticityof demandis higher(i.e., 0.6 comparedto 0.5 for the other consumercategories). TAX REVENUE FRM LIUODFUELS.1991-95 Tobtl : PROJECTED (Cufient zWII VW CettZs ZH Znn IZd Z*mn ZeZ ZSni mifo Zfm ZI ZAM Ztmn Zdfl Z$mn Z#A Z*m 10.4 533 4 333.1 CASE I tREND T TOTAL G.son viPs 70.0 311.0 222.3 71.1 301.7 227.2 03.0. 206.2 73.6 368. 237.6 9 03.0 2es.5 92.2 301.7 4n.2 20.8 117.6 20.8 122.8 16.0 18.8 18.2 115.4 20.0 134.8 K.toen 7.6 4.0 7.6 4.3 7.6 4.0 8.7 6.6 9.9 0.8 22.8 11.0 154.3 8.0 26.1 12.1 175.9 9.4 J Fuel Aviation owlin* 0.7 4.0 5.7 6.7 4.0 6.9 0.2 6.7 4.0 6.9 0.2 7.7 4.0 6.9 0.2 0.7 6.2 7.9 0.3 9.7 6.8 8.8 0.2 0.4 10.6 6.4 9.7 0.5 11.4 1.2 12.4 1.3 23.7 2.6. 27.3 3.2 30.8 3.6 34.2 4.0 37.7 4.8 LPGfi/ SCENARIO II - BASECASEtPOLICY-NEUTRAL V4.3 TOTAL asoln s8nd 63.9 209.3 6108 447.1 J83. 73.6 244.1 83.0 280.0 92.2 315.0 578.9 101.4 361.6 Desed 16.8 101.3 18.2 123.4 20.6 147.8 22.6 173.3 26.1 Kmaxna 7.0 4.6 6.7 6.6 9.9 6.8 11.0 8.0 12.1 9.4 Jet Fud 6.7 6.1 7.7 7.2 8.7 8.3 9.7 9.6 10.6 10.6 Aviation Gasoline 4.0 0.2 4.8 0.2 6.2 0.3 6.8 0.3 0.4 0.3 23.7 2.8 27.3 3.2 30.8 3.9 34.2 4.7 37.7 6.1 LPGA 201.9 CENARIO III - 8ASECASEPOLICY-ACTIVE TOTAL Gso01ine Blend 11t2 462.0 323.9 810.1 707.4 63.9 209.7 63.9 212.7 63.9 Dies Ketogan 15.8 100.0 33.5 222.4 61.0 353.3 66.6 412.6 62.3 7.8 4.6 24.5 16.7 41.0 27.6 46.6 32.6 60.0 38.0 Jet Fue 0.7 0.0 7.7 7.o 8.7 8.0 9.7 9.2 10.0 10.2 Aviton Gasoline 4.0 0.2 4.6 0.2 6.2 0.3 6.8 0.3 6.3 0.3 23.7 2.8' 23.4 4.0 45.0 6.6 50.0 6.7 64.9 7.2 LPG Sem. DOERD; NOCZIM; valustiontsn 216.4 70.9 246.8 78.0 277.1 477.3 stimats. 5.47 For liquid Wfus,the demandunder the Policy-activeScenariois loweredby 3%, 4% and 10% in 1995,2000, and 2010, respectively,comparedto the Policy-neutralScenario. Most importantly, 1990-2010demandgrowth for dieselwould slowdo''n from 5.9% to 5% p.a. whilethe demandgrowth of gasolineblendunder the Policy-activeScenariowouldacceleratefrom 1.7% to 2.4% p.a. duringthat period. Thus, for 1995, 2000, and 2010, dieseldemandunder the Policy-activeScenariois loweredby -58 - 5%, 9%, and 17%, while gasolineblend demandwould be higher by 3%, 9%, and 15% comparedto the Plicy-neutral Scenario.a The demand of other petroleum products and coal is projected to changelittle in responseto price changes. 5.48 Fxial Inmag=. More active taxation as part of energy demand managementwould contributeimportantlyto strengtheningthe Govemnment's fiscal position. Followinga decline in 1991 in tax rates for, and revenue from, gasolineblend and diesel, it is projectedthat under the Policy-active Scenario, (a) during 1992-93,tax rates on gasolineblend remainunchangedin nominalterms, but those on dieselwill be substantiallyincreasedto 80% of taxes on gasolineblend, and taxeson keroseneto 80% of those of diesel; and (b) from 1994onwards, tax rates for all liquid fuels wIll be raised in line with inflation. Underthese assumptions,approximatelyZ$670mn (currentprices)of additionalrevenuefrom existingenergytaxes is projectedto be mobilizedduring 1991-95alone, comparedto the Policy-neutral Scenario. This does not take into account the possibilityof taxing electricityand coal consumption. Highertax rates wouldmorethan compensatefor relativelylower growthof energyconsumptionas result of higherprices. 5.49 Balanceof PaymentsImpacts. The balanceof paymentswouldbenefitsincelower energy demandgrowth wouldresult in reducingthe costsof petroleumproducts importsalone by around 10% or Z$140 mn p.a. by 2010. In addition, there would be lower requirementsfor equipmentimports in the electricityand liquid fuels subsectors, in line with the slower pace of expansionrequired. These developmentswouldfavor Zimbabwe'sexternaldebtpositionthrough lower borrowingrequirementsand subsequently,lower debt service. 2J1 Deand growth of gasolineblend acceleratesbecauseunder the Policytive Scenario its realprice is asswnedto decreasefor a period of time whitethe real dieselprice incrrasesby 28%. By allowingthe gasolinebknd price to fall In real terms, the dferenuiat betwen disel and gasolne blend prices is narrowedmore quickly than (f the aignent in relativeprices weresobe achievedthroughIncreasesin dieselpricesonl (the diesel/gasolineblendprice radowoub be alteredfromn 0.55 in 1989to 0.8 In 1992). 7hisis expectedto encouragesubstitutionof gasolne blend for dieseL ENERGYIMPORTS,1990;1995;2000;2010M/ Table17: PROJECTED Unitsand CurrentUSS millions) (Physicat Estimated Physical Units 1,034 ProductsC?'D000) Petroleum 887 (Glh) Electricity 107 (N.T.'000) Coal& Coke Total 1969 USS mn 209.8 3.9 9.2 J~~~"Qir Physical USS on Units 1,070 761 107 296.7 7.9 9.4 314.0 2000-..01- Physical USt 00ScS Units en calI0 P 2hysi en Units 995 P en Units Ph Units 1,217 6,158 88 336.5 41.3 10.0 387.8 1,376 5,659 88 586.4 39.3 12.6 638.3 1,548 5,659 E8 787.8 39.3 16.3 843.4 1,756 1,026.6 39.3 5,659 _2t.0 88 1,086.9 1,311 6,158 88 362.7 41.3 10.0 414.0 1,613 5,659 88 687.5 39.3 12. 739.4 1,959 5,659 88 996.9 39.3 16.3 1052.5 2,411 5,659 88 1,409.0 39.3 210 1,469.3 1,348 6,158 88 372.7 41.3 10.0 424.0 1,679 5,659 88 715.7 39.3 12.6 767.6 2,093 5,659 88 2,648 5,659 88 1,547.9 39.3 21.0 1,608.2 cn Base Case- Policv-active Scenario Products(m0'000) Petroleum (GWh) Electricity (N.T.'000) Coal& toke Total BOse Case- Policy-neutralScenarioFPetroleum Products (s3'000) (Glh) Electricity (N.T.'000) Coal & Coke Total _/ bt g/ Sy 1,065.2 39.3 16.3 1,120.8 by 17.S%p.s. during 1992-95, resumetheir increase International petroleum prices to increase in real terms st about 34%p.a. during 1990-91; decline increase by 0.41 p.a. during 1990-95; to increase to terms real in prices International coat at 5.81 during 1996-2000, and at 0.3% p.a. thereafter. at 1.0X p.a. during 1996-2000; and 1.5X p.a. thereafter. measuresare taken. Basedon 4.51 p.a. GDP growth during 1990-2010, no energy demandmnangement 1990-2010. during growth GDP p.a. 3.5X Based on measuresare taken. Based on 4.5% p.a. GOPgrowth during 1990-2010; energy dewd mwanagement team estimates Evaluation Scurce. DOERD;ZESA;NMCZIN; MCC; 1 u -60 VI. ENERGYSUBSECTORISSUES Electricity BagkaUmnd 6.1 Zimbabwehas one of the largest electricitysystemsin subsaharanAfrica, which caters largelyto industrialdemand. Underthe 1985ElectricityAct, the ZimbabweElectricitySupplyAuthority (ZESA) was given the responsibility for generation, transmission, and distribution of electricity throughoutZimbabwe. ZESA was establishedin 1987by amalgamatingthe generationand transmission facilities in Zimbabweof the Central African Power Corporation(CAPC) with those of the Electricity SupplyCommissionand four municipalelectricityundertakingsinto a singlenationalentity. At the same time, CAPCwas reconstitutedas the ZambeziRiverAuthority(ZRA)by Actsof Parliamentin Zimbabwe and Zambia, with the main functionto operate, monitor, and maintainthe KaribaDam complex and to investigatethe constructionof new dams on the Zambeziriver. Both Governmentsare representedon ZRA's supervisorybody. Kariba South and North hydropowerstations in the respective countries, includingtransmissionlines,are nowmanagedand controlledby ZESA and ZESCO,the Zambianpower utility. 6.2 Supplies. In the publicsystem,ZESA's installedcapacityof 1,961MW (1990)comprises a mix of hydropowerand coal-firedsteamplant with an effectiveoutputof 1,780 MW. The maximum demandon the system during FY 89 was 1,518 MW - an increaseof 8% over the preceding year - at an annual load factor of 74%. The Kariba hydroelectriccomplexconsistsof two stations, i.e., Kariba South in Zimbabwe,with 6 x 111MW sets commissionedin 1959-62,and KaribaNorth in Zambia,with 4 x 150 MW sets commissionedin 1976-77. The rights to the water of the reservoirare shared equally betweenthe two countries. The generatoipat KaribaSouthare beingupratedto a total of 750 MW (i.e., 125 MW each)under the Power 11projecd The mainthermal generatingsource is the mine-mouthplant at Hwangewhosenameplatecapacitytotals 920 MW (i.e., 4 x 120 MW commissionedaround 1984; 2 x 220 MW commissionedin 1986)with sent-outcapacityof 874 MW. Other coal-firedplantscomprise the municipalsWions at Harare (135 MW), Bulawayo,and Munyati(120 MW each). Privately-owned thermalplants, totallingsome 110 MW, are run by WCC, two sugar estates, and various metal mining and smeltingindustries. 6.3 The sources of electricitysupplies have shiftedsince 1984from a dominanceof hydro plus importsfrom Zambiatowardsthermalas Hwangehas comeon stream. Thermalgenerationin FY 88/89 accountedfor 58% of electricitysupplies,while KaribaSouth (Hydro)and imports(mostlyfrom Zambia)accountedfor 29% and 13%, respectively.Importshavefallen correspondinglysince1984when they contributed45% of system energy needs. They were severely curtailed in 1989-90because of a major accident at Zambia's Kafue plant so that Zimbabwehad to provide limited energy support to Zambia, thereby temporarilyreversingthe flow of electricitybetween the two countries. (Electricity supplies from Kafue Gorge are expectedto be fully resumedby end-1991). As operationsat Hwange were beset by technical problems as well,Ml the municipal plants, which normally are used for 24/ Thesewere mainly relatedto the operationsof the coal grindingmills andpowerplant transformerdamagein 1989. -61 peakingonly, weretemporarilybase-loadedandusedto the limitof theirtechnicalcapacity,i.e. about 50%plantfactor.25/ OF ELECTRICENERGY,FY 1988/89 Table 18: ZESA: INSTALLEDCAPACITYAND SMURCES (NW;Gwh;Percent) Hydro: Kariba South Thermal: Nwange Nwicipal Units Purchase fron Industrial Self-Producer. Imports p/ Total Capacity/Gross Consumption (fnct. tosses) Note: Percent Gwh Percent 666 920 28.1 38.8 2,506 4,600 28.8 52.8 375 t10 2071 total g/ NW 300 2.3?1 15.8 4.6 499 1 5.7 - 43 7.606 87.3 12.7 1,108 12.7 8.714 100.0 100.0 Contracted from Zambia. Yhe breakdown betweenNuangeand themunicipal unitsisestimated on the basisof ZESA's Annual Reports. Source: ZESA 6.4 Transmissionand Distribution. The transmissionand distributionsystem is quite systemconsistsof3,444 extensiveanddenseinthe centralpart of thecountry.Theprimarytransmission kmof 330 kV lineswhichformsa grid connecting the generatingstationsat HwangeandKaribato the major load centersaroundHarare,Bulawayoand the Midlands,and Mutare,throughsix step-down substations.2&/The subtransmission systemstotalling3,175 km are concentratedaroundHarareand Bulawayo.Theyconsistof 132,88, and66 kV lines (thelatterin the area northof Bulawayo),nearly all radialfeeders. Distributionlinestotal42,265km(Table18). 6.5 Accessto electricityis fairly widespreadwithinthe establisheddistributionsystembut the bulk of low-incomeperiurbanand rural consumersdo not receiveelectricity.The back-logof connectionsin urbanandperiurbanareasis estimatedby theEvaluationteamat some50,000nationwide, mostof whichis residentialandsmall-scalecommercial load. 6.6 Interconnection withOtherCountries.Apartfromthe majorbulkpurchasethroughthe 330 kV link at Kariba,a 7 MWpurchasesupplyfrom Zambiaexistsat distributionvoltage(11kV)at Chirundu,as well as a stand-byfacilityfor 20 MWimportthrough33 kV linesat VictoriaFalls. The Beitbridgearea in the far south presentlyis suppliedfrom SouthAfrica at 33 kV, but a 132 kV U/ By May1991,foar of deesixKajke anils are back inoperaion and dhemunk4Walplantshave revertedtopeaking and reserveduty. 36/ These are locaed at Alaka, Noron, Warren(nearHarare),Sherwood, _aw4yo, and OrangeGrove(nearMutare). -62 connection to Mwenezi is under consideration. A weak (30MVA, 110 kV) connection to the Mozambiquecentralregionoriginatesin Mutare. The upgradingof this linkto cater for a larger transfer (up to 100 MW) is being considered. A 336 km, 220 kV line has been installedbetween Zambia ;nd Botswana(146 km of it in Zimbabwe)to wheel up to 100 MW from Zambia to Botswana,which also provides an interconnectionbetweenthe latter countryand Zimbabwe. Table19: ZESA:ELECTRICITY LINEDATA,19905/ (km) Area 330kV 132kv 110kv 8BkV EasternSystem Northern System SouthernSystem Western System Harare System 151.8 1,155.0 599.8 1,508.0 29.2 421.9 340.5 200.1 58.4 5.0 223.7 857.7 399.6 479.5 Totat 3,443.9 1,021.0 Substation MVAtI a/ 1,804 - 66kV 178.0 - 5.0 1,970.5 840 - 178.0 794 33kV 11kV LV Total 2,310.5 5,629.5 811.2 2,472.8 10,630.3 757.4 733.2 3,489.2 561.2 892.7 4,374.2 2,596.8 383.7 2,287.0 5,446.1 9,563.6 16,214.0 5,983.3 10,029.2 7,093.4 6,793.1 26,410.3 48,883.6 9,061.7 79 Includes all lines taken over from Municipal Undertakings and CAPCO. Transmission, excluding step-up transformers at power plants. Source: ZESA SupblyReauirementsand Options. 1991-2010 6.7 In order to optimize the objectives of least-cost supplies and supply reliability of electricityover the mediumto longer term, it is necessaryto assess the various alternativesavailableto Zimbabwe,i.e., hydro vs. coal; capacityprojectsvs. energyprojects; and nationalvs. regionalsupplies. A decision on the sequenceof projects and a particular project will essentiallybe determinedby (a) investmentand operating costs; (b) the availabilityof financing; (c) the risks of delays in project completion;(d) hydrologicaluncertainty;(e) the reliabilityof the HV transmissionsystem; (t) the risks inherent in increased imports especially in regard to availability and costs; (g) other technical, economic/financial,and environmentalrisks; and (h) maintenancecapability,particularlyat the Hwange thermalstation. Sugy gtions 6.8 Shortfallsof electricitysuppliesare likely during 1993-95,which may affect economic activity. The optionsto deal with any shortfallsover the shortterm (i.e. 1991-94)are, either individually or in combination: (a) rehabilitationof municipalthermalstations:this couldadd up to 100MW of firm power; -63 (b) increased impotts from Zambia: these would depend on future load growth in that country and alternativepower exports from Zambia, e.g. to Botswana. The scope for sustainedincreasesbeyond300 MW is likely to be small, however; (b) imports of 100 MW from Mozambique(EDM) via Mutare: this would involve the constructionof an 80 km, 220 kV transmissionline in Mozambiqueand 220/330 kV terminal equipmentin Zimbabwe,at a cost estimatedat 1989Z$40 mn.271 The line could be commissionedby July 1993at the earliest; and (c) expanded load management, network loss reduction, and other energy efficiency improvements:these could result in savingsof up to 100 MW at times of stress on the system, equivalentto 7% of 1989maximumdemand, at relativelylow economiccosts. As the country's largestelectricityconsumer,SableChemicalsalone couldattainsavings of 40 MW. From the nationalperspective, this would be the most attractiveoption becauseit providesZESA with a flexibleand quicklyimplementablemeasureto respond to uncertaintiesin futuredemandwithoutthe need for investmentin supply facilities. 6.9 The major supply optionsto meet the forecast demandover the mediumto longer term (i.e., until 2010) are presentedbelow withoutreference to economicmerit: Estimated Capital cost (1989Zs mn) Options Hydro Kariba SouthExtersion UpperZambezi &/ Batoka GorgestageI g/ Batoka GorgeStageIIal Thermal Hwange StageIII GasTurbine Irports Zambia Cahora BassaInterconnection a/ b/ 9/ 440.6 825.5 2,174.5 208.0 874.2 135.7 270.4 Instatled capacity 300 MN up to 300NW 800 NW 400NW Earliest Possible Comissioning Date January 1997 January 1998 January2002 n.a. 440NW hI January 1998 for150MW c/ withintwoyears of initiation 240 NW 180 MU FY94-97 FY98 onwards 500MU January 1995 Includes costs of associated transmission. Sent-out caracity of 420MW fortwounitsof 220NW each. Sent-out capacity of 138MU inHarare.Theplantcauldbe located at Mutare. in whichcasethe send-out capacity wouldbe 148NW. Source: ZESA;Evaluation teamestimates. 6.10 Cahora Bassa Interconnection. Electricity supplies from Cahora Bassa would be the earliestfeasibleoption. The Governmentsof Zimbabweand Mozambiqueare consideringan agreement L71 7heMiare link ako is env;saged to stabilze the cowby-wide completingthe transmssion lwop. transission system win Zinbabwe, dtrough -64 for ZESA to acquire up to 500 MW (of which 400 MW are take-or-pay)from Hidroelectricade Cahora Bassa (HCB). Plans are beingstudiedto connectCahoraBassato the ZESA network by means of twin 300 km, 420 kV transmissionlines (operatedinitiallyat 330 kV), at a cost estimatedby the Evaluation team to be Z$270 mn (1989 prices),/ based on a pre-feasibilitystudy carried out with Norwegian and Swedishtechnical assistance.Assuminga constructionperiod of three years, the CahoraBassa line could be in service in early 1995. The HCBoption takes advantageof the virtual cessationof power productionat Cahora Bassa under the long-term contract to supply ESKOM due to sabotage of the transmissionline to South Africa, utilizing capacity that currently is not required nor accessibleby ESKOM. The memorandumof understandingbetweenZESA and HCB provides for firm supplyuntil end-2000, with a possible two-year extension depending on the requirementsof ESKOM by that time.22/ Thereafter, the interconnectioncould provide substantialreserve capacity which may be consideredfirm for short-termsupport. 6.11 KaribaSouthExtension(KSE). Underthis project, the generatingcapacityof the Kariba South station would be increased by 300 MW. (Mheinvestmentwould include a new underground powerhouse,two 150 MW turbo generatingunits, penstock,tailrate tunnels, and cable shafts, whereas no work on the dam is involved.) On the basis of the long-termrecords of water flows in the Zambezi, this additionalcapacitywouldnot increasethe firm energyfrom the overallKaribacomplex. KSEwould, however, add some 300 GWh of average energyper year. It also wouldprovideadditionalcapacityto meet system peak demand and for reserve. KSE thus is an option when the system is in capacity, but not energy, deficit. Overthe longerterm, there is substantialfirm power potentialfrom the conjunctive use of Karibaand Batoka,which would increasethe benefitsof KSE. There is also such potentialfrom the conjunctiveuse of Karibaand CahoraBassa: the HCB line would make it possible for Zimbabwe to exploitthis potentialand defer the neeCfor KSEor other supplyalternatives. Zambiaevidentlywould have to be a party to such an agreementsince it wouldaffect the operationsof the Kariba NorthStation. 6.12 Gas Turbines. This equipmenthas a numberof attractionsas it can be installedwithin a relativelyshort period(abouttwo years) and has low capitalcost. Its considerableoperationalflexibility makes it suitable as peaking plant, but it would be a high-costsource of (intermediateand base load) energy. Also, ZESA's staff wouldhave to prepare for this technology. A stock of importeddiesel fuel and spares would have to be set up, for which provisions would have to be taken in the context of expandingstrategic fuel reserves. As an alternativeprimary energy source, coalbedmethane could be used if proven to exist in commercialquantities. 6.13 HwangeSa This project consists of adding2 x 220 MW coal-firedsteam units to the existing station. Dlespitethe recent operationalproblems with the existing units, with proper 28/ 7he pAed (0991)cost ofthe enr project is estimatedat US$227mn dependingon the schemechosen,about 60% of which wo"udbefor constructionin Zimbabwe. Cot in localcurrencyamountto 34% of total costs. ,/ Snce the HCBcontracthas beenmodelledby dividingeklctriy importsho twoparts, i.e., 400 MWat a high load factor and 100 MWsubjectedto merit order dspatch, any separate allocationsof electricityfrom Mozambique's enttlementto elkctrcityfrom HCD,such as suppliesthrougha Mutarelink, are Rketyto reducethe overallallocations Cs.e.500MVVfrom NC. - 65 upgradingthis type of plant couldachieveat least 75% annualavailability. A &Len-field coal-firedpQwer tgtopjis another possibleoption, set up near the recntly developedSengwamine rather than Wankie. However, the capitaland operatingcosts of equivalentgeneratingcapacitywould be far higher than for HwangeIll, and there is considerableuncertaintyaboutits lead time. While this optioncould lend itself to developmentas a BOT scheme, it is tenuousand therefore, has not been analyzedby the Evaluation team. 6.14 Uppet ZambeziErojct. This project entailsthe constructionof an undergroundpower station and three 100 MW generatingunits immediatelyupstreamof VictoriaFalls. The schemewould be an energyas well as capacityproject, meetingintermediateloads and generating1,116 GWh p.a. of average energy. To meet the proposedoutput of 300 MW, it wouldbe necessaryto abstract from the river up to 330 cumec for electricity generation (and an additional 83 cumec for storage). This abstractionwould be confinedto night time to avoidloss of the tourist amenityduring daytime. Since during periods of low flow, the total flow of the river may be reduced to 200-300 cumec, these abstractionswould detract from the amenityof particularly imposingsectionsof the Falls and would adverselyaffectthe rainforestalongsidethe Falls. The economicviabilityof the project would require careful study under the rigorousenvironmentalconstraintswhich wil! need to be imposed. The extent of the controversyresulting from the environmentalimpactof the scheme could result in substantial delaysin project financingand implementation. 6.15 Batka. The BatokaGorge hydro scheme would be the largest single investmentever undertakenin Zimbabwe. StageI includesconstructionof a dam, 800 (4x200)MWgeneratingunits, and an undergroundpower house on th- south bank of the ZambeziRiver. However, Batokawouldoperate as a run-of-riverproject becauseof its limitedstoragecapacity. It wouldprovide5,105 GWhp.a. of firm energy and average energy of 6,115 GWh p.a. under conjunctive use with the Kariba complex. Investmentcosts are estimatedat 1989Z$2. 17 bn and implementation(includingdesign and arranging financing)at 11 years as a minimum. Sge n entails adding400 (2 x 200) MW to the capacityon the south bank. It would annuallyprovide 1,163GWhIof firm energy and 2,025 GWh of average energy. Investmentcosts are estimatedat 1989Z$208 mn and implementation,three years. 6.16 EKOM. A high-voltageDC linkto SouthAfrica's MatimbastationwouldenableZESA to obtain electricityfrom that countryand, possibly,defer other investmentsby several years. Supply reliabilityin the major transmissiongrids throughoutthe Regionwouldbe increased,and once the HCB interconnectionis in plac4, power from Cahora Bassacould be transmitedto Southern Mozambiqueas wellas to South Africavia a Zimbabwe-SouthAfricalink. Indeed,such a linkmay be essentialfor EDM to benefit from CahoraBassa with any degreeof certainty,given the securityrisk of the existingHCBSouth Africatransmissionline and the high cost of tappingthis DC line for a relativelysmall ACsupply. In the more distant future, once Batoka I and 11are on stream, electricitycouldbe exported to South Africa via this line. However, the Evaluationteam has not analyzedthis optionbecause of its present uncertainprospects. -66 Qoermnt Straeegy 6.11 Tbe Government aims to have sufficient internal capacity to meet at all times the maximumdemandon the electricitysystem. Its systemplanningcriteria are: (a) the internalgenerafting capacityshall at least be equal to maximumdemand;(b) the minimumtotal reserve level shall be 25% of demand 30/; and (c) electricityimportsmay equal or exceed the reserve level only if criterion (a) is met. The traditionalreliabilitycriterionadoptedby ZESA is to meet a loss-of-loadprobability(LOLP) of fivehrstyear. The Governmentemphasizeshydrodevelopment,which it considersto be cheaper and operationallyeasierthanthermalprojects,and is reluctantfor strategicreasonsto allov .lectricityimports to exceed25% of demand,even under abovepolicies. 6.18 Tne Goverrnent's criteriahave formed the basis tI plan wh'ch incorporatesthe followingprojects: 'SA's draft systemdevelopment (a) Purchasesfrom Zambia- the sole additionalsource of firm capacityand energy in the early years - of 300 MW of firmpower plus emergencysupportthrough 1997,declining to 150 MW by 1998,and zero after 1999; (b) Rehabilitationof the larrer units of the municipal thermnalstations for stand-by and occasionalpeak use,31/ with a target for completionby mid-1993; (c) Interconnectionwith Cahora Bassafor the importationof up to 500 MW of firm power (400 MW to be on a take-or-paybasis), with a target in-servicedate of 1995; (d) KaribaSouth Extension(KSE;300 MW), with a target in-servicedate of early 1997; (e) UpperZambezihydroelectricschemeat VictoriaFalls(300 MW), with a target in-service date of 1998;and (f) Batoka I (800 MW in Zimbabwe), with a target in-service date of 2002, possibly followedby 800 MW on the Zambianside. 6.19 The Governmentand ZESA see KSE essentiallyas a means to optimize the trade-off between least-cost expansionand maintainingsufficient internalcapacity to enhance the reliabilityof electricitysupplies. DOERD has givena strong preferenceto commissioningKSE as the first project of the plantingprogramon the groundsthat, in its view, this scheme(a) has relativelylow operatingand maintenancecosts and a longer economiclife than thermalplants; (b) has lower foreignexchangecosts than thermal alternatives;(c) can be complementedby other hydro projects (i.e. Batokaand the Upper Q This ,)/ Includescapaci on scheduld ntenane. Whfikthe rehabied wurdof the mnkpal ihermalplantscouldoperareat a 50%plantfactor untilekletric supplesfromCahoraBassacomeon stream,base-loading themfor manyyearswouldmakeItnecessaryto virtaly program. re-buildhse uts, whichis notlikelyto be partof a kast-costexpansion -67 - Zambezischeme)or by importsfrom CahoraBassato providefirm energy; (d) wouldobviate the need for the Hwange expansion, provided that electicity inynorts can be continued until Batoka is commissioned;and (e) has already beendesignedand can be undertakenalmost immediately.32/ aSye xM sio-imulation- 6.20 AssumptioM.The key questionsconcerningthe future electricitysupplystrategyare (a) whether to emphasizeinvestmentin indigenousgenerationor have imports determinedby economic criteria, through takingadvantageof lower-wcost importsfrom Zambiaand Mozambiqueto an extentthat would exceed the (..vernment-imposedlimit; and (b) what should be the sequence of new supply projects. The needfor additionalpower supplycapacityin the Zimbabweansystemdependson the future growthof electricitydemandand the reliabilitystandardfor meetingthis demand. The Governmentand ZESA are ableto influenceboth factors, i.e. demandthroughpricing and load management,and system reliabilitythrough the planningcriteria adopted. 6.21 The Evaluationteam has tested the implicationsof alternativepolicies for demandand system reliabilityon the investmentsrequiredfor the power system. The team has approachedthis task by evaluatingcomprehersivelya referencecase, and then assessingthe impactof modifiedpoliciesunder alternativecases. For the reference case, the Evaluationteam has assumed that (a) the Government followssoundelectricitypricingand loadmanagementpoliciesand thus, the demandforecastof the Base Case/Policy-activeScenario is adopted; and (b) strict system reliabilitycriteria are observed, based on a plannedLOLP of fivehrs/year. 6.22 To ascertainwhen supplyshortfallsin ZESA's systemare likelyto occur, the Evaluation teamhas projectedthe balancebetweensupplyand demandfor both capacityand energy(Table 19). lle projectionsof existing and committedsupply capacity are predicatedon (a) improvedperformanceof Hwange (capacity factor increasingto 75% followingthe completionof ongoing improvements);(b) availabilityof 300 MW of firm power from Zambia (at 95% capacity factor)33/ up to 1992/93and of 240 MW up to 1996/97, decliningto 180 MW by 1998/99. Alternatively,the availabilityof firm power would declineto 180MW by 1997/98and zero by 1999/2000; (c) the municipalthermalplants to be capableof operating at up to 50% annual average plant factor for a numberof years following rehabilitation;(d) KaribaSouth upgradingto 750 MW to be completedby 1992/93;and (e) no increase in load managementeven thoughZESA has already been extensivelypracticingit for some years. 6.23 The projectionsthus are based on two key hypothesesin regard to electricityimports. Tbe Governmentand ZESA assumethat electricityimports from Zambia cease after 1999. However, Zambiamay have a surplus of firm capacityand energy unti 2010. Therefore, developmentprograms havealso been evaluatedon the hypothesisthat a surplusin Zambiaof up to 180 MW base load capacity II/ Considerions (c) and (d) have to be reconciled viththe Govermnent'splanning criteriaand may well involvehigher investmentsthan in the 5 hrs/yearLOLP case. II/ TheEvahwtionteam assumesdw 95% despatchfrom Zambia is the manbmunattainableunder load despatchand system operatingconstrains. -68will coinue to be availableuntfl 2010, which would clearly be part of the least-cost option to meet electricity demand in Zimbabwe. it is also assumed that ZESA will proceed soon with fu rehabilitatng about 270 MW of capacityat the three municipalthemal stationsto extend their usefil operating lives by 10-15 years from the early 1990sonwards.34/ These stations are essential for meetingdemandthrough the 1990s,whateversupply optionsare subsequentlychosen, sincethey are the lowest-costand quickestoptionto reinforce systemcapacityfrom indigenouspower capacity,as well as a source of firm energy. Capacity and Energy Balances. These indicate that ZESA's system would require 6.24 additionalcapacityto meet peak demandand for operatingreserveby 1992193,and an additionalsource of energy by 1995/96. However, none of the mediumterm supply options can materialize in time to meet the capacity shortfall in 1992/93, with the possible exception of gas turbines. In the a= Scenario,the systemwill be capacityconstrainedfrom 1992/93, whereas an energy Case1Policy-active constraintwill not appearuntil 1995/96. In the Base Case/Policy-neutralScenario,theseconstraintswill arise in the sameyears but wouldbe considerablylarger. In the Trod Case, small capacitydeficits(less than 10 MW) will start in 1992/93, with the first significantdeficit in 1994/95and an energyshortfall emergingin 1997198. Under the Policy-activeScenario,energydeficitsuntil 1995would be small (ess than 40 GWh), hence the associatedrisk of supply interruptionswould be small. However, under the Policy-neutralScenario,the deficitis 540 GWhor 4.3% of energyrequirementsprojectedfor 1995. For the periodthrough 2010, under the Policy-activeScenario,nearly 9.4 TWh of additionalenergywill be needed. Least-costProgramwith ZambiaImnorts to 2010 The Evaluationteam has analyzedthe costs of alternativeplantingprograms to meet the 6.25 conditionsfor the Base Case/Policy-activeScenario,up to the year 2010. Theseprograms are basedon the Evaluationteam's electricitydemandforecastfor 1991-2010(para 4.17) and ZESA's supply options for the mediumto longer term. The in-servicedates as indicatedby ZESA were consideredto be the earliestfeasible dates and were modifiedso as to attain a least-costprogram. A critical assumptionis that HCB will continueto supply500 MW firm power until BatokaI is commissioned,and that 180 MW of base-loadedcapacityfrom Zambiacontinueto be availableuntil 2010. The programs are predicated on ZESA's reliabilitystandardof a maximumof five hrs LOLP in any one year. 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(3,15* (4OP 2,32.3 2,8332 3.43 2,57* 2,65. 2.16* 15,26A3 351512* 14,84.4 t6.9793 37,5963 3242,9 (4.9 2,85.1t 29.2 3.3 3,8176. 1,933*9 19.6123 2,.5 23,09 (e6 (991.71 L6061) O(54 ,.7) (.396* 6444t (J6 3860*) 0,409*) (7 0,5232) (8,59.2) 3^6921 J17 (1,7312) 9.* 0(88 (30,0.) 1 l~~~~~~~~~~~~~~~7 6.26 -o The alternativeplantingprogramsconsideredby the Evaluationteam are as follows: P1: HCB in 1995; KSE in 1998; and Batoka I in 2002. This program is the nearest to ZESA's presentlypreferred1 'rogram. KSEis not neededat its earliestpossiblein-service date in 1997since HCB fully meets the system's capacity requirementsup to 1998, as well as its energy requirementsto 2002. P2: HCB In 1995; KSE in 1998; HwangeIII in 2002; and BatokaI in 2005. This program tests the use of HwangeIII to defer the large-scaleinvestmentfor Batoka, which it does by three-fouryears. P3: HCB in 1995; KSE in 1998; Upper Zambezi in 2002; and Batoka I in 2005. This program carries out a similartest as P2, but with the Upper Zambeziproject insteadof HwangeIII. This allows Batokato be deferredby three years. P4: HCB in 1995; one gas turbine each in 1998 and 2000; and Batoka I in 2002. This program tests the replacementof KSE by two gas turbines of similar joint capacityto KSE. PS: HCB in 1995; HwangeStage HI in 1998; and BatokaI in 2002. This programtests the replacementof KSEby HwangeIII. P6: Gas turbines (five units) during 1995-98; HwangeIII in 2000; and BatokaI in 2004. Ihis programtests the impactof not proceedingwith the HCB option, and of a delay in completingBatoka. P7: Gas turbines(five units)during 1995-98;HwangeHI in 2000; KSE in 2004; and Batoka I in 2007. This programalso tests the impactof not proceedingwith HCB, combined with deferringthe Batokaoptionby three years. N_o_: The prefix "P" denotesthose developmentprogramsdesignedto meet future electricity demandunder the Policy-activeScenario. 6.27 Even assuming maximum imports from Zambia (300 MW), there would be an unavoidableminor capacityshortagein 1993-94since noneof the supplyoptionscouldbe commissioned before 1995. Althoughthis impliesthat ZESAwouldhaveto breachits reliabilitystandardin theseyears (LOLPwouldbe 21 hrs in 1992/93and 47 hrs in 1993/94under the Policy-activeScenario),this shortfall could be handled through load management,as it is currently practiced by ZESA. HCB cannot be delayed beyond 1995without violatingthe "firm energy" criterion.3S/ 35/ Fim energyis defined as energyavailabk in each year based on tMeentireperio of hydrologicalrecord. -71 - 6.28 An economicraking of theseprogrms was undertake based on the net present value N) of their capital and operatingcosts, expressedin 1989 prices and discountedover the economic livesof the new supplyfacilities at a rate of 10%. Detailsof the projectedcapacityand energy balances and the evaluationof NPVs for these programs are given in Annex-. The comparativeresults of the developmentprograms for the Base Case/Policy-activeScenarioare as follows: Pi P2 P3 P4 PS P6 P7 (1989ZSmn) 3,856 3,836 3,758 3,529 4,058 3,982 4,062 6.29 Accordingto the analysis,the optionP4 representsthe least-costprogram in the Policyactive Scenario, i.e. the HCB interconnectionby 1995, one gas turbine each in 1998 and 2000, and BatokaI in 2002. Its NPV is substantiallylower - by 1989Z$200-300mn - than those of the programs nearest to it, i.e. those with HCB fbllowedby KSE in 1998 instead of gas turbines (P3; P2; P1). ProgramsintroducingHwangeHI beforeBatoka (PS; P6; P7) entailthe highestcosts of the alternatives considered. 6.30 The ranking demonstratesthat HCB would be the least-costoption as the next major electricitysource. Zimbabwewouldbenefitsubstantily up to the year 2000: comparedto foregoingthis option (i.e. cases P6, P7) the economicsavingsin termsof NPV wouldbe at least 1989Z$450 mn. The option is economicallyjustified even with the relatively short period - i.e. five to seven years - of contractedfirm power availableto Zimbabwe. OnceBatokacomeson stream, however,a 400 MW takeor-pay arrangementfor Cahora Bassa wouldbecomeunattractivesince little HCB firm power wouldbe required for many years after the completionof Batoka. Therefore, it would not be economicfor Zimbabweto continueto contractfor the full 400 MW after Batoka is commissioned. Even a limited (say, 200 MW) take-or-paycontractwith HCB wouldoffer no advantageas it would be more costlythan electricityfrom Batoka. 6.31 The replacementof KSE by gas turbineshas not formedpart of the Government'sand ZESA's plans to date. Nevertheless,the advantagesof gas turbinesfor the Zimbabweansystem should not be overlooked. Tbe short lead time for this type of plantallowsit to defer a decisionon new capacity unti after the HCBinterconnection,by whichtime (a) actualprogresson Batokaconstructionwill permit the in-servicedate of that schemeto be forecastwith greater precision;(b) uncertaintyaboutmediumterm demandgrowth will be less; (c) the scope for electricityimports,especiallyfrom Zambia, maybe larger and be available for more years than conservativelyassumed for this study; and (d) extended load management,yet to be fully evaluated, may be a lower-cost(and more acceptable)alternativeto the installationof gas turbine plant itself. - 72 - 6.32 The analysisalso showsthat Batokais criticalfor the least-costexpansionprogramover the mediumto longer term and for the timing of most other projectsof this program. Its completionby not later than 2005 is of key importancefor long-termelectricitysupplies. In particular, the timing of the contractfor HCBsuppliesshould,if at all possible,be linkedto the commissioningof Batoka.If there is a gap betweenthe expirationof the HCB importcontractand the commissioningof Batoka, a stop-gap project will be neededto meet both capacityand energydeficits. A similar situationarises in the case of suppliesfrom Zambia, althoughthe deficitswould not be as large in view of lower imports (180 MW) at that time compared to HCB (500 MW). This finding is bound to have a strong influenceon the selectionof projectsto be installedbefore as well as after Batoka. In particular, in the absence of gas turbines, the justificationfor KSEhinges on the timely completionof Batoka,since KSE wouldprovide only limited economicbenefits before Batoka is commissioned. Over the longer term, KSE would become useful in conjunctionwith either Cahora Bassa, Batoka, Kafue, and/or the Upper Zambezi scheme, with which it would yield additional firm energy in the context of the system. Additional capacitywould permit deliveringthe Kariba energyto the peak of the system when electricitydemand has grown sufficientlyto use a majorportionof that energyin the peak: KSEeventuallywillbe of value to the system, but its inceptionover the mediumterm wouldbe prematureif firm energy from Zambia is availableuntil 2010. 6.33 Onthe other hand, with Batokain place, HwangeIII wouldnot seemto be required until after 2010. The outputfrom Batokawould effectivelyleave the HwangeHI units idle and would result in a drastic reductionin HPS coal demand. Once Batokais brought on stream, a decline in coal output of about2.3 mn tpy wouldoccur (out of a total volumeof about6 mn tpy) and likely persist for four to five years until the growth in electricitydentand wouldagain make increasedthermal power generation neceay. The economicsof HwangeHI wouldbe seriouslydepressedas resultof commissioningBatoka as the former wouldbe used at very low capacityfor extendedperiods, with adverse effects on WCC operationsas well (para. 6.80). Least-Cos Program with No ZambiaImports after 1999 6.34 The effect of the cessationof electricityimportsfrom Zambiaby the year 2000 was also eyamined. This is the assumption adopted by ZESA in its system developmentplan. 6/ The programs consideredby the Evaluationteam are as follows: PIZ: L61 HCB in 1995; KSE in 1998; 150 MW (138 MW sent out) gas turbine in 2000; Batoka I in 2002; and Batoka II in 2010. KSE is not needed at its assumed earliest in-service date of 1997sinceHCBfully meetsthe systemcapacityrequirementsup to 1998,as well ZESA's assunption that ektricity suppliesfrom Zambiaon aflnn basis willcease afler 1999 a basedon ZESCO's 1990loadforecast. However, it is the Evaluationteam's view that there will be little, f any, increasein electricity consumptionin Zambiabecauseof modestprospectsfor economicgrowth in general and the likelihoodof a secular activitiesin particular(the copperindusteyaccountsfor about60% of Zambia's eclririty declinein copper-reolated conswnption). Zambia's long-termprospectsfor copperproduion remainpoor because of deeliningore grades, amitedreserves,and worseningminingeonditions.Ihus, Zambia'sproduton of refinedcopperisprojectedto decline from 0.47 mn M.T. in 1989 to 0.25 mn M.T. by 2000 and less than 0.2 mn M.T. by 2005. (World Bank, Price 1990). ProspectsforMajor Prnaay Commodities,Decemnber -73 - as energyrequirementsto 2002. One gas turbinewould be installedto meet the capacity deficits in 2000 until Bateka I is available in 2002, since it representsthe least cost capacityof the availableoptions. P2Z: HCB in 1995; KSEin 1998;HwangeIm in 2000; gas turbinein 2004; BatokaI in 2005. P4Z: HCB in 1995; first gas turbine in 1998, two more gas turbines in 2000; a fourth gas turbine in 2001; BatokaI in 2002. P9Z: HCB in 1995; Hwangem in 1998; gas turbines in 2000, 2001 and 2003; Batoka I in 2005. PIOZ: HCBin 1995;first gas turbine in 1998; HwangeIII in 2000; furthergas turbinesin 2001 and 2003; BatokaI in 2005. The resultsof the analysisat a 10%discountrate for the BaseCaseIfolicy-activeScenario 6.35 are as follows: DevelopmentPRograms PIZ P2Z P4Z P9Z PIOZ NPV (1989 Z$ mn) 660 3,961 3,635 3,953 3,843 6.36 The analysisindicatesthere is litle to choose betweenoptionPIZ with KSE and one gas turbine and optionP4Z with four gas turbines. However, under both options, additionalplant is needed to fill the gap beforeBatoka is commissioned.Tbis can be met most economicallyby gas turbines.For optionP1Z, a singlegas turbine is requiredin 2000 when importsfrom Zambiaare no longeravailable, whereasin option P4Z, four gas turbinesare requiredduring 1998-2001.Given the small cost difference betweenthe optionswith and withoutKSEbeforeBatoka,other argumentshave to be considered. Over the longerterm, KSE wouldbecomeuseful for conjunctiveoperationwith either CahoraBassa, Batoka, andlor the Upper Zambezischeme.In the short to mediumterm, prior to the commissioningof Batoka, KSE does not provideany additionalfirm energybut it would afford protectionagainstinterruptionsto the HCB interconnection:during outages,Kariba couldbe over-drawnto provide additionalenergy, to be replacedby HCBoncethe supplywas restored.This wouldallowadditionalsecurityof supplywithout incurringhigh fuel costs which would be the case with the gas turbine option. On the other hand, the all-gastutbine option allows investmentdecisionsto be deferred u-ltiIthere is more certaintyabout the capacityand energy balances in the years just before and after 2000. This option would also provide protectionagainst interruptionto the HCB interconnection,the same way as KSE. -74 6.37 For analyzingthe effect of an additionalenergy project that would be needed after the conunissioningof HCB and prior to the commissioningof Batoka,HwangeStageIH rather than KSE or gas turbines was considered(optionP9Z). 1Th cost of that option is 1989Z$318 mn higher than the least-costprogram. Further analysiswas carried out to test the effectof delavingHwangeIII until ater either KSE 2Z) or a gas turbine(PIOZ),i.e. until the year 2000. In the case of KSE,the costs are little changed,but by installinga gas turbine before HwangeII, there is a saving of Z$1 10 mn comparedto the programwith Hwangem in 1998.Tbis resultdemonstratesthat it is not economicto install Hwange m before Batoka. Furthermore, there will be a major impact on WCC's operation once the HCB interconnectionand later, Batokacome intoservice. over futuregrowthof electricitydemand, 6.38 Accountneedsto be taken of the uncertaintiesfeasiblein-servicedatesof the supplyschemes,and the consequencesof Government-imposedconstraints in regard to LOLP, installedcapacitywithin Zimbabwe, and electricijyim.orts. The ranking of the developmentprograms has been tested for the Base Case/Policy-neutralScenario, with necessary adjustmentsto the timing of the individualinvestments. These programsdiffer essentiallyin regard to their assumptionson electricitydemand growth, LOLP, and consequently,the optimalin-servicedates for the availablesupplyoptions. An "internalcapacitycase" has also been evaluatedthat takes account of the Government'sobjectiveof high capacityreserves installedin Zimbabwe. 6.39 Sensitivityanalysishas been used to examinetwo issues, i.e. (a) whetherthe rankingof alternativeprograms, and thus the compositionand sequenceof supplyoptions to be considered,would be affectedby the changesin assumptionsaboutthe key variables;and (b) how sensitivethe timing of individualinvestmentsand thus. the size of the requiredinvestmentprogramin terms of its NPV are to these changes. The Evaluationteam has tested the sensitivity of the least-cost power development program to changesin the followingfour key variablesfrom the reference case assumptions: (a) the demandforecast- the higher case under the Policy-neutralScenario; (b) the systemreliabilitystandard- a slightrelaxationof the LOLP criterionto 20 hrs/year; (c) the earliest in-servicedate of Batoka I - a delay of three years to 2005, but the HCB finr power supply is continuedup to 2005; and (d) cessationof HCB firm power supply in 2000, with BatokaI delayed to 2005. The excess cost over the least-costprogramof implementingthe Government'sobjective 6.40 to meet the system maximumdemand from indigenouscapacityhas also been analyzed. However,the Evaluationteam did not examinethe caseof a delayto the commissioningof BatokaI beyond2005. This eventualitywould not become unavoidableuntil around 1995and is thus beyond the focus of this Study. Moreover, this situation would require Zimbabweto investigatesupply options that are presentlytoo tenwtive, such as imports from new sources in southern Africa and a greenfield coal-fired plant in - 75 Zimbabwe.Sbould it emergethat Batokais not feasible withinthe periodunder consideration,the leastcost developmentprogram would have to be re-definedin the light of updated demand forecastsand progress in dedng new supply options. 641 Electricity Demand Forecast. The impact of following the Policy-neutraldemand Scenariowhileassumingno changein the otherplanningparameters,is shownbelow in termsof changes in investmentrequirements,developmentprograms,and associatedNPVs(Table21). Electricitydemand under the Policy-neutralScenarioby 2010 wouldbe nearly 5,400 GWb or 26% higher than under the Policy-activeScenario. To meet the higher capacityrequirementstotalling 1,100 MW under the Policyneutral Scenario,KSE wouid have to be brought into service by 1997, the Upper ZarnbeziSchemeby 1999, BatokaI by 2002, and Batoka11by 2007, in additionto one gas turbine (by 2009). The NPV of this supplyprogram would exceedthe least-costprogramfor the Policy-activeScenarioby 1989Z$674 mn under fivehrs/year LOt D standard,highlightingthe substantiallyhighercosts of not proceedingwith sound energydemandmanagement,particularlypricing. 6.42 SvstemReliabilityStandard. Unlessexpandedloadmanagementispracticed, the forecast loadgrowth over the short term will reduce the system's reservecapacitymargin and increase LOLP to 21 hrs in 1993and 47 hrs in 1994in the Policy-activeScenario(27 hrs and 70 hrs, respectively,in the Policy-neutralScenario),eventhoughtheseoutagesare not excessiveor unmanageable.Thereafter,new plant has to be scheduledto meet the target reliabilitylimit of five hrs/year, as used for the reference case. Ihis is a stringent LOLP criterion for a developing economy which was set to meet the expectationsof sophisticatedmajor industrialconsumers,but whichmaybe uneconomicallyhigh for other consumers. It involvessubstantialadditionalcost whoseNPV for the 1990-2010period is estimatedat Z$100-120mn for the Policy-activeScenario(Table 23) dependingon the earliest in-servicedate for BatokaI, comparedto a slightlyless rigo-ous criterionof 20 hrs/year.32/ A 20 hrs/year LOLP, under the Policy-activeScenario, would make it feasible to postpone the commissioningof new capacityto follow the HCB interconnectionto at least the year 2000. While there is a strategictrade-off between reducedinvestmentand reducedsystem reliability,key consumerscan take their own precautions,e.g. through loadmanagement,at substantiallylowercoststhanthose to ZESA of improvingsystemreliability to fivehrs/yearLOLP. Pastevidenceof ZESA's demandmanagementmeasuresshowsthat ripplecontrol and contractualloadshedding,althoughnot direct substitutesfor systemreliability,canbe accommodated by major consumersand can reduce the costs to these users resulting from lower reliabilitystandards. Furthermore,adequatesuppliesto certain industrialand other consumersdependingon high reliability can be maintained through selective shedding of other consumers' loads. Other consumers would probablynot be significantlyaffectedby a moveto a 20 hrs/year LOLP. (As an indicationof the value attachedby industrialelectricityconsumersto high LOLP standards,ZESA's special agreementswith its major customersincorporatecomparativelylow tariffs for interruptiblesupplies.) )Z/ LOLP in WesternEuropeanand NorthAmer!cansystemsgeneraly amountto 24 hrs in 1Oyears, ie., aboutone-haf of thatproposedby ZESA. In contrast, Thaiwand, Malaysia,and other semi-indusialked countei applya LOLP of 2448 hrslear. -766.43 The examiation of a 20 hrs/year LOLP standardis promptedby (a) the stringencyof ZESA's present planning standard of five hrslyear for generation, which, while not affecting all co sumersimultanously, does incrme unplannedoutages above the five hrs/year level, and (b) ZESA's actualtransmissionand distributionsystemsoutages(unplannedsystemoutagesin FY90 totalled around 170 hors). The latter are bound to remain high until major reinforcementsand rehabilitation have taken place. Tbe importantconsiderationis that the reliability standards of all three system componentsshould be reasonablyconsistent,so that the achievementof high reliabilityin generationis not negatedby lower levels elsewherein the system. 6.44 BatokaCogmissioningDa. Given the risks of implementationdelaysfor hydropower projects in general, 2J/ and the substantial cost and difficulties related to mobilizing the required funding for Batokain particular,the completionof this project may well slip towards2005. Evaluating the consequencesof a delay, to 2005, for the earliest in-servicedate for Batoka I is prompted by a numberof major uncertaintiesabout the feasible timing of the project. The main sources of possible delaysare (a) the difficultyin mobilizingthe substantialfinancingrequired for this large-scaleproject; and (b) legal complexitiessurroundingthe needed agreementto allow Zimbabweto use Zambia's 50% shareof the water rights at Batoka (untila power stationon the Zambianside is built), withoutwhichthe dam and the south bank developmentwould not be economic.2_/ Zambia may not have a clear incentiveto proceed with the scheme at a timing to suit Zimbabwe, whilst it would displace Zambian electricityexportsto the latter country,unlessprofitableexportoutletsexiston her part. Also, if Zambia did not have an exportmarket for any additionalelectricity,it would be difficultto arrange international financingof the magnituderequired for Batokawithoutcast-ironassurancesthat Zambia's water share couldbe used in the SouthBank Station. If Batokacan be commissionedby 2002, prior new investments - gas turbines or KSE - are neededonly for capacity. However,if Batokacannotbe commissionedby that date, an energy project or sequenceof projects prior to Batokawould be neededboth in the five hrs/year and 20 hrs/year LOLP cases to meet forecast electricityrequirementswhether or not KSE is implemented,i.e. 140 MW for the Policy-activeCase and about 560 MW for the Policy-neutralCase. Furthermore,should suppliesfrom Zambiacease by the year 2000, an energy project will be needed in that year The analysis shows that, under the Policy-activeScenario, gas turbines would be more economicthan Hwange III to meet the energy shortfall.This result is independentof whetherBatoka is commissionedin 2002 or 2005. 6.45 Given the importantinteractionof system reliabilityand the earliest in-servicedate for Batokaon integratedpower system development,the Evaluationteam has analyzedand ranked the full range of combinationsof these variablesfor the programs consideredunder the Policy-activeScenario. The results are summarizedbelow. The results of the referenceevaluation- with and without imports 38/ 9/ projectsfinancedby the WorldBank.for nearly 30% oftiaes Accordingto an evauation of 49 major hydropower construion took twie as longor longerthan originaly envisaged,andconstrution costs were at keastwice as high as planned afterallowingfor inflation. (See: Understandingthe Costs and Schedulesof World BknkSupported Hydroelect Projects. WorldBankEnergySeries PaperNo. 31, Jul 1990.) lhe potentialof the Zambeziexpiresinthe year present ZimbabweiZambiaagreementon developingthe hydropower 2000. -77 - fom Zambia - are also given. The compositionand sequenceof supplyoptkns in each program is defined above (paras 6.26; 6.34) but the timing of tese optionshas been adjustedto satisfy the LOLP criteriafor each case. The raings of the four most economicprogram evaluatedunder each scenario for LOLP and Batka in-servicedates are as follows: Tabge 21: LOLP(hrslyear) Batoka in-service (Year) SENSITIVITYOF THEELECTRICITY SUPPLYDEVELOPMENT PROORAJI TO LOSS-OF-LOAD PROBABILITY ANDBATOIAIN-SERVICEDATES g/ Reforense Evaluation 5 2002 WPV (1989 ZS mn) Sensitivity 5 2005 20 2002 RPV (1989ZS Mn) I Rankin8 P4 P3 P2) P1) 3,529 3,758 3,836 3,856 P1) P4) P2) P3) 3,409 3,413 3,615 3,627 3I Ranking P4Z) P1Z) 3,635 3,660 P1Z P4Z 3,463 3,516 Evaluation 20 2005 NPV (1989 ZS on) UPV (1989 ZS on) ZAMBIA SUPPLIES UNTIL2010 P4 P2 P3) P1) 3,458 3,836 3,758 3,776 P4 P1 P2) P3) 3,350 3,403 3,615 3,627 ZAMBIASUPPLIES UNTIL 1999 P1Z P42 P9Z 3,551 3,633 3,953 P1Z) P4Z) P9m J/ Assumesthat the supply of 500 MW .rm power from Cahora Bassa is continued until coamissioned. Note: Twoprograms linked by parentheses are almost equal in their NPVs. 3.504 3,506 3,726 Batoka I is Source:Annex 25. Risk Elements 6.46 Given the size and complexityof the electricity generationprogram (many of whose componentswould have to be implementedsimultaneously),this program will likely face financingand implementationconstraints. In addition, technical/operationalproblemsmay occur. Besidesdelays in the completionof Batoka,the principalrisks concerningfuture electricitysuppliesare that (a) electricity from Cahora Bassa will not become availableby 1995 or will not become available at all or will be frequentlyinterrupted;(b) e'ectricityfom Cahora Bassawill not be fully availableat 500 MW beyond the year 2000or so; and (c) cost overrunsoccuron some or all projects. Shouldelectricitysuppliesfrom Cahora Bassa not materialize, feasible options would be gas turbines (750 MW du ing 1995-98), temporary increasesin importsfrom Zambia, or an interconnectionwith South Africato importenergy from that countryuntil Zimbabwe'snext larger-sizedenergyproject is in place, i.e. either Hwange 111 or Batoka. The problems associatedwith possiblefrequent interruptionsof the HCB transmissionline -78 - are-complex, in particular their impact on overall electricitysupplies and the economy at large and therefore, shouldbe evaluatedin detailthrough a separate study. Such a study should also considerthe potentialbenefits of KSE vs. gas turbinesas emergencyshort-termenergysource. 6.47 C1wqu.SMpp1ifromCA= jm. WhetherBatoi.a is commissionedas soon as possible, delayed, or not commissionedat all, supply from Cahora Bassa is significantlyless expensive than any other optionsopen to Zimbabwe,and wouldbe particularlyattractiveif it could be prolonged beyond 2000. Firming up a longer-termsupply beyond 2000 would require either agreement from ESKOMto forego its importentitlementfor a fiurtherperiod or an early start on the constructionof the Cahora Bassa north bank power station. Otherwise, an emergencyimport contract or, possibly, a regional cooperationagreementon emergencysupplies appear to be worth investigation,even if tariffs to be paid are higher than those under a takeor-pay agreement. However, there is the risk that firm suDpliesto Zimbabwefrom CahoraBassawill terminatebeforeBatokaI comes on stream. This would be the case when ESKOMneeds its owr share fully. This wouldleave a capacityand energydeficit of significantproportionsin the Zimbabweansystem. The Evaluationteam has investigatedfollowingcases: P4;P1: HCB supplvlasts until mid-2001when Batokais commissioned,or alternatively,Batoka commissioningis delayedto mid-2004and HCB supply continuesuntil then. P8: Batoka commissioningis delayed to early 2004 but HCB supply ceases at the end of 2001; gas turbine 1 is commissionedin 1999;gas turbine 2 in 2001; gas tutrbines3 and 4 and Hwange3 in 2002; and gas turbine 5 in 2003.40/ HCB Supplies Terminate (June 30 of Year) BatokaCommissioned (July 1 of Year) (1) 2001 (2) 2001 (3) 2004 2001 2004 2004 Evaluation Program NPV (1989Z$ mn) P4 P8 Pi 3,352 3,879 3,350 6.48 The deficit in Program Pg couldpossibly be handledthrough attemptingto extend the HCB contract either for firm or tem,porarysupplies,even at higher than presently envisagedprices for electricity purchases, indicating the importance of closer cooperation with ESKOM. (Electricity purchasesfrom ESKOMdirectlymightalso be feasiblebut have not been further analyzed.) Shouldthis prove to be impossible,the sole nationalsupplyoptionsto providesufficientcapacityand energywould be a combinationof additionalgas turbines and Hwange InI. The Upper Zambezischeme would not provide sufficientenergy for being considered. The analysisshows that the three-yeargap betweenthe cessation of HCB supply and the commissioningof Batoka I would impose a substantial cost on rmGas turbineshave been incorporatedinto theplantingprogramso as to avoid infinging the LOLP standard. However, they are nconomic in this constellation,and are probably not required. -79Zimbabwe. The NPV of the additionalinvestmentover and abovethat required if supplies from HCB extend untiUthe commissioningof BatokaI amount to nearly 1989Z$520 mn for a programbasei on 20 lHyear LOLP. Given the magnitudeof this investment,a program based on anythingless than 20 btslyear LPL? would be technicallyand economicallyinfeasibleas Zimbabwewouldnot have sufficient optiora for new capacity available. 'Me closenessof the NPVs for programs when the HCB supply extendsto the commissioningdate for BatokaI, whether2001 or 2004, also shows that the costs of meetingfuture electricitydemand are not sensitiveto the commissioningdate of Batoka up to 2005, providedthat suppliesfrom CahoraBassa are availableup to the commissioningof Batoka1. 6.49 b=jjl CapK . To meet the criterionof domesticily installedcapacityequalling maximumdemand and a five hrs/year LOLP standard, additionalcapacitywould be necessarytotalling 1,100MW under the Policy-activeScenarioand 1,700MW un ',r the Policy-neutralScenarioover 19902010. NPV costswouldexceedthoseunder the least-costoptionof the Policy-activeCase (20 hrs LOLP) by 1989Z$207 mn and nearly 1989Z$1.3 bn, respectively. Additionalunits requiredcompriseKSE by 1996 (this target could probablynot be met), BatokaI in 2002, BatokaII in 2010, and one or five gas turbinesfrom 1997onwardsunder the two demandscenarios,respectively. 6.50 Oter Cases. For the Trend Case, the least-costprogramis fairly similar to that of the Policy-acive Scenariogiven the closenessof the electricitydemandforecasts. These findings remain valid at discountrates of 8% and 12%, and are not sensitiveto a lower LOLP standardof 70 hrs/ycar. Conclusionsand Recommendations 6.51 In view of the costs and risks associated with electricity supply development, it is importantto select an expansionnrogramthat is least-costand affordablewithinthe financingconstraints of the economy. The Evaluationteam considersthat a programbased on a sound policy for demand managementespeciallyLRMC-basedpricing, and a LOLP standardof 20 hrs/year is realistic in terms of system managementand has considerablylower economiccosts than any alternative: this program allows it to commissionthe HCB interconnectionaround 1995, KSE or gas turbines around 2000 and thereafter, and Batoka I anytimeduring 2002-05.41/ The savings over the 1990-2010period for the Policy-activeScenariowouldbe considerable,i.e. 1989Z$674 mn comparedto a supplyprogramfor the Policy-neutralScenarioand based on five hrs/year LOLP. 6.52 A delay in Batoka'scommissioninguntil 2005can be accommodatedwithoutseriouscost or capacity shortage implications(in fact, modestsavings would occur in most programs with Batoka delayed until 2005), but only on the critical assumptionthat supplies from HCB and Zambia can be maintained. The cessationof suppliesfrom Zambiaas early as 1999wouldrequire a replacementenergy projectto meet the shortfalluntil Batokais commissioned. However,if Batokacan be broughton strean already by 2002, the precedinggap couldpossiblybe handledthrough load managementand contingency IL/ developmentprogram (P) requirescommnissioning BatokaI in 2005 UnderthePolicy-activeScenario,theleast-cost ratherthan2002,wde, LOLPof bothfive and 20hrslyear. so - of these,obviatingthe needfor gas importsfromZambia,HCB,and/orSouthAfrica,or a combination turblnesor for anyotherbridgingcapacity. of the analysisare as follows: The mainspecificconclusions 6.53 42/ (a) Pgra: (i) theCahoraBassaInterconnection CMoitign andSequnc gf m remainsthe least-costoptionas majorfirmenergysourcefor the nextadditionto supply (85%on capacityunder all scenariosevaluated. At a chargeaveragingZM1.6/kWh capacity,15%on energy),electricityfromCahoraBassawouldbe verycompetitivewith by 2002,gas turbinesarea lowerthe otheroptions;(ii)if BatokaI canbe commissioned costoptionthan KSE for the late 1990sat a LOLPof five hrs/year,but there is little differencebetweentheseoptionsat a LOLPof 20 hrs/year.Inthe casethatsuppliesfrom Zambiaare discontinuedin 1999,KSE wouldbe lower-costthan gas turbines;(iii) if by 2002butZambiasuppliesare availableuntil2010, BatokaI cannotbe comnimissioned at both gas turbinesarea lower-costoptionthanKSEto followtheHCBInterconnection LOLPstandards;and(iv)the UpperZambeziandHwangeIII schemesdo notformpart of the least-st programto 2010underanyof thesescenarios,providedthat BatokaI canbe commissioned by notlaterthan2005. (b) is requiredby 1995under both Timingof Investments:(i) the HCB Interconnection Scenarioand by LOLPcasesof five and20 hrs/year;and (ii) under the Policy-active relaxingthe reliabilitystandardto 20 hrs/year, new capacityto followthe HCB canbe delayedby two yearsto 2000, and BatokaI by one year from interconnection 2002to 2003, at a costsavingin NPVtermsof aboutZ$116mn. (c) BatokaI by 2002 Roleof KSE andGas Turbines:If the prospectsfor commissioning are at all uncertain,and Zanbian supplieswouldbe availableuntil 2010, then gas turbinesare a lower-costoptionthan KSE. Underthisscenario,gas turbineswouldbe up thebestalternativefor meetinganyemergingdeficitsbeforeBatokais commissioned to at least2005,whetheror notHCBsupplyis availableup to the timeof commissioning Batoka1.42/ Whileit is the Evaluationteam's consideredopinionthat Zambiawill have substantialexportablesurplusesof electricitywellbeyond1999,the reluctanceon in thisrespectleavesZimbabwefor the time the part of Zambiato makea commitment beingno alternativebut to plan on the basisof firmsuppliesfromZambiato terminate by 1999. If Zambiansupplieswere to terminatein 1999, both ZESA's and the Evaluationteam'sanalysisindicatesthatKSEis superiorto gasturbinesandpart of the least-costsolution. Tle crucialissuefor the systemdevelopmentstrategyis whena UnderthePoly-active &enario,electricty to be generatedfoimgas turbineswouldbe relativelysmall - 246 GVlh at i peak in 2004 - and thus, wouldadd on abou 5% the natonal conswnpionof diesel in thoseyears, as projectedby the Evluation team(assmninga specfc conswnpon rateof .32 kg/kW ofdlesell) Gasturbineswouk of BatokaI slips essentiall be neededfor capacitypurposes onl. However,in the event that the commdssioning beyond2002, gas turbineswouldthenprovidea wluablecover to meetingadditionaldemandforenergy(w*ichKSE could not be relied upon)until aa I entersinto operation. - 81 commitmenthas to be made to fte optionthat succeedsthe HCB Interconnection. KSE in the medium term camot add to the firm energy capability of the system and its utilizationwouldbe primaily as reserve capacity. More economicalternativesfor the mediumterm wouldbe load managementand energyimports, combinedwith the astute maintenanceof the existingKaribaand Hwangeunits, and, possibly,gas turbines. It is worth noting that the need for new capacitythat KSEor gas turbines wouldfulfil ariseW two years later (2000) at the LOLP level of 20 hrslyearthan under the standardof fiv6, hrslyear.Allowingfor the constuction period, no commitmentto KSEneedsto be made until 1994and to gas turbinesuntil the end of the decade, which is after the time that the constructionof the BatokaI project wouldhave started to bring it into serviceby 2002. While engineeringstudies on KSE couldbe carried out in the meantime, a decision on the capacityadditionto folow the HCBInterconnectionshould be deferred until a firm date for commissioningBatokaI is established,the outlookfor longerterm suppliesfrom Zambiaor any other import sources is clarified, and the longerterm demand prospects are re-assessed. (d) egionalSchemes: The benefitsfrom conjunctiveuse of the hydropowercomplexesin the Region are considerableand should be studied in more detail. From a regional perspective, it might be least-costto develop generatingcapacityon the north bank at Cahora Bassato effectivelycontinuethe HCB supply to Zimbabwe. This option would be particularlyattractiveif Batoka I were to be seriouslydelayed. There also may be interest on the part of ESKOMto extendthe high-voltagetransmissionsystem through Zimbabweto South Africa to obtain additionalaccess to Cahora Bassa and, possibly, other hydropowerschemesin the Region,as well as supplyingelectricityto the countries so connectedon an intermittentbasis. (e) Cessation of HCB supply prior to Batoka 1: Zimbabwe should try to match the termination date of the HCB firm supply presently under negotiation with the commissioningdate for Batoka1. Otherwise,Zimbabwewould have to incur a cost for additionalgeneratingunits of about 1989Z$ 500 mn in NPVterms for the Policy-active demandScenarioand 20 hrs/year LOLP. 6.54 The Evaluationteam recommendsthat, for reasonsof affordabilityas well as reliability, the electricitysupply developmentprogramshould pursuepolicy-activedemandmanagement,be based on 20 hrslyear LOLP, and comprise the following supply components: (a) during 1990-93, the continuationof importsfromZambia;KaribaSouthupgrading;and rehabilitationof the municipalthermal plants;and (b) for the 1994-2010period,continuedpurchasesof electricityfrom Zambiaevenif available levels are reduced; purchases of electricityfrom Cahora Bassa as long as these are availableon a firm basis; KSEor gas turbines,subjectto review in the mid-1990sto confirmtheirjustification;and Batoka I, reinforced by continmedload management. Tbe HCB interconnection,which would provide both capcity and energy, shouldbe commissionedas early as possible, but not later than 1995,providedthat there are no unmanageablesecurity problems in the area. To cover the risk of non-availabilityof - 82 electricityfrom Cahora Bassaprior to the commissioningof Batoka I, ZESA sbould aim to extendthe contractedperiodof HCB suppliesto 2005. 6.55 At 20 hrs/yearLOLP, the target in-servicedate for KSE (or gas turbines)wouldbe tie year 2000, which requires a commitmentto KSE be made by 1994. If KSE was selected,this solution would reduce the economiccosts of the expansionprograms by Z$ 63 mn in NPV terms compared to bringingKSEon streamby 1998. It wouldprovidetwo moreyears in the immediatefuture for reviewing the situationin regard to electricityloadgrowthand the availabilityof alternativeimportoptionsover the medium to longer term (especiallyfrom Zambia, Mozambique,and, possibly, South Africa). On the other hand, bringingin KSE by 1998wouldprovidea degreeof securityagainstsupply interruptionson the HCB interconnection.The economicjustificationfor doing this needs to rest on KSE as a back-up in case of interruptions on the HCB interconnection, should these interruptions exceed 343 hrslyear.43f 6.56 In order to meet the requiredtargets for expandingthe supply systems,whiletaking full accountof the considerablelead time and the likely delays in implementingthe projectsin question,the Govermnent and ZESA should commence firm preparations especially securing financing for the rehabilitationof the thermal power stationsand upgradingof Hwange, the HCB interconnectionand Batoka (in view of the last-mentionedprojects's long lead time), to be followed if appropriateby preparationfor KSE by 1994so that this projectcould be completedby 2000. However, it is of upmost importanceto reviewby 1993at the latestthe situationin regardto medium-to longer-termloadforecasts and alternativesupplysourcesfor the criticalperiodduringthe late 1990s/early2000suntil Batokacomes on stream. The choicewouldthen be betweenKSE and gas turbines(whichhave a lead time of at most two years and would not require a decisior.until around 1998). It may well be that gas turbinesprove to be altogetherunnecessaryin the light of above alternativesand the possibilityof more active load management. 6.57 Regardless of the outcome of this analysis, ZESA will be faced with the need to implementa numberof large-scaleprojects at the same time. This will increasesubstantiallyZESA's requirementsfor internalcash generationand borrowing,which mightexceedprudentlimits for the entity and the economyat large. A situationcould arise where difficultiesin obtainingfinancingfor too many projects puts all of them intojeopardy. Also, ZESA's project implementationcapacitywill be severely tested. It will thereforebe essentialthat the Governmentand ZESAprepare for these challengesthrough appropriatetariff action and institutionalstrengtheningat ZESA especiallyfor project evaluationand implementation. This should includethe appointmentof project managersfor the principalexpansion projects. 6.58 Recognizingthe complexitiesinvolvedin electricitysupply optimization,as well as the fact that ZESA does have a well-functioningplanningdepartment,areas shouldneverthelessbe explored where specialized assistance may be required. These areas include load forecasting, demand 43/ Assung econoniccostsof owtagesof US$A25/kWhequivaletfor residentialconswuersand US$I.-/kW*equivalenx for non-residential(essentiallyindustrial)conswners. -83 managemet, and corporatefinancingstrategies,possiblythroughtwinningarrangementswith experienced foreignutilities. Transmisgsinand Distribution Maor Issus 6.59 For the consumers to benefit from a strengthened electricity supply position, the transmissionand distributionsystemsneed to be considerablyextendedand their reliability improved. Accordingto a recent network analysiscarried out by Norconsult,the grid is able to cover the load at 1988peak load conditionsif all lines are in operation,withoutany overloadingor voltageproblems. If the oonclusionsare still valid, there wouldbe no particulartransferproblemsin the present330 kV grid under normal operating peak conditionsand different generating situations. In contrast, there are problems in the subtransmissionsystems mainly relatedto thermal overload under normal conditions which canbe expectedto increasewithload growth.Back-upsupplypossibilitiesare limited, due to these thermal constraintsor low voltage conditionson long lines. Many substationsare radially suppliedand transfrmers are overloaded. 6.60 Investment ntions. ZESA projects the maximumload to the system in 1993at 1,792 MW and 790 MVAr, representingan increaseof about 30% (5.5% p.a.) over 1988.44/ Transmission and distributionneeds are directlylinked to electricitydemand growth. They are therefore relatively inflexible in an optimized system but if a system needs major improvements,numerous investment alternativesfor different voltage levels and network configu.ationsneed to be considered. ZESA has recognizedthe need for reinforcing, upgrading,and expandingthe system. Assistedby Norconsult, ZESA has identifieda priority investmnent program for commontransmission(includingtransmissionat 330 and 132 kV) to be implementedduring 1990-1995. Tlis program consistsof transmissionlines at a cost totallingUS$20 mn and Z$26 mn and substationstotallingUS$51 mn and Z$19 mn. Norconsult has recommendedthat new 330 kV linesbe constructedimmediatelyfrom (a) Tokwe in the Midlandsto Triangle in the South, initially to be energized at 132 kV; and (b) Alaska through Mutorashangato Bindura,the first sectionto be energizedat 330 kV and the secondat 132kV. The latter line will form part of a planned 330 kV ring around Harare which will eventuallylink into a planned 330/132 kV substationat Seke, near Chitungwiza. This schemewouldobviatethe needfor the 132 kV Warren-Seke line originallyplanned under the Power 11project. The Midlands industrial area requires increased transmissioncapacityto supply ZIMASCOand Sable Chemicals,and a 330 kV line from Sherwoodto ZIMASCO,initiallyenergizedat 88 kV. (A projectis currentlybeing preparedto upgradetransmission and distributioncapacityin the Midlands.) Finally, Norconsultconsidersthat the proposed330 kV line from Warren through Kadomato Sherwoodis not an immediatepriority, and has recommendedits deferral untflafter 1993. 44/ Ths analy'sisis based on apowerfactor of 0.9 (0.98for Sableand ZIfASCO) and a coincidencefactorof 0.88for al ladts except Sable and ZMASCO, - 84 - Norconsultalso has proposedthat the system voltagesof 66 and 88 kV commonlyused 6.61 should be replacedby 132 kV voltageover a 10-20year period, which would reduce line losses. The Evaluation team supports this proposal, given the associated standardization advantages and the simultaneousupgradingat relativelylow cost, providedthe same line support is used (otherwise,costs includingfor transformerstationscanbe considerable).Reinforcementof the networkwith highergauge feedersas well as reconductoringof line sectionscouldalso contributeto loss reductionand improvement of system reliabilitylevels. These measureshould contributeconsiderablyto reducing losses both at transmissionand subtransmissionlevels (presentlyestimatedat nearly 9% of electricitysent out). The loss reduction as a result of shunt capacitorsmay have a pay-backof one to two years, particularlyfor the first phasesof capacitoradditions. They also willallow postponingother substationreinforcements. Distributionmaintenanceand expansionhave been neglected. This was because the 6.62 municipalauthoritieswhich had responsibilityuntil FY 87, did not make the necessaryfunds available, but also becauseof loss of skilled manpowerat ZESA and the lack of foreignexchangefor the purchase of spare parts, vehicles, and materials. As a result, faults on the networks have increasedsharply. Becauseof inadequateinvestmentin thedistributionsystem, ZESAhas a backlogof over 50,000requests for connectionor additionalsupply. Many circuits are overloadedand supply failures are frequent. Substantialreinforcementof the 33 kV systemis needed. ZESA plans to address this problem through reinforcingthe 33 kV and 11 kV distributionsystemsin selectedareas and then acceleratethe pace of new connectionsto 10,000-12,000p.a. over the next five years. This is a challengingtarget but could be attainableas a numberof official financingagencieshave expressedinterest in providingassistance. A US$24.7 mn World Bankloan was extendedfor distributionmaterialsunder the Power n project. It aims to (a) connect additional consumers; (b) improve power system operations and efficiency by upgradingthe control and data acquisitionsystem so it is capableof handlingthe growingtransmission network; and (c) further strengthen ZESA through improvedsystem planning and completionof its managementinformationsystem. The cost of the programtotals aboutUS$150mn. Financingis being arrangedwith the WorldBank (for connecting27,000 new consumersin urban and peri-urbanareas), the AfricanDevelopmentBank (coveringthe easternsectionof the system),the EuropeanInvestmentBank, Finland, and Switzerland. ZESA currently is preparing a programfor distributionreinforcementand extension. Requirementsand Recommendations There is an immediateneed for networkreinforcementsthrough line upgrading,but new 6.63 transmissionand distributionprojectsneedto be carefullyprioritized. In order to allowZESA to focus on these reinforcements,a number of transmissionlines and substationsoriginallyenvisagedas part of the Power 11project should be postponedand alternativesolutions implementedthat would serve the system needs better. Thus, withinthe 330 kV bulk supplygrid, a numberof new 300 kV lines planned (such as the Sherwo"d-Warren-Alaskaline) will not be neededbefore 1993but some 300 kV lines are recommendedfor those areas whererea,onablereinforcementat substationlevel wouldnot be sufficient to Harare should Shortlyafter 1993,a 330 kV ring connectionfrom Alaska(via Mutorashanga-Bindura) level, the 132 subtransmission the At system. the be establishedas any delay may create problemson kV system requires substantialupgradingfor existing lines as well as new lines in the North of the ' 85 - oountry, and reinforcementthrough additionaltransformer capacityfor the Harare area. Therefore, priorityshouldbe givento reinforcingand extending132kV Ines, especiallyaroundHlarareto cope with future load growth, and in the Eastern and Northern areas. Large investmentsin the 66 and 88 kV networksshouldbe avoidedas thesewouldnot fit into a futurecountry-wide132kV system. In addition, there is needfor more reactorson lightlyloaded linesto compensatefor the capacitivegenerationof the lines. Reservetransformers,alternativesupply lines, more feeders to enhancethe 88 kV system or the early introductionof a M32 kV systemwill also be neededto providesufficientreliabilityto industrialand other large-volumeconsumers. In particular, increased 330/88 kV transformercapacity is required in the Bulawayoarea. The optimaltimingof thesemeasuresdependson load growth, the scopeof benefits to be attainedfrom loss reduction,reliabilityenhancementetc., and needs to be studied in more detail. In addition to new lines, less expensivebut quickly implementablemeasuresshould be consideredto improvevoltageconditionsand reducereactiveline flowssuch as additionalcapacitorbanks,or additional distributionfeeders and transformers,which can be combinedwith other reinforcementmeasures. 6.64 Investmentrequirementsfor the 1990-93period for high priority projectsare estimated at Z$ 1S7mn(1989prices). BeforeZESA's investmentprogramis finalized,detailedelectricitydemand forecastsneed to be prepared for the main areas to be supplied,and adequatesolutions chosenthat are capableof meetingthe forecastdemand. Theseproposalsmaybe deferred if the expecteddemandgrowth is not beingrealized. Loadforecastsand networkdevelopmentplans should be regularly updated. The installationof computerizeddistributionplanningsystemsand the preparationof distributionmasterplans for Harare and Bulawayo(i.e. the two load centers likely to absorb the largest proportionof distribution investment)are importantfor systemrehabilitationand expansion. Rural Electrification Mainlisses 6.65 As in other developingcountries,rural electrificationin Zimbabwehas been designedto achievea numberof socio-economicobjectives,i.e. (a) to act as catalystfor economicdevelopmentof rural areas; (b) to replace inferior-qualityenergysources, and improvethe quality of life of the rural population;and (c) to stem rural-urban migration. Because of its versatility, electricity can meet a broader range of energy needs than fuels. However, electricity per s does not seem to initiate the successfuldevelopmentof a particular region, rural or otherwise, nor does it contribute to poverty alleviation. It is therefore advisablethat rural electrificationfollowsrather than precedesthe economic developmentof a particularregion. The dispersionand relativelylow incomesof the rural population renders rural electrificationa high-cost and slow process compared to other forms of rural energy supplies.451 Nevertheless, while economicreturns of many rural electrificationschemesare low, it 451 A postl-npkementationewvlation of 40 rural eketrificationprojects carrid out during the 1970sin 20 deveoping countriesindcates that mostprojectsdid not meet theirinitialexpectationsbecauseof (a) low loadfactorsgenerally in the order of 15-20%, (b) shorter than estimatedlife expectanty of installatlions,(c) substandardperformance resultingin high technicaland non-technicalosses;and (d) inadequatetariffscomparedto hightotal costs, especiall in systems with unform nationaltarjffs. Economuccosts were covered in only a few cases, and financial losses occurredformostprojectsfor at least 10.15years. Realcosts of electriciy in rural systemsmay averageaboutVSd - 86- should be borne in mind that followingrelativelylarge initial investments,recurrent averagecosts tend to declinerapidlyas the numberof customersand the loadper connectionincrease. Also, the consumers' willingnessto pay - which is relatedto the costsof energy alternatives-- could be such that even highcost electricitysuppliesmay be economic. Ruraltowns often are importantcentersof potentialdemand growth, and electrificationwould supporttheir process of rural-urbantransition. 6.66 Under a Government-designed, ZESA-executedprogram,24 ruralcenterswere connected during 1984-86. The cost of this program was aboutZ$19 mn, of which Z$3 mn was allocatedfrom ZESA's own resources. This program in its second phase (1986 onwards) envisaged connecting48 additionalcenters but only 13 were connected. Progress has been slowed by rising costs, lack of financingespeciallyof foreignexchangein the wake of decliningdonor support, and additionalscope of work in some centers previouslyconnectedbecause of the intermittentbuild-up of demand. In the meantime, increases in electricity consumptionin some rural centers were such that reinforcement investmenthas becomenecessary. 6.67 A GTZ-sponsoredevaluationof past rural electrificationprograms is in progress. The Governmentplans to reassess its rural electricificationstrategy based on this evaluation. The Governmentexpects to obtain funding from AFDB, Spain, and Scandinaviandonors to continue the program. Financing arrangementsare complicatedbecause the Governmenton-lends these funds to ZESA at commercialinterest rates whereasZESA's revenuesfrom rural consumersdo not even cover the operatingcosts of the systems. A solutionto this problemis beingdiscussedbetweenthe Government and ZESA, with a view to passingon thesegrants to ZESA at low to zero interestto finance investments, whereasZESA absorbsthe maintenancecosts of rural electricitysystems. Reguirementsand Recommendations While theyare a potentiallyviable and desirableinvestment,rural electrificationschemes 6.68 need to be based on a clear rankingof economicdevelopmentpriorities for the geographic areas under consideration,as identifiedthrough evaluationsof the agriculturaland other productivepotential, and population and income trends over the long term (20-25 years). The timing of rural electrification schemesshouldbe carefrlly consideredespeciallywhensupplyconstraintsprevailin the electricitysystem at large (as is likely during 1993-95). Adding prematureand heavily subsidizedrural electrification schemesto ZESA's substantialinvestmentprogramwouldaggravatethat entity's financialproblems. It needs to be ensured that for the locations considered,the scope and timing of the selectedelectricity supply projects are economic,that sociallydesirable but economicallyunviable investmentsbe kept to a minimum,and that least-costoptionsare implemented.Basedon existingenergyconsumptionpatterns (which shouldbe properly surveyedbefore these schemesare undertaken),alternativesto extendingthe electricitygrid needto be evaluated,includinglocal electricitygenerationand improvedsupplyof energy other than electricity, and their implicationsfor pricing policiesbe clearly determined. 20/iWi equivalentor higher if high distribntionlossesdue to low loadfacJors and the additionalburden psed duringpeak demandperiods are taken intoaccount - 87 - 6.69 Limitedcross-subsidizationof rural by urban consumerswill perhaps also in future be needed by means of the unified national tariff. as it is done at present, or alternatively, through surwarges on electricitybills. Lifelinetariffsshould be granted to lowest-incomeconsumers. Blanket subsidizationto large areas and consumergroups should be avoided: to the extent that higher-income famers or rural industriesare in a positionto pay unsubsidizedrates, their ability to pay should be captured by charging cost-basedtariffs, and by allowing individualproducers to generate electricity. Effectiveload managementshouldbe introducedat an early stage, includingtime-of-day/peakloadtariffs for Irrigationconsumersand other consumerswith contracteddemandsabove a certain level. 6.70 The averagecosts of supplyingelectricityto rural consumersshouldbe loweredthrough adoptingcost-effectiveconstructiondesignsand standardsespeciallyfor connectionand wiring systems (acceptingsometimesa cost/reliabilityof service trade-oft), participationof local residents in works relatedto system expansionand administration(e.g. meter reading), and promotingthe productiveuse of electricityby small businessesand cottageindustries. Options should be evaluatedto increase the numberof rural consumersto be connectedat an early stagesthrough financialassistancefor the security deposit, house wiring and connection,and the purchaseof simpleappliances. Term payment schemes may be feasiblewherebythe custonDerc"anpay for both connectionand equipmentby installmentson the electricitybill. 6.71 Externalfinancingon concessionalterms will be essentialfor manyrural electrification projectsto becomefinanciallyfeasible. The successof rural electrificationprograms will largelydepend on proper coordinationbetween ZESA and the other relevant agencies. ZESA will need technical assistanceto upgrade its rural electrificationplanningand managementcapabilities. ElectricitySystem EfficiencyImprovements Scone and Options 6.72 Substantialpotentialremainsto improvethe efficiencyof electricityoperationsboth on the supply and the demand side. The cost of efficiencyimprovementsmay be only 25-50% that of expandinggeneratingcapacity. Electricitysupplyoperationscan be strengthenedthrough (a) improved thermal efficiency,plant availability,and emission controlsof generatingplant; (b) transmissionand distributionloss reduction;(c) improvedpower systemoperatingpracticesthrough merit order dispatch and better hydro resource management;and (d) demand managementby tariff structuringto provide incentivesfor efficientconsumptionand remote control of consumerloads. While the present level of line lossesis acceptable(i.e. about 10%- 4% for transmission,6% for distribution),there is potential for further reductionsthrough increasingconductorsizes, reactive power compensation,and selective reiforcement. There is also scope for reducingnon-technicallosses, which ZESA is pursuing more rigorouslythrough detectionand rectificationof electricitytheft whichpresentsa problemin someareas. 6.73 If electricityrequirementsin the economycould be loweredacross the board, or their gr *vthbe sloweddownconsiderably,new investnentsin electricitysupplycouldbe reducedor delayed. More efficientelectricityuse can help to hold down the consumers' electricitybills even with required - 88 - tariff increases taking place. As capacity expansionrequirementsare lowered, the needs for tariff increasesalso wouldbe less. Furthermore,lower requirementsfor capacityexpansionmakes it feasible to shift funds to projects with social benefits, such as nual electrificationand distribution system expansionin low-incomeurban areas. 6.74 Tbe use of electricity for motive power and lighting offers significant scope for efficiencyimprovements,e.g. throughthe use of moreefficientmotors, motorspeedcontrols,lightbulbs, refrigerators,waterheaters, and air conditioners. Powerfactor correctionin particularis a cost-effective means of reducing electricity demand.4/ Improved building designs, daylight sensors, and task lighting can reduce electricityconsumptionin commercialbuildingsby as much as 80%. Economizer cycles added to air conditioningsystems can reduce electricityrequirementsfor cooling by 40-75%. Time-of-dayuse tariffs will reinforcethe incentiveto applyingload-levelingtechniques. Aware of the trade-off between system reliabilityand investmentand operating cost, ZESA wants to promote any economically viable efforts to improve the efficiency of electricity generation, transmission and distribution, and end-use, through strengtheningmaterials procurementand load management. The Evaluationteam estimatesthat load managementcould reduce maximumdemand by as much as 10%, or some 150 MW. The Governmentand ZESA recently have started an electricity conservation campaignto address the relatively high residentialelectricityconsumption(averaging700 kWh/month among Harare residential consumers). To achievelasting improvements,this campaignneeds to be complementedthrough appropriateelectricitypricing. ReQuirementsand Recommendations 6.75 The requirementsfor improvingthe efficiencyof electricityend-use by and large are similar to those for energyend-use overall. In addition, there are specificrequirementssince electricty demandis inhanentlyless easy to controlor measure,so that specialistsin consumerbehavior,marketing, and programs design, implementation,and evaluationare needed. The most importantcomponentsof a programto improvethe efficiencyof electricityend-useare as follows: O/ A. Data Collection 1. Energyuse surveys 2. Industrialand commercialreportingon electricityconsumption B. Eguipmentdemonstrationand testing I. Equipmentdemonstration 2. Evaluationof equipment 3. Measurementof energy savings In hndia,the cost of installingcapacitorsu estimatedat US$150200-kWequavalent,i.e. much lessthan the cost of newgeneratingcapacity. Accordingto WorldRank estimates,correctinga 0.80 powerfactor to 0.95 has a beneftcost ratioof 3-15dependingon electricit loadandprice conditions(Munasinghe and Scott, 1982). -89- C. Labsative NWe at i 1. Generalconservationlegislation 2. 3. 4. S. - appliancelabelingand standards buildingcodes auditingand retrofit programs trainingprograms incentiveand financingprograms Regulationrequiringutilitiesto engagein energyconservation programs - evaluationof technical options - financingand incentiveprograms Eqvipmentstandardsspecifyingminimumyet cost-effective efficiencyrequired Buildingcodes - ventilationrates - indoor temperatures - lighting - power levels, etc. Voluntaryguidelines D. Informationandeducation programs 1. Generalinformation 2. Efficiencylabels 3. Energyaudits47/ 4. Training(for energyconservationmanagers,energyauditors,inspectors,and nationalconsultingspecialists) S. Energyconservationcenters(possiblyset up as regionalcenters) E. Incentives 1. 2. 3. 4. Tax creditsandtaxationpolicy Grants(e.g. for institutional electricityconsumers) Rateincentives Rebatesfor the purchaseof electricity-efficient equipment(withoutstimulating higherequipmentsaturationlevels,however) F. FinAmcng 1. Government andutilityloans 2. Thirdpartyfinancing G. Marketing 7heseAouldpossibJy be combinedwhfifincing or incentiveprogramsso as to uwreasethe laelihoodthat energ consmwners wiUfolloaw up ontheaudit recommendaios. -90 6.76 Electicity tariffs shouldbe strucred to stimulateusers to attain conservationand efficiencyimprovements. Thiswouldbe achievedrough rate designsta impacton energyefficiency, or the timingof use, or both,as follows: (a) discountrates:theseare offerredto facilidesmeetingcertainefficiencylevels, as long as theseratesexceedthe short-runmarginalcostsof supply. (b) timeof-dayuse rates: higher rates are appliedduring peak hours or peak season, corresponding to highermarginalgeneratingcosts. (c) demandcharges:these are determinedby the in=:anteous demandsfor power by consumercategories,at the timeof the systempeakdemand. (d) interruptiblerates: these are comparativelylow, but consumersmust reducetheir electricityuse whenso requestedby the utility,at the timewhenthe systemis facing overloae. 6.77 ZESAcurrendyappliesbothdemandchargesandinterruptible rates,in additionto energy charges. The Evaluationteam tv'ommendsthat the suitabilityof incorporatingother efficiencystimulating rates intothetariffstructurebe evaluatedas well. Demandcharges,off-peakrates,andtimeof-dayuse rates are commonlyappliedfor large industrialand commercialcustomersbecausethese contributeheavilyto peakdemandandthe requiredmeteringequipmentis feasiblefor suchcustomers. 6.78 Assistancein marketingelectricity-efficient appliancesmaybe justifiedif the reduction in ZESA'soperatingcostsandcapitalinvestments exceedthe costsof therelevantschemes,suchas free or below-costinstallationof conservationdevices. To the extentthat ZESA would participatein marketingappliances(whichit may be able to acquireat lower costs, due to bulk purchases),its customerscouldbe chargedon an instalment plan throughthe utilitybillingsystem. 6.79 rgrm mementatgn A comprehensive efficiencyenhancement programat ZESA needsto be basedon clearobjectivesin termsof the entity'sload profile,capacityrequirementsand costs,andenergycosts,as wellas prospectsof obtainingcertainlevelsof consumerresponse.Program alternatives needto be definedandevaluatedforthe majorconsumercategoriesandtechnologies covered. Forexpansion planning,loadforecastsshouldbe disaggregated intomajorconsumergroups,whichwould help to capturethe dynamicnatureof electricitydemandand to avoidcostlyinvestmentsin electricity supplythat maynotbe needed. Instuio-nal Lssue 6.80 ZESA'scurrentfinancialweaknesses, coupledwithlarge-scaleinvestmentrequirements, involvethe distinctrisk that the entity's long-termviabilitybe jeopardized. Steps must be taken immediately to raise tariffsto levelsthat will makeZESAfinancily viable,eitherthroughautomatic pass-throughof unavoidable cost increasesor by grantingZESAgreaterautonomyin tariffsettingand -91adjustment. The latter course of action is preferable. This could be achieved by negotiatinga performance contractbetween the utility and the Government. Private sector involvementis another option for strengtheninginstitutionsin ti2 electricitysubsector (and other energy subsectors), as this wouldprovie both additionalsourcescf financingas wellas importantmanagerialand technicalinputs. There are options especiallyin generutionthrough build, own and operate (BOO), build, operate, and transfer (B), and build, sell, and operate (BSO)schemeswhich providepublicly-ownedutilitieswith a respite from constructing,operating,and maintainingpower stations. Tlese schemeslend themselves well to internationalcompetitivebidding,thereforegeneratingthe lowestprice for the goodsand services provided,and wouldrelievethe govemrmentfrom financingthe correspondingassets. The same concept in principle is applicableto transmissionand subtransmissionsystems, but privatizationof distribution would be more difficult, even though regionalizationschemeswould offer some promise. Ancillary activitiessuch as billing and collectioncould also be contractedthrough competitivebidding, whereby collectioncouldbe carried out throughbanks. ZESA's operationsprobablyare at the thresholdat which potentialforeign investors maybe preparedto become associated. approachat the 6.81 Ri quirementsand Recmmendations. Commitmentto a commercially-oriented policylevel and the technicallevelare a preconditionfor any of the availableoptions. Performance-based contracts appear to be necessaryto both improveoperationalperformanceand strengthenthe utility to the point where private investorsmay become interestedin participating. Total or partial privatization would require a minimumn level of performanceto be achievedby the enterpriseand a minimumset of conditionsto be met by the Government,such as adequate tariff levels, so that the utility generates enough funds to cover its costs. At the policy level, a fair regulatory system, a bona fide process for settling differences, and mechanismsallowingadequate access to foreign exchange are also needed. Donor assistance would be importantfor establishinga trustworthy regulatory system, bidding and negotiatingwiththe privatesector, and establishingcreditablesystemsto allowaccessto foreignexchange and to arbitratedisputes. £Q1 Coal Mining and Marketing 6.82 Zimbabwe'sprovencoalreservesare largecomparedto presentconsumptionof just about 5 mn tpy. Virtually no explorationilas been carried out in recent years as reserves have been welldelineated. Only the coalfieldsat Wankie and Sengwahave the necessaryinfrastructureto mine and supplycoal markets,with the latteronly recentlycominginto productionin a smallway. Becauseof their inaccessibility,other coalfieldsare not likely to be developedin the forseeablefuture. The run-of-mine and as-soldcharacteristicsof both coalfields(Annex23) indicatea relativelylow quality of both steam and cokingcoals for internationaltrade but acceptablequalityfor nationaland regionaluse. Sincethese -92 fieldsare capableof meetingall currentlyenvisionedcoal demands,productionin the foreseeablefuture is likely to be confinedto these two areas. 6.83 At YAnkie, both steam coal and coking coal are mined by the Wankie Colliery Co. (WCC) in which the Governmentholds a 40% equity. Low-gradesteam (HPS) coal containingabout 25% ash is mined from the upper part of the seamnand is used exclusivelyfor power generation at ZESA's Hwange power station nearby, which accountsfor about 45% of total coal demand. Higherquality steam coal less than 16 % ash) found beneath the HPS coal serves as fuel for the railways, industry, and agriculture. The coking coal horizon at the base of the seam is mined with the higherquality steam coal, separated in the washery,and convertedto coke for use in metallurgicalindustries. Wankie coal has a mediumsulphur contentof about 2%,41t which is high by internationalstandards. Productionat WCC is mainlyopen-castbut undergroundminingcontinuesto produceWC coals (about 0.7mn tpy) for blendingwith open-castcoal in the processingplant. Undergroundmining is a laborintensive,relativelyhigh-cost,and low-productivityactivity (outputis just about2 to 3 M.T.Iman-shift) even though coal seams are of shallowdepth (about 250m) and of considerablethickness(up to 10m). Present miningcapacityis put at 2.8 mn tpy of HPS coal and 3 mn tpy of WC coal. Washed(i.e. lower in ash and better sized)and non-washedproductsaccountfor aboutone-halfeach of WC coal. Currently, coal washingdoes not resultin appreciableimprovementsof coal quality. However, as the demandfor washed coal increasesrelative to non-washedproducts, the washing plant will eventuallyhave to be expanded,as it is plannedby WCC. 6.84 The capacity of the coke ovens at Wankie amounts to 0.31 inn tpy of coal feedstock yielding0.22 mn tpy of coke,which is suffie.entto meet envisageddemandto the year 2010. Coke oven gas, a by-productfrom the WCC cokeworks,is of potentialuse as start-upand stabilizationfuel at the HwangePower Station, in substitutionfor diesel. WCC and ZESA have recentlyagreedon a projectto supply 29 mn 3l/year of coke oven gas to ZESA via a 6 km pipeline. In addition, plans are afoot for ZimbabweChemicalsto acquire coal tar and benzol from the WCC and ZISCOcoke ovens to produce certainchemicalsto substituteimports. 6.85 In additionto domesticproduction,some0.1Imntpy of low-sulphur,low-phosphoruscoal and coke from South Africaare importedfor the ferroalloyindustry. A new opencastmine at Sgngwa has beendevelopedby Rio Tinto (Zimbabwe)Ltd. to replacesomeof these imports. Sengwacoal is lowsulphur, low-phosphorusbut has no cokingqualities,eventhough it couldbe admiAedto metallurgicalgrade coal to produce coke. A company, SENCOL, has been formed to exploit the deposit. The Governmentcurrently is negotiatingan option to obtain a shareholdingof up to 51% in SENCOL. Developmentcosts for the mine have been in the order of US$4 mn equivalent,in additionto US$4 mn equivalentfor road infrastructurebromeby the Government. Operationson a trial basis started in end1990. 48/ lhe averagesulfr contenti 1.6%for high-phosphorous cokig coal. High-gradesteatncoal and cokingcoal, whk*h is not seR to the HwangePower Staton, is referredto in this docwent as WankieColliery(WC)coal. -93 nkie - CWollieC,olnpmpa 6.86 Qlffent.Qetkin. WCC's principal problemshave traditionallybeen related to (a) restricteddomesticmarkets,especiallyfor HPScoal, whichlimits its capacityutilizationto aout 75-80% and thus, adversely affects production costs; and (b) deficienciesin rail transport. While the latter problemis being alleviated,a lasting solutionis neededpromptlyin the interest of maintainingWCC's productivecapacityand reliabilityof supply, as Wankiepresentlyaccountsfor almostall of Zimbabwe's coal production. WCC does not experiencemajormaintenanceand operationproblems,largelybecause sufficientforeignloans were made availablein the past for equipmentand servicesrequired for its opencast operations, includingfrom IFC (US$38mn in 1981). Other sectionsare operated with outmoded machinery, however, which cannot be replaced due to shortage of foreign currency. Also, some problems arise in regard to restrictionson the importationof utility vehicles. Its net income in 1990, Z$35.8 mn, was 78% over that in 1989,but accessibletax lossesin previous years still preclude any tax liability. WCC has had cash generationproblemsin the past which were exacerbatedby its debt service. WCC is highlygeareddue to outstandingloansof Z$ 190mn obtainedfor open pit expansionin the early 1980s. Its service in FY 1988/89on domesticand foreign debt amountedto Z$ 30 mn, part of which WCC had to roll over to meet its recurrent capitalneeds. 6.87 Mediumto Longrem Strategy. The principaland quite complexplanningproblemis to achievethe optimalproportion in output of HPS and WC coals, while minimizingtotal cost. The strategy for this must be worked out for each major coal demandscenario, which in turn is strongly intluencedby the electricityexpansionscenarios,especiallythe futurerole of coal-basedgeneration. The ratio of HPS.WC coal reserves and the optimaloutputvary in each open-castarea, as does the stripping ratio. Differentdemandscenariosfor electricitygenerationyield wide and rapid variationsin HPS coal requirementsranging between0.5 mn tpy and 2.4 mn tpy and thus, in the HPS:WC coal output ratio. The HPS:WC coal ratio in the current open-castreserve areas ranges from 0.77:1 (BlocksJ, K, L) to 5:1 (Chaba Block). Allowingfor current levels of undergroundoutput, which is 100%WC coal, the lowest feasible ratio of HPS:WCcoal outputis about0.67:1. 6.88 In years of low demandfor HPS coal, HPS coal necessarilyexcavatedto accessWC coal is in surplusto requirements. Nevertheless,WCC's mining capacityhas to be maintainedto cope with peak offtakes, i.e. annual overburdenremoval ranges of 7.9-12.9 mn BCM. 421 The two principal alternatives,then, are to discardsurplus HPS coal as waste (since it has no other market)or to increase considerablythe proportionof WC coal mined undergroundand simultaneouslyreduce open-castWC output so as to adjust to lower HPS coal demand. The latter alternativeis high-costbecause of the relativelyhigh unit costs of undergroundproduction. A third option to achievethe balancebetweenthe HPS and WC coal output might be to meet a certain proportionof WC coal requirementsfrom mining 491 To meet the largeswings in output,one- hypothet - alterative would be to open the ChabaBlock in 1992for threeyears, then close itfor three years, open it again in 1998forfour years, ilhenclose itfor sit years, re-openi in 2008 and re-closeit in 2010. This strategy while technkaly feasiblewould impose logisticaland operational probkmsand affectWCC'sflnacialposition. Formischoftheperiod.Wankiewotldhaveexcesscapacitywihosecosts are borne by WC coal on the present methodof pricing analysis. Were it notfor the peaks of HPSdemand,present capacdty wouldnotneed to be expanded,and LRMC of WC coal woulddecline -94 out pillars of old mines, and/or double-washunrequiredIPS coal and market it as WC coal. However, double-washingis likely to be costly, especiallyin view of the infrequentuse of additional washing capacityto cater for large swings in HPS coal demands(which wouldbe more economicallyused for washingWC coal whose demandis likely to grow in comparisonto unwashedcoal), and neither option could fully deal with the volumesrequired.5Q/ Finally, it may be possible to increase output from S*gwa at the expenseof Wankie WC coal to the extent that thesecoals are of the same quality. This woiXdavoidor minimizediscardingof HPS coal but it wouldalso implya higherdeliveredcost to many consumersbecauseof higher transportcosts for Sengwacoal, besidesa loss in market share for Wankie. By contrast, in years of h demandfor HPS coal, there is some flexibilityto increase 6.89 the proportionof HPS coal by lowering the demarcationline between HPS and WC coals in mining operations. This wouldcater for modestpeaks in HPSdemandbut not for larger increasessustainedover a number of years. The opening up of a "strategic' pit planned later in the 1990s would provide additionaloutput. For higherpeaks, the appropriatestrategywould be to divert some productionfrom the current working area (which has a HPS:WC ratio of 0.77:1) to a new area with the much higher HPS:WCratio of 5.0:1. By varying outputrates from the two areas, a wide range of HPS:WCratios can be accommodatedat little additionalcost. Advancedstrippingof overburdento access additional reservesof HPS coal is not a preferredoptionbecauseof the tendencyof the coal to ignite when exposed and mined. For the same reason, long-termstockpilingof HPS coal is not tenable. The undergroundmine provides high-qualitycoal for blending and gives operational 6.90 flexibilitywithincertainranges (say, 20%). However, it wouldbe rather inflexibleto respondto largevolume changes over the longer term unless major mechanizationwere to take place. 51/ Because of relativelyhigh unit costs of undergroundmining, outputshould not be increasedmuch abovepresent levels. Alternatively,undergroundmining of WC coal could be reduced and replaced with cheaper surface-minedWC coal. This wouldreduce overallcost and make larger volumesof HPS coal available, but it would result in major job losses with potentially serious social implications. Therefore, the Evaluationteam considersthat the optimalstrategy for meetingfuture coal demand is to maintainthe output of the undergroundmine at present 1vels and meet all additionaldemand through varyingthe outputfrom surfacemines. SENCOLColliery Company Output at Sengwahas direct productioncostsof aboutZ$21/MT and a pitheadsale price 6.91 of Z$35/MT. This operation is still in early stages, and its markets, especiallyamongthe ferroalloy &Qf that the cost of doublewashingare in the order of Z$81M.T., and that less dhan25% The Evahtadontean estwmates of the volumeof HPScoal subjectedto double-washingmay in the end be recovered. Thus, double-washedRPS coal benefciacedin this mannercould be more costly than WC coolfrom open-castmining. Also, most of the HPS coal thus recoveredwouldbe fine coal (-5 mm)for which there arefew markets. IL/ WCChasprepared a project to increasethe mechaniation of undergroundmining, involvingan investmentof about Z730 mn and increasingundergroundmine outputby nearly60%, to 1.1 mn tpy. Wk.ilethis expansionwouldprovide enhancedoperationalflexibUiy,a shiftfrom opencastto undergroundminingin WCcoal outputwouldprobablyresult in higher costs than thoseof discardinga correspondingvolwne of non-requiredHPS coal as overburden. - 95 - producers, are not yet well defined. Nonetheless, a significant if temporary market outside the ferrochrome industry has emerged among lopi consumers, like tobacco farmers and brickmakers for whom assured and continuoussupplies of cogl are essential. Despitethe restructuringof the National Railwaysof Zimbabwe(NRZ),theseconisumersremaindoubtfulwhetherNRZ's efficiencyimprovements can be sustained. Therefore, there mightbe a non-ferrochromemarketfor Sengwacoal in the range of 0.05 - 0.2 mn tpy, dependingon the confidenceof consumersin the performanceof NRZ. 6.92 Withlow fixedcostscomparedto Wankie,Sengwaprobablyis wellplacedto act as swing producerfor non-cokingcoal. Nevertheless,sinceit otherwiselackscompetitivenesswith Wankie(mainly due to high transportcost and limitedtransportinfrastructure),Sengwa'soutputis likelyto remainmodest and willprobablynot exceed0.1-0.2 mn tpy in the foreseeablefuture,save in the unlikelyeventof major captiveprojectssuch as a greenfieldthermalpower plant or a coal conversionfacility. Over the medium to longerterm, Wankieand Sengwacoalsare likelyto competeonly in limitedmarkets(e.g., agriculture and general industry in the Midlands)but Sengwacoal may find a market niche for metal smelting.S2/ Investmentover the 20-yearperiod for establishinga permanentmine wouldtotal aboutZ$25 mn (1989 prices),70% of it in foreignexchange. For the volumesof outputenvisaged,a full-timeoperationis not justified becauseof serious under-utilizationof equipment. Therefore, Sengwa should continue to be workedby contractorson a campaignbasis, involvingrelativelymoderateinvestmentestimatedat Z$ 4.5 mnnduring 1990-2010. This may changeif Sengwawere to gain in marketshare in competitionwith WC ooal.3/ In the latter event, a rail connectionwouldbecomea possible althoughhigh-costoption. Coal TransnortIssues 6.93 Efficientcoal transport is critical withinthe Government'sobjectiveof reliable energy supplies. Becausecoal consumedoutsideof Hwange is mainly transported by rail and only a minor portion by road, managerialand operationaldifficultiesat NRZ in the past have severely affectedthe movement of coal, A senior committee of Government officials was appointed in end-1989 to recommendsolutions. NRZ's servicessincetnen have much improved. WCC is nearly 300 km away from its nearest non-HPSmarket (Bulawayo)and thus its prices to consumersare heavily dependenton rail transporttariffs. Coalrepresentsabouta quarterof NRZ's commoditytransport(in termsof ton-km) but until 1990generatedonly about one-sixthof its revenue. Accordingto World Bank estimates,in 1987only 60% of the variableoperating costsof coal transportwere coveredby NRZ's tariff. As part of the Government's Structural AdjustmentProgram, the rail tariff is being recasted to reflect more closely its economiccosts. As a result, there has been a series of major increases in the coal and coke transportrates, with further increasesplanned. Table 21 illustratesthe escalationin the coal price and the transport tariff for coal and coke (for deliveriesat Kwekwe): ,2/ _/ However,changesinsmeltingcondiuwons atZIMASCOpet .;e ueseofhigher-sulphurhigher-phosphorouscoals than hitherto. This has opened a new marketfor WCC co .nd coke (about6,000-10,000ipy which WCC is already utilizing). Concernis being expressedby the Departmentof StateRoadsover this developmentas the road usedfor the Sengwa coal haul was designedfor a maximumof 0.1 mn tpy. RT(Z)believethat the eventualnarket couldbe 4 - 5 timesthis vwlume. - 966.94 NRZ's Road MotorService(RMS)is to haul the bulk of Sengwacoal to its main markets, i.e. the ferrochromesmelters at Kwekwe. RMS' rates (which were effectivelyalso subsidized)are currendy under negotiaton. However,the haul costs from Sengwafor contractorsotherthan RMS were affectedby the increasesin fuel prices in 1990-91and have risen from about Z$0.17/ton-kmto about Z$0.25, dependingon the haulier used. Deliveredcosts for such coal at Kwekweare now of the order of Z$105/M.T., or about 33% higher than for WCC coal at the same destination.54 Rail transport cost for Wankie coal (aboutZo 4-5/ton-km)are considerablylower than road transportcost for Sengwa coal (aboutZc 25/ton-km)which is bound to put the latter at a competitivedisadvantage. Therefore, the economicsof Sengwacoal will remain affectedby high transportationcosts and, possibly,potential transport constraints,and the relativelylow saleablevolumesare boundto impacton mining costs. Table 22: PRICESAND TRAMSPORT TARIFFS FOR iANKIE AND SEWGYA,F.O.R. KIEKUE, 1989 - 91 (ZS/M.T. and Percent) WANKIE COAL AND COKE Price FOR Retail Total Overall Wankie Increase Haul Cost Increase Cost Increase CZS/M.T.) (Percent) CZSt/.T.) (Percent) (ZS/M.T.) (Percent) SENGWA COAL Price FOR Road Total Sengwa Haul Cost (ZS M.T.) (ZS/M.T.) (ZS/M.T.) ML A/ Nid-1989 March 1991 30.80 137.03 20.2 20.03 41.9 50.83 78.85 55.1 170.31 237.45 39.4 198.9 n.e 35.-- n.a 70.-- n.a. 105.-- COKE Nid-1989 March 1991 Pi 147.42 192.55 30.6 22.89 44.90 96.2 Dry products S:grce: WCC; RT(Z) Ltd.; NRZ. InstitutionalIssues 6.95 The present institutional and legal framework in the coal industry is satisfactory. However,the need for direct Governmentinvolvementthrough equityparticipationin WCC and Sengwa shouldbe reassessedbecause(a) the Governmentcan influence,indeed control, the developmentof the coal subsectorwithoutparticipatingin equity,and (b) the Government'sfinancialresourcescouldbe used for higher priority purposeselsewhere in the economyfor which private sector capital is not readily available. 6.96 Employmentat WCC currently amountsto Just under 5,000 of whom 440 work in the opencast mine and 1,120 underground.Any increases in output over the medium to longer term will probablycomefrom opencastminingwhereproductivityis high. Increasesin surfaceemployment,if any, are likely to be ',ffsetby decreases in the undergroundlabor force as a result of mechanizationand, possibly, reductionsin demand,so that employmentat Wankie is expectedto remain static. In terms of 54/ However,in cases whereonly small volws are required(ie. less than 1,(000M.T./month)and no private siding is available,purchaing A/ankiecoal througha merchantcan bring the deliveredcost close to that of Sengwacoal. - 7- the original concept, Sengwa'slimitedoperationswouldoffer only little employment,probablytotailing not more than 100 for aboutfour monthsper year. Requirementsand Reommlendations 6.97 The principalmedium-to long-termissue in the coal subsectorin general and for WCC In particular remainsto be tackled, i.e. how the outputof Hwangepower stationcoal and coking-grade coal can be varied least-cost in line with varying requirementsfor thermally generated electricity at Hwange. Resolvingthis issuerequiresan analysisto definea joint optimizationof the coal and electricity subsectoroperations, which goes beyondthe scope of this StrategyEvaluationand should therefore be subject of a separate study. In the meantime,close coordinationbetweenWCC and ZESA in matters pertainingto their respective-expansionprogramsshould be established. Ca Conversion ftincipal Issue 6.98 AmmoniaProduction. The Governmentis considering a proposal for coal-based amnmonia productionto replaceelectrolyticallyproducedhydrogen with coal-basedhydrogen. It sees potential advantages from this option through foreign exchange savings from the substitution of ammonia/ureaimportsand substantialsavingsof electricityfrom the closingof the electrolyticprocess at Sable Chemicals. The gasificationof Zimbabweancoalsapplyingboth the Koppers-Totzekand Lurgi processes is technicallyfeasible, despite their relatively low hydrogen content and the attendant low reactivity. 55/ However, there are major technical risks, i.e., (a) the coals might fail to behave as expectedin gasification,and (b) the complexityof the processesmay lead to reducedplant availability, with adverseeffectson the economicsof the operation. Coal conversionplantsare much more complex than conventionalfacilities such as thermal power stations, and considerabledifficultieshave been encounteredin their operation. Also, ammonia-fromcoal productionis less reliable than production basedon the electrolyticprocess, whichwouldbe aggravatedif newequipmentwere to be combinedwith old equipmentat the existing nitrogenousfertilizer plant. (However,given the low cost of Zimbabwe coals, processperformancein terms of thermalefficiencymaybe less of a concernthan in countrieswith relativelyhigher costs of coal.) With an estimatedinvestmentof about US$120 mn for retrofittingthe existing plant through adding coal gasification facilities, such a project would be uneconomic(the productioncosts - with proper shadow-pricingof foreign exchange- are likely to be about 1.5 times the cost of importedammoniaof aboutUS$ 320/M.T.). Ammonia/ureademandprospectsin Zimbabwe are beingstudiedin moredetail. However,there are uncertaintiesas to whetherthe domesticmarketcan absorb the output evenof a minimum-scaleplant, whilethe potentialfor exports is likelyto be small. In view of the high capitalintensityfor a relativelylow plant size, anythingless thanfull capacityutilization is boundto depressthe economicsof this schemeeven further. S/ Ihus coaldresult ln economicpenaltiesbecauseof highcarbonloss and highoxygenconsumption,even thoaghthese probkms hve been overcomein ammonia-from-coal productionin SouthAfrica andZambia A more detailedstudy wouid be reqauredto determinethe exuentof these effects. -98 - 6.99 Aaed M . Substantialdepositsof coalbedmethanemight exist in Zimbabwe,in which case a simpler and cheaper plant couldbe used for ammoniaproduction. Methane is presumed to arise from thennal activityin the coal seamswhilethe latterare under high pressure. The implications of finding such a resource in Zimbabwecould be far-reaching. However, the extent of commercially viable methanereserves and their cost to users need to be establishedfirst before any attendantoptions can be evaluated.5§/ 6.100 Anotherpotentiallyviableoptionmay be the use of blue water gas generatorsto produce a crude synthesisgas basedon coke gasification,which couldbe processedinto ammoniasynthesisgas. This technology, which was applied in industrializedcountries before the Second World War for producingtowngas, wouldhave a numberof advantages,i.e. (a) nc.oxygenplant wouldbe requiredfor the cokegasificationfacilityitself (althoughin case of decommissioningthe Sableelectrolysisplant, the ZISCOsteelworkswouldneedan alternativesource of oxygen, which should properlybe costedagainst this project);(b) large and relativelylow-coststocksof surpluscoke are availablein Zimbabwe;and (c) part of the equipmentcould be manufacturedin Zimbabwe. On the other hand, ammoniaproduction requiresa gas feedstockwith a high degreeof purity so that gas cleaningrequirementsare likely to be substantialif raw gas is derivedfrom coal. Also, for treatinggas at low ambientpressure, large-sized equipmentor a batteryof gasifierswill be needed,posinga problemof switchingand control. No recent informationaboutequipmentand productioncosts of this option is available. 6.101 As an alternativeto rehabilitatingthe existingplant, a new ammoniaplant of about300 tpd capacity would require about 1.2mn tpy of coal. The capital cost of such a plant would be in the order of US$ 200mn. Even with low-costZimbabweancoal, ammoniais unlikelyto be producedat less than US$ 500/M.T., 60% of which wouldbe capital cost. Potentially,natural gas from Mozambique couldbe used for ammoniaproduction(capitalcostsfor a 300 tpd natural gas based ammoniaplant would be less than one-halfof those of a coal-basedplant). However, naturalgas would have to be obtained at a low price CIF plant to make this option viable, which is difficult to be attained given high transmissioncosts for the relativelylow volumesinvolved. 6.102 Another proposal for calcium carbide production is based on the use of coke from Wankie. Theprincipalproduct, acetylene,couldbe used as fuel (albeita high-costone) e.g. for welding, as well as raw material in the manufactureof plastics. The technicalfeasibilityand economicviability of this scheme have yet to be evaluated. Preliminary indicationsare that the - shadow-pricedproductioncost would be nearly US$ 400/M.T. equivalent(includingcapital charges)comparedto costs of importsof about US$ 300/M.T., which wouldmake this schemeuneconomic. 5lf/ A private Zmbabweangroupplans to drill threeshallowexplorationwells in the Lowveldat a cost of approximately US$1.5inn,for which it seeksforeignfinding. The0overnmenthas grantedan explorationconcession. - 99 - NITROGENOUS FERTIUZERS * SOMEOPTIONSFORZIMBABWE Sable Chemicals at Kwekwe is the largestoperation outside Norwaywhich uses electrolysisto separatehydrogenfrom water to produceammoniaand ammoniumnitrate. Sable is today somethingof an anachronism, havingbeenestablishedpriorto Independence to makethe former Rhodesiaself sufficient in a strategic resource,utilizing what was then surplus power availablefrom the Karibadam. The original investors were reportedly not eager to undertakethe project, but the government of the day forced it through on the basis of an agreement which stipulated a fixed return on the capital invested. The original conception of the project was that it would have a limited lite and would be scrapped when the excess capacity from Karibacame to be neededfor other purposes. FollowingIndependence, the Government opted to expand domestic electricity generation capacity through commissioning the thermal power plant at Hwange. The high costs of Hwange necessitatedincreases in the price of electricity to the consumer. Specialprovisionshad to be madefor Sable, so as not to have too rapid a rise in the price of fertilizers, which would have had an adverse impact on the agriculturalsector, especially on Govemment's efforts to raise agricultural output. With Sable consuming around 12% of national electrcal energy, once Hwange had beencompleted,it became more dificult to close down Sable, as this would have reducedthe revenuesneededto Kafue and Mozambique now proceeding with the Pandenatural gas project. Internationally, natural gas is the most economic feedstock for nitrogenous fertilizer, but the financial costs for Zimbabwe would depend on the price negotiatedwith Mozambiquefor any gas imports, and on domestic marketinq costs. Account needsalso to be taken of tne increasedcapacity Mozambiquewould then have to import Zimbabwean manufactureo goods. . The insurgence in Mozamr.que 3nld thus the threat of disruption of oowe, lines and other vital projects, is said to preciuce reliance on Mozambique for such 5trateg,c commoditiesas electricity and fertilizers. The contrary argument is that strengtheningthe Mozambiqueeconomy is part of the effort to stabilize that counry politically. Without a strong economy, Mozambique may require military assistance into the indefinite future, a critical perception for Zimbabwegiven the present heavy cost of that assistance. ~'') Pt ¶ coverthe debt serviceassociatedwith the lIwangt project. Sable also poses some important regional issues. If continuation or even expansion (on the basis of second-handequipment) of electrolysis were to be based on increasedelectricity imports from Zambia or Mozambique, the regional impact would be positive. More significant in the regional context is the fact that Zambia has underutilized capacity at NitrogenChemicalsat It - 100- In view of the large coal reserves in the countryand the absenceof knownhydrocarbon 6.103 deposits, combinedcoal gasificationand ynfthesishas sometimesbeen envisagedas a pot.nial optionto substitute for imports of petroleum products. While the required technologies exist - they were commerciallyapplied during the 1930sand 1940sin Europe and sincethe mid-1950sin South Africatheyare complexand involvevery high Investmentcosts in the order of US$520mn and productioncosts of US$80-901Bequivalentfor a plant size of about0.2mn tpy (this wouldbe equivalentto about25% of domesticdemandof liquidfuels). Increasingthe size of a liquefactionplant - say, to I mn tpy capacity- wouldreduce unit productioncosts somewhatbut not sufficientlyto make the schemecompetitivewith importationof petroleumproducts.L2I $ignificance of By-products. In principle, the economics of liquefaction could be 6.104 improved somewhat through sidestream production of certain chemicals as inputs for downstream industries(e.g. ethylene,propylene,alcohols,ketones,acids, waxes). Also, ammoniacouldbe produced from the tail gas of liquid fuels synthesis,which would involvea lower technicalrisk than the chemical feedstocksroute. However, both options introduceextra complexityinto an already complexplant and wouldthemselvesrequire additionalinvestment. Given the poor economicsof coal liquefactionproper, the enhancementthat might be achievedthrough by-productsis unlikelyto be sufficientto reverse this outcome. Requirementsand Recommendations No technicallyprovenoptions for the coal-basedproductionof ammoniaand liquid fuels 6.105 are likely to be economicallyviable at current and projected internationalprices, with the possible exceptionof the use of blue watergasor coalbed methanein the case of commercially-sizedreserves. Tle key reason is the high capital cost per unit of output of coal conversionplants, especiallyfor relativelysmall-scaleoperationsrelevantto the domesticmarketof Zimbabwe.Eventhe foreignexchange benefitsfrom replacingimportedliquid fuels and petrochemicalswith low-costindigenouscoalwouldbe largely offset by the high foreign exchangecomponentof the investments,which is in the order of 7080% for all options evaluated. For instance, for a 300 tpd ammoniaplant, this equates to about US$ 150mnwhereas annual importsof ammoniaamountto less than US$ lOmn. Local productionwould enhancesupplysecurityonly to the extentthat the plantsare madeto operate withoutmajor interruption. There is some concernwhetherthis is attainablein Zimbabwein the near term. The Evaluationteam's analysisis based on the assumptionof a capacityutilizationof 85% which effectivelyassumesno shutdown other than for scheduledmzintenance.Sincethe large portion of productioncosts is fixed, any capacityshortfall wouldresult in an almostproportionalincreasein productioncosts. These conditionsof non-viabilityare likely to prevail unless major and lasting supply 6.106 interruptionsoccur. However,the use of coalbedmethaneas a feedstockin place of coal couldimprove the viability and simplify the technologyinvolved. It therefore is recommendedto (a) refrain from 57/ is not liketyto beviableedher: basedon natral gasimportedfromMozambique Ihe optionofproducingliquidfuels inn)andaprocessingplt costof at leastUS$100 about560km(at anestnmated it wouldrequ*rea pipelineextending (US$260 mn)which wouldlfl prodactioncoststo a kvdeof about US$60-70/8equivalent. 101 - preinvestnem studies on ca conversionschemes at the present time but to periodicallyreview the sitaion in the light of fiture developmentsof internationalenergy markets and coal liquefaction technologies:(b) carry out a preinvestmentevaluationon the use of blue watergasgeneratorsfor amnmonia production, and (c) evaluatethe potentialfor utilizingcoalbed methanefor ammoniaand fuel synthesis as well as other markets, once its existencein cotmnercialquantitiesis proven. L&iWFuels Procurementand Storage 6.107 Zimbabwehas no knownhydrocarbondeposits, and its 20,000 B/D refinery at Feruka has not been in operationsincethe mid-1960s.Consequently, all petroleumproductsare imported, under supply contracts as well as tender arrangementsand occasionalspot purchases, normally through multiproductshipments. Mostproducts are transportedvia the port of Beira (Mozambique)by pipeline to Feruka, stored at the refinery tank farm, and transportedto the distributiondepots throughoutthe countryeither by rail (60%)or road (40%). Smallvolumesof LPG are importedfrom Zambiaand South Africa. Ethanol, which has been producedby the Trianglesugar estate since 1980, is used as gasoline extender and is moved by rail or road to the depots. NOCZIM is the sole importer of petroleum products. Five private distributioncompaniesrun the distributiondepots and interfacewith NOCZIM at the point of acquiring products for the distributiondepots. NOCZIM is also responsiblefor the provisionand planningof productsstorage. The schedulingof products importsand deliveriesattempts to meet the Government'soverall objectiveof maintainingadequatestocks(i.e. numberof Days Supply) of products throughout the country. For that purpose, NOCZIM rents tankage from several oil companiesand maintainsabout22,000 ml of products(mostlydiesel)as reservestocks. The Government and NOCZIM aim at increasingstorage to six months' requirementsfor each product, comparedto less than 30 days presently attained (para 6.101). NOCZIM is consideringextending its operations into distribudon,which would put it in direct competitionwith the private sector. 6.108 Given Zimbabwe's land-locked location, the relatively small volumes shipped, and deficienciesfor overlandtransport,the practiceof importingpetroleumproducts inevitablyinvolveshigh costs. About 20-25% of supply costs CIF Feruka represent ocean transportation,port handling, and pipelinetransportationwithinMozambique. Consideringthe logisticalcomplexities,NOCZIM'ssystem of supplyingpetroleumproducts is quite efficient. A stock and productsofftake reporting system has been establishedwith the distributioncompaniesand the major industriesthat allows NOCZIMto advise MEWRDdaily of the country-wideproductsconsumptionand inventorystatus. However,the scheduling of cargo replenishmentsand tank car loadingorders on Feruka sometimesresult in costlyrail demurrage or rail-siding diversions. The pipelinepumping scheduledepends heavily on the ullage situation in Feruka and ultimately,on the uplift of the NRZ tank cars which has beenvery erratic. This contributes to unplanned,and thus costly, correctiveaction. The lack of experiencedpersonnelto evaluatesalesl operationalperformancefails to bring manyshortcomingsto the attentionof NOCZIM's management. At Beir, there is adequateterminal storageto schedulegeneral purpose sized tankers, 6.109 but the port is draft-restricted aid ship arrivals must be scheduled according to the high tide to - 102 - accommodatetankers. A project to improvethe draft at the port is being held in abeyance. While a sepaate charge berth is now available, demurrage is mainly due to the inadequacyof discharge facilities.5V Schedulingproblems may, in part, be the result of NOCZIM not being sufficiently selective amongtanker offers and of its policy of only importingtwo products at a time. Using the alternativereceivingterminal for offshoresuppliesat the Maputorefinery (where NOCZIM has access on a throughputbasis) involvessignificantlyhigher costs of transportingproducts. The most serious threat to the securityof supplyis posed duringtransit through Mozambique.The Beira-FerukaPipeline, whichis ownedand operatedby theLONHRO-affiliated Companhiado PipelineMocambique-Zimababwe (CPMZ), has experienceddisruptionsover the last few years causedby rebel activity in Mozambique, which has caused products shortages in Zimbabwe, albeit of short duration, and the need to use the Maputo terminalat times. Since the Zimbabweanarmy now is maintaininga presencethroughoutthe BeiraCorridor,the pipelineis pumpingwith only minordowntime. The pumpingcapacityof the pipeline is about twice that needed to meet Zimbabwe's demand of liquid fuels. There is a volume incentive clause which reducesthe pipelinecharge once annualthroughputexceeds0.65 mn m3 (which is always the case). However,costs are incurredby rail demurragesand diversions. Productsbackedinto Feruka will eventuallybe backed into Beira, thereby addingdemurragecharges. 6.110 NOCZIM's main domesticdepot, the Feruka terminal, is well-runwith the appropriate concern for required products quality. However, the concentrationof storage facilities at Feruka highlightstwo major problems:(a) for strategicreasons, the bulk of in-ountry storage is badlylocated, i.e., being about 10 km from the Mozambiqueborder but 260 km from the main consumingcenter of Harare; and (b) for operationalreasons, inadequateullage compoundsthe problemof backing products into Feruka, rail demurrage,and rail-sidingdiversions. RegardingLPG, there is a shortage of rolling stock - supplies from the Ndola refinery tie up rail tank cars for as long as 30 days - which makes it difficultto maintaininventoriesand reliable supply. As an alternative,offshore LPG suppliescouldbe procured through tender arrangements,with tankage and receivingloading facilitiesprovidedat Beira, until suppliesfrom regional suppliersare secured. In regard to bulk distribution,while the numberof rail tank cars is sufficientfor the next few years, NRZ is shortof workingenginesand spare parts which could put the vital transportationlink in jeopardy if no correctiveaction is taken soon. However, the adoptionof the computer-programmedPetroleum Stock managementinformationsystem prepared by ESMAP will provide NOCZIM with an accuratetool for schedulingtank car loadings,cargo imports, pipeline pumpingoperation, and the maintenanceof an optimumDays Supplyof in-countryproducts inventories. L81 Thesefacilitiesare tenporary,pendingthe co,nstruction of a new oil terninal. (Ihe new tenninal is likely to be bult during 1992-93,with Norwegianassistance) WhenschedulingNOCZIMreplenislunents,the expectedtine of arrival at Beira of tankerssupplyingthe MozanbicancompanyPETROMOCgenerallyis not taken into account Usually, the Beira PortAuthoritygives priority to dischargingPETROMOCtankers (whosearrivals are erraticand tend not to be comnunicatedin tine to NOCZIM). Thereis the risk that a NOCVM-scheduledtanker may be requiredto vacatethe berth if it coqflictswith the arrivalof a PETROMOCtanker. ^ 103 bSw5xan i2flOptions, n2W 6.111 The Governmentand NOCZIM plan to increase the strategic stocks to six months' requirementsand to locatethem in undergroundfacilities.They are consideringto expand the storage capacityfor diesel, gasoline,and double-purposekerosene(i.e. jet fuel and illuminatingparaffin)by 0.36 mn n3 by means of new undergroundfacilities, at a capital cost estimated at US$87 mnnequivalent. Implementationis assumedto take three years. This would increasestoragecapacityfrom about65 days presentlyto 190 days at 1990consumptionlevels./Q/ Even by the years 2000 and 2010, the expanded storagewould be equal to 135days and 90 days, respectively,of liquid fuels consumptionas projected under the Action-orientedScenario. 6.112 The Government and NOCZIM prefer the underground storage option because of considerationsof physicalsecurity, a relativelyelevatedlocal share in investment(about30%), and the availabilityof soft loans from Scandinaviandonors. The main reasons for increasingstorage capacity are to (a) accommodatevariations in shipments,especiallyunplanneddelays, (b) providefor protracted supply interruptions,and (c) allow for errors in forecastingdemand. While it may be prudentto make provisionsfor two to three months of stocks, this probablycan be accommodatedwith storagecapacity already existingin Zimbabwe. Anythingbeyondthis level wouldbe considered'strategic" storagewhich is justified only if there were to be a strong probabilityof severe and extended supply interruptions, producing substantialeconomiccosts in their wake. However, for Zimbabwe, there will always be aternative (thoughhigher-ost) sourcesof supplyto the nornal Beira route. Theseresources might not meet normaldemand,but combinedwith well-scheduleddemandreductionsthey shouldbe ableto greatly extendthe period until stocks were run down to crisis levels. 6.113 EconomicCosts and Benefits. While the underground storage scheme has positive elements,e.g. the absenceof opticalintrusionand requirementsfor less landarea, the front-endcostsof construction and of maintainingstocks at full capacity would approximateZ$365 mn, compared to Z$275 mn for above-groundstorage of the same capacity and Z$5-10 mn p.a. during 1992-98for a gradualbuild-upof stocksto 90 days in line with expandingdemand. Over the full 1990-2010period, the economiccost of the undergroundschemewouldtotal Z$ 238 mn (1989NPV), comparedto Z$ 168 mn for a gradual expansionof storage capacity and stock levels of 90 days consumption,in line with requirementsincreasingover the next20 years. This indicatesthe excesscost of enhancingsecurityover that period, which would be justified only in the unlikely event of massive and protracted supply interruptions. The capital cost for the undergroundstorageoption, estimatedat US$87 mn, is equivalent to US$38/Bstored, comparedto a maximumof US$15-20/Bfor above-groundstoragetanks. In addition, the costs of the stored product for six months would total US$72 mn.Jil/ To the extent that stocks _/ Seealso Annex 26, OpzionsforLiquidFuels Storage.' dO/ By comparison,actualstocks of lquid fuels in Zimbabwe(as distinctfromnstoragecapacity)in early 1991were less than 30 days for NOCZIMand dte distributioncompaniescomnbined, whikicis low In view of the risk of supply interruptions. 61/ lhis is based on averagedeliveredcosts of US$321Bequivalent,as underpre-Guy war conditions. - 104- of two months' supply are sufficientfor normaloperating contingenciesand an additionalstock of one monthwouldaccountfor unforeseenrisks, the costs of the additionalthree monthsstockswouldproduce no return save In the unlikelyevent of severeand protractedsupply disruptions. Operatingcosts would be relatively minor and would be higher for the above-groundoption, because of higher maintenance costs. The economicbenefitsof the undergroundstorageproposaldependon the probabilityof a severe disruption in supplies lasting more than about two morths and on the cost of this disruptionto the economy. Feruka-HararePipelineProject 6.114 High costs, relatively low reliability,and severe capacitybottlenecksof rail and road transport are major impedimentsto supplying petroleum products to the centers of consumption. PETROZIM,a joint ventureowned in equal parts by NOCZIMand LONRHO,has decidedto construct a 204 Ima, 10' multiproductspipeline,with an initial capacityof 1.3 mn m3, together with a pumping station and a storage terminal and associatedfacilitiesto transport petroleumproducts to Harare (and onwardsvia rail to Gweruand Bulawayo),as an extensionof the existingBeira-Ferukapipeline. These marketsaccountfor about80% of country-wideconsumption.Pipelinethroughputinitiallyis set at 0.85 mn m3 /year, whosecapacityis plannedto be increasedin future to 2.35 mn m3 /year through additional pumpingcapacity(which is not includedin the project). Investmentcosts are estimatedat US$67 mn, 80% of it in foreignexchange. Of these, aboutUS$7 mnnwouldbe for storagefacilitiesin Harare (cost of plant and equipmentwithoutincludingcivil works). Theseare required in any case irrespectiveof the mode of transport for petroleumproductson the Mutare-Hararerun, and anotherportion in fact would form part of the strategicstorage. Constructionis to take abouttwo years, with completionplannedby July 1993. Project financinghas been obtained from IFC (US$16.7 mn), foreign commercialbanks (US$16mn), and ECGD through exportcredits, as well as from local banks. The pipelinetariff would be set at a level to covercashoperatingexpenses,debt service,taxes, and profits, whichwouldstill result in lower than presenttransport chargesby either road or rail.62/ Full-capacityutilizationis not likely to be achievedbefore the mid-1990s,which tends to depress somewhatthe project's economicreturn, estimatedto be in the range of 13-16%dependingon pipelinethroughputgrowth, capital and operating osts, and efficiencyimprovementsto be achievedon the railways.63/ 6.115 The operationof the pipeline is subjectto technical risks since there is no expertise in Zimbabwe in pipeline managementapart from LONRHO's involvementin the Beira-Ferukapipeline. That companywill initiallyprovidemost technicalstaff and will train nationalspecialists,so that the need for expatriatespecialistswillbe graduallyphasedout. LONRHO'sinvolvementboth as shareholderand main contractorcould give rise to a conflictof interest. However,IFC's participationin the project and its role as a broker in the joint-venture agreementswill ensure that contract provisions are fair and provide for reasonableburden sharing between contractorand operator, with particular focus on the project's capital and operatingcosts, managementstructure, and operatingarrangements. 621 Thei&pliedcaplal recoveryperiod - IS years - is short is chosen. ibernional standards.Commonly,a 20-30year period I/ The net benefitof the pipelin project is based on the savingsof pipelineover rail/roadtransport. - 105 - 6.116 The Feruka-Hararepipeline Is the first utility to be constructed in Zimbabwe with signifiat privat sectorinvolvennt. It willprovidean additionalmodeof transportationfor a strategic resourcethat is vitaly maintenancefree, less vulnerableto failure, and devoid of the infrastructural problemsinherent in rail and road transportation. Furthermore, it will have the followingbenefits: (i) the relocaton of the in-transitstoragefrom Ferukato the main consumptioncenter of Harare; (ii) a lower transportcost and pipelinetariff than current rail and road tariffs; (iii) reducedhandlingand evaporation losses, and (iv) better environmentalprotection. Economicbenefits over the medium to lower term accre from savingsboth of capitaland operatingcosts associatedwith shiftingto a more efficientform of transport. 6.117 On balance, pipelinetransport of petroleumproducts will be more economicand more securethan either rail or road transport,with less productsloss through evaporation,fewer operational problems, and fewer adverse impacts on the environment,its relatively low economicreturn and the rehabilitationof the NRZ rail system notwithstanding.o/ Also, increasingfuel costs, through their impict on rail/road operating costs, are likely to improve the comparative economics of pipeline transport. Followingthe completionof the pipeline,the rehabilitatedrail system would remain be the optimummode for transportingliquid fuels to points south and west of Harare, supplyingdepots in the Midlands,Bulawayo,and Hwange, for which the rolling stock no longer neededon the Feruka-Harare run should be deployed. Road transport wouldcontinueto supply areas tributary to these railheads, as well as the importantarea around Harare. Pe um RefingW 6.118 The Governmentis anxious to find the optimum dispositionof the Feruka petroleum refinery. It considers the reactivationof petroleumrefining as a means to develop higher-technology activities and associatedmanagerialand professionalcapabilities,as part of its industrialdevelopment strategy. However, any plans to resume petroleumrefining in Zimbabweare bound to face major obstacles. This is because of (a) the high investmentcosts involved, estimated at Z$150 mn for reconuiissioningthe existingrefinery, and up to Z$450 mn for buildinga new hydroskimmingrefinery; (b) difficultiesin balancingthe products mix posed by the refinery's high gasoline yield (up to 40%) whereasthe market requiresonly about30% gasolinebut 60-70%middle distillates;,6/ (c) dependence on very light crudes, which in future may be subject to supply shortagesand whose prices may rise relativeto heaviercrudes and to refinedproducts;and (d) the needfor high-costhydrocrackingto reduce fuel oil surpluses,or alternatively,the need to sell fuel oil domesticallyin substitutionfor coal, and/or §4/ Ton-bntranport costsfor thepipelhneareheavil influencedby inital investnentcostsandfor rail/road,by operaton and maitennce costs. PETROZOM's tariff is to covercash operatingcosts, debt service,and a margin(basedona minnkm throughputof 0.85mn m}pa.a, with a discountfor higherthroughputs).7he notionaltarifffor thefirstfull year of operations(1994)calculatedon that basis is Z$61.201m'of throughput,comparedto the January1991tatiffs for raiway transportof Z$S590-66.70l/r dependingon type of products, andfor road transportof Z$92Arn'. The pipelinetariff decreasesas the debt servicedeclines. Qi/ Whenthe Feruka refinerywas commissionedin 1965, the conswnptionof gasolinewas nearly tWce that of diesel. -106to reexport it at distressprices. In general,refiningeconomicsarevery sensitiveto unexpectedincreases in investmentand operatingcosts and reductionsin refinery margins. 6.119 i The use of lighter Nigeriancrudes in the refinery wouldbe technicallyfeasibleespeciallyForcadoswhich has a high gas oil content(and which also meetssulphur specifications). Relativelysmall amountsof fuel oil remainingcouldbe used as refineryfuel or replace coal tar fuel in industry.(/ However, for this optionto be viable, the capacityof the Beira port needs to be extendedso that it can receive60000 M.T. tankers (insteadof 20,000 M.T. tankersas at present, to attain economiesin ocean freight), which is not assured. Otherwise, high maritimetransport costs would precludethis option. Even if there were to be domesticrefining, continuedimportsof products especiallydiesel would be necessarybecauseof the refinery's limitedsize on the one hand and the mismatch betweenthe compositionof refinery output and of domestic consumption,on the other. To the extent that petroleumcrude and products cannot be movedthrough the samepipeline withoutproducts contamination,any optionsto acquireand refine crudein Zimbabweare precludedunlessa separatecrude pipeline were to be built, which would depress the economics still further, however. Reducingthe imbalancein domesticdemandof petroleumproducts would require more activedemand management, especiallymeasuresaimed at limitingthe consumptionof diesel (such as in rail transport). The use of reconstitutedcrude in the existing refinery would entail some transport savings and some scope for products upgradingbut the net marginof such an operationwouldbe negativeeven beforeconsidering the investmentfor requiredupgrading, 6.120 As an aiternativeto re-commissioningthe entire refinery, its reformingunit could be rcommissloned to upgradenaphta to gasoline,LPG, and, possibly,small quantitiesof solvents(Annex 3 28). The output - about 0.37 mn m of gasoline and 15,000 e 3 of LPG, from 0.4 mn m3 of naphtha processed- would be sufficientto meet domesticdemandfor gasolineand LPG at least until the mid1990s. The benefit of this operationwouldbe derivedfrom savingsin transportingLPG, the major cost itemof that high-ost product. The internationalprice of naphthahas remainedrather steadilyabout 15% below that of gasoline. Naphthacouldbe easilytransportedtogether with other products via the Beira pipeline. At an Initial investmentin the order of US$12.6 mn and a net margin of US$3.8 mn p.a. (ased on a reformeryield of 85%), the economicreturnwouldbe in the order of 14-27%dependingon the assumptionsin regard to (investmentand operating) cost overruns. Thus, the scheme may be economicallyviable but it would be very sensitive to the naphtha-gasolineprice differential on internationalmarkets. In principle,napbthatreatmentcanbe combinedwith the processingof raw gasoil Intodiesel andjet-gradekerosenebut the requiredexpansionof hydrogenand desulphurizationcapacities might precludethis option as well. Mg/ Currently theconsumption of coaltar asfuelamounts to about 3,000tpy. - 107 - 6.121 A screeningof the principalopdonsfor recommissioning the existingrefinerygivesthe followingresults: Table 23: REFINING OPTIONS- MAJORINDICATORS Gross Revenue Option Operating Costs Capital Total Al - - Cost Anial ized .51 - 1989 ZS miltion -- Surplus/ Loss (-) EconomdcRate of Return (Percent) / _ ) 1 "Ninimuf investment _t 39.6 45.0 134.0 15.7 -21.1 neg. 2 aNighuinvestment c/ 46.0 45.0 315.0 37.0 -36.0 neg. 3 Reconstituted Crude d/ 17.6 25.0 70.0 8.2 -15.6 neg. 4 Angalian Nediun f/ 46.9 45.0 50.0 5.8 - 3.9 neg. 5 NapthaReforming 29.5 10.7 27.0 3.2 Q1 kY 0/ g, sY -' gJ hi 15.6 27.0 Productssalestess crude costs. Additionof gas oil and naphtedesulphurization units,a hydrogenunit,and a gasoline maroxunitto existi.,conversion equipment; refining of ArabLight. Replacementof fluid catalytic cracker by hydrocracker to maximize middle distillate production; new dksalter, vacuumdistillation unit, nd hydrogen plant;additionat offaites; refining of Arab Light. Use of a mixture of about 20%crude, SO% naphta, 30% kerosene, and minorproportion of butane. Iydroskimuing only. FCCUto be operated, ceer to be shut down; refining of Forcados-type crude. 31- API Palanca crude. At 10Xp... over 20 years. Over 10 years. Fajres: Evaluatfon team estimates. 6.122 New RefinervOption. The Governmentis also consideringa new refineryto serve regional markets. However,the economicsof it are likely to be even less favorablethan fbr recommissioning the existingrefinery. The large-scaleinvestment required(i.e. US$150-250mnfor a simplehydroskinming refinery)wouldrendersucha schemeunviable,in viewofZimbabwe'slandlocked positionandthe absenceof indigenouscrudesupplies.61V 6.123 Petroleumrefiningin Zimbabweis unlikelyto be economicas long as the domestic marketremainssmalland highlyskewed,requiringmainlymiddledistillates,relativelylittlegasoline, andvirtuallyno residualfuel. Importsandrexportsof productswouldneedto be balanced,whichis not possibleif the Beira-Feruka pipelinewerein crudeservice. Also,domesticrefiningwouldonlybe an #Z At currentandprojectedcrudeandpetrolewnproductspries, refiningmarginsaresuwh hA on&largerejtris Wh conversionfacilitiesclose to inqor marketsor internatonalshippingroutesare viable. A prelimnaiy assessmentof W4CC regoal refiningstrategiessuggeststax (a) a singlelarge refineryto serve the Regiondoes noaappearto be jus#We (b) the possibilityof developingthe refieries at Maputo and Dar-es-Salan should be exanined; (c) *nprovemen;sin supply routes, especialy pipelines. should be given priority over any new refinery;(d) additional storage should be considered for land-lockedcoantries; and (e) private sector financig should be attracted to downstreampetroleumoperatfons. I,108 - attactive optionif Beiracouldreceivemuchlarger crudetankersthan can nowbe accommodated.While the Governmentviews domestic refiningas a means to enhancethe security of liquid fuel supplies, it appearsthat over the mediumto longer term, importingcrude oil from world markets and subsequent refining in Zimbabwewould not be cheapernor more securethan procuringpetroleumproducts under term contracts and through spot purchases as at present. In fact, being subject to technical failures, domesticpetroleumrefiningmay reduce, rather than enhance,the securityof supplies. Byproductsfrom the refinery might be useablefor the productionof chemicalswhich, however, is not likely to increase benefitssufficientlyto makerefiningeconomic. Also,there is no refiningexpertisein Zimbabwe,which initially would affect the efficiencyof operationsand thus, operating costs. Alternatively,expatriate specialistswould need to be employedover extendedperiods which would increaseoperating costs as well. Thus, most refinery options are either ruled out on technical groundsor are economicallynonviable in view of high capital costs, low returns, logisticalobstacles to importing crude in required quantities,and technicaldifficultiesto run the refinery. 6.124 The foregoingresultsare likelyto remainvalid also in marketsituationsof unusuallyhigh refinerymarginssuch as those that prevailedduring MiddleEast crisis of 1990-91. That crisis erupted at a time whenmuch surplusrefiningcapacityworld-widehad already been eliminated,on top of which about0.7 mn B/D of sophisticatedexportrefiningcapacityin Kuwait were removedfrom world market availability. As a result, internationalpetroleumproducts pricesfor a periodincreasedfaster than crude prices, so that refinerymarginsimproved. However,additionalmothballedcapacitywas quicklybrought on stream so that no major shortagesemerged. Also, such improvementsin marginstraditionallyhave been short-lived. (In the caseof Zimbabwe,a refiningmarginof US$6.-IBis requiredunder the optimal alternativei.e. use of Forcadoscrude in the existingrefinery, to achievethe minimumeconomicreturn of 10%.) Ethanol 6.125 Ethanol productionsince 1988, about 30 mn 1/year,has been some 15-20% below its 1980-87 average, in part attributable to favorable prices for sugar exports, which depressed the availabilityof sugar cane as raw material. Thus, ethanollevelshardlyever exceeded 10%of total blend products instead of 13% as planned, and premium gasoline had to be imported to meet octane requirementson the blend. Producingethanol from sugar as raw material is not economicat current internationalsugar prices. The Governmentplansto expandethanolproductionso as to increasethe ratio of ethanolin gasolineblendto 20%, with the objectiveof saving foreignexchange. To achievethis, the capacityof the Triangleplant wouldneed to be doubledto around 100 mn 1/year. Sugarcaneproduction wouldneedto be expandedas well, probablyrequiringinvestmentin irrigation. The economicsof such an expansionneed to be examinedin the light of the outlookfor internationalprices of petroleumvs. sugar over the mediumto longerterm. If petroleumprices were to returnto levelsprevailingbeforeJuly 1990 while sugar prices increase,the opportunitycosts of expandedethanol productionbased on sugar would be too high to make this option economic.6/ O/ On, during1982485- wheninternational sugarprices weredepressedandpetrolewnprices werehigh - was it more economicto produceethanolfrom sugarthanto sell sugar on Iernational markets. - 109- 6.126 In contrast,the productionof ethanolfrom molassesis economic,providedthat molasses otherwisediscarded as waste product are used whoseopportunitycost may be zero or even negative. However, if producedfrom purchasedmolasses (whosecost is around Z$ 1401M.T.),costs of ethanol are very close to those of importinggasolineadjustedby their shadowexchangerate, even under due considerationof the shadow price of imports and the sunk cost of the existing facilities for ethanol production,which renders this option only marginallyeconomic. As an additionalconstuaiing factor, ethanol can also be used as chemicalfeedstockwhoseopportunitycost likewisemayexceed the value of fuels. Analternativesource fethanol wouldbe from surplusmaizeand maize crop residues, and a plant of this type has been proposed. The suggestedinvestmentof Z$50 mn would necessitatea break-even price for ethanol of about Zc75/1, which is less than the current high CIF import cost of gasoline (Z,CS91), olzQi 6.127 This byproductof cokeproductionpotentiallyis anothercomponentfor gasolineblending but at present is little used. Until such time that higher value uses are developed (e.g. for chemicals and/or solvents)benzol shouldbe blendedin gasoline to the maximumextent feasible, in combination with ethanol, thus allowingsome substitutionof petroleumimports. Reauirementsand Recommendations Procurementand Storage 6.128 NOCZ1Mneedsto determinethe optimumamountof petroleumstocksto be held in the countryand in Beirawithoutincurringrail and tankerdemurragecharges. This shouldtake intoaccount the costs of inventory, the risks of disruptions, and the availabilityof tankage. In the shot-trm, NOCZIMshould optimize its basicallysound supply system. In the mediumterm, the facilities along the supply route should be upgraded so as to guaranteemore efficientoperations. Since imports of petroleumproductsvia Beira are likely to remainthe least-costsupply optionfor the foreseeablefuture, the mainneed is to continuewith measuresto improveand securethe Beira supplyroute. There are few optionsfor reducingsupply costs externalto Zimbabwe,other than continuingthe flexibleprocurement arrangementsthroughterm contractsallowingfor shiftingto the spot markets withoutlong delay when productssuppliesbecometight, and monthlyformulaadjustments. Other optionsincludecargo-by-cargo purchases,supportfor Beiraport improvements,and reductionof pipelinecharges. Someresearchshould be carried out on required products specifications,particularlyon gasoline octane and diesel cetane contents,with a view to identifyingpossiblereductionsin specificationsand savings in unit prices. 6.129 In the interest of efficiencyin providingpetroleumproducts suppliesto Zimbabwe, as well as reinforcingthe Government'spolicyof maintainingadequateand strategicallylocatedcompulsory stocks, the followingimprovementsshouldbe enacted: (a) Offshore procurement: (i) careful selection of tanker offers and improving tanker scheduling,with a view to meetingNOCZIM'stiming requirementsand acceptableday -110- ranges;(ii) use of multi-productscargoesto facilitateschedulingand reduce demurrage; and (iii) evaluationof the economicsof obtainingLPG supplies offshorethrough tender arrangements,and of importingpart of the reqizirementsfrom other SADCC countries providedsupplies can be securedat reasonablecost; (2I (b) Beira port operations: (i) more efficientvessel discharge, (ii) more accurate expected arrival time information,and (iii) a tank cleaningprogram to resolve products quality problemsinvolvingsediment; (c) Beira-Ferukapieline operations: more appropriatepumpingschedules;and (d) In-coun storage: (i) determineoptimumusage, controllabledemurrage,and rail-siding diversions associated with different levels of usage so as to reduce demurrage and diversions;(ii) identifythe most appropriatelocationand capacityfor additionalstorage to attainthe optimallevel of the Days Supplyof products;and-CiiM) select the least-cost solution based on gradually increasingthe strategic reserve to 90 days of supplies to provide againstpossible supply interruptions,consistentwith acceptable reliabilityand risk. 6.130 Whilesome increasein stocksof petroleumproductsfrom their presentlevelsis probably justified on securitygrounds, a carefulanalysisof the justificationfor additionalstrategicstorageshould be made beforeproceedingwith the undergroundstorageproject, especialiyof the risks to be protected againstand feasible alternativessuch as curtailmentof discretionaryuses of liquid fuels in emergencies. Becauseof the high costs involved,the Governmentshould considerincreasingthe storage capacityand stocks more gradually in line with future demand growth, limiting the build-up to three months of requirementsand spreadover three years or so, and selectinglesser-costsolutions,such as above-ground floatingroof steel tanks. Over the 1991-2010period, the costs of that option (in NPV terms) wouldbe nearly 1989Z$530 mn less than those of six months stocks held in undergroundstorage.7Q/ Such a programshouldbe designednow, be combinedwithcontingencyplans for securingsuppliesby alternative routesand for temporaryproductsrationing,as wellas programsto improvethe efficiencyof using liquid fuels. Cr'teria need to be developedfor defining minimumand maximumstock levels and storage capabilities. g21 The onlyfeasible option at present would be via Zambia which, however, is a high-costroureand Imnitedby the capacityof the rail network. Zambianconsunptfic ofpetrokewnproductsanounts to aboat0. 7 mn tpy whereasits Ndola refinety has a capacityof .1 mn tpy.. 70/ The InternationalEnergyAgency recomends ha its membercountrieshold stocks equivaknt to three monthsof requirements. The cost of above-groud steel tankage amountsto about JS$9-10IB vs. US$27/Bfor underground storage. Overa 20-yearperiod,the NPVof a si-mons strategicreserveheld n undergroundstoragewouldbe 1989 Z$857 mn, comparedto 1989Z$329 mnfor three-monthsstrategicreserve in above-groundstorage. 6.131 Giventhatthepipelineprojeet ismoreeconomic thaneitherrail or roadtransportyetvery sensitive to unforeseenincreasesin capitalcosts,the Governmentshouldconsiderenhancingthe share ofprivatesectorparticipation andfinanciogin theproject. Costsavingsin projectimplementation should be mobilizedto the feasibleextent. Arrangements shouldbe madeto securethe efficientmanagement andoperationof the pipelineby LONRHO.Properregulationof operationsthroughan independent and effectiveentityresponsiblefor arms-lengthregulationof energy-related activitiesshouldbe established. In the meantime,NOCZIMshouldaim to obtainfrom NRZ lower transporttariffs for petroleum products. Petroleum Refinng 6.132 The presentpracticeof importingpetroleumproducts,ratherthan domesticrefining,is likelyto be the least-costsupplyoptionfor theforeseeablefuture. Insteadof furtherevaluatingthe fullscalerecommissioning of the existingrefineryor the constructionof a new refinery,the Government shouldfocuson reducingsupplycoststhroughmoreefftcientprocurement andon negotiatinga reduction in port and pipelinechargesin Mozambique.Evenbeforethe naphthaprocessingoptionis takenany further,its economicsshouldbe firmedup by an in-depthstudy,basedon a detailedinspectionof the Ferukarefinery,moredefinitivecostestimates,anda reviewof international petroleummarketprospects thatwouldaffectthe crucialrelationshipbetweenpricesof straight-runnaphthaandof finishedgasoline to a specification suitablefor the Zimbabwemarket. Etanol 6.133 Presentand projectedinternational pricesof sugarandgasolineindicatethat exporting sugarwouldprovidelargereconomicbenefitsthanconvertingit intoethanol. Molassesshouldbe used for ethanolproductiononlyoncetherequirements foranimalfeedare met. Also,theoptionof producing ethanolfrom surplusmaizeor maize residuesshouldonly be pursuedif lastingprice changesand technological developments occur. Shouldthestagnationor reductionof ethanolproductioncreatesupply shortages,its admixturewith gasolineshouldbe limitedto those geographicareas closeto ethanol production. However,the environmental valueof ethanolas a relativelyclean fuel shouldbe duly consideredin decisionson the possibleexpansionof ethanolproduction. -112 - Vll. ENVIRONMENTALIMPACTSOF ENERGY OPERATIONS Qverview 7.1 Energy-relatedenvironmentalissuesin Zimbabweare not as seriousas in mostother subsaharan African countries, but are by no means insignificant. The main problem is posed by deforestation,which in large part is attributableto agricultureand fuelwoodcutting estimatedat 6.1 mn M.T. in 1989. These make rural areas vulnerableto soil erosion, siltation,and declines in agricultural yields. The burningof woodfuelsalso contributesto atmosphericpollution.Concentrationof industrial activities is limited, thus creatingonly relatively localizedpollution. However, sulphur emissionsare significantat Hwange resulting from coal-basedpower generation, which also poses an ash disposal problem. Coal mininginvolvesenvironmentalcoststhrough air and waterpollutionresultingfrom spoil disposaland unrehabilitatedland, spontaneouscombustionof spoTIheaps, and coal washing, in -ddition to visual impacts. 7.2 Emission problems in the ransrt sector are mainly related to excessivesmoke and particulatesbecauseof the age and inadequatemaintenanceof the vehicle fleet, and poor standardsof vehicleuse (e.g. over-loading). There is a direct relationshipbetweenenergy consumptionand pollutant enissions in the transportsector. Traffic densities are not yet at levels to cause major health concerns but existingproblemsare likely to be aggravatedwith futuretransportgrowth, especiallythoseassociated with diesel consumptionin urbantransport. Also, the exposureto air pollutantsincreaseswith population concentration,sinceairshedshave a finite capacityto absorb emissions. Motorizationand motorvehicle pollutionwhile largely an urban problem, is bound to increase substantiallyover the 1990-2010period, especiallybecauseof the heavyrelianceon bussesfor public transportationand the likely shift in modal shares towards increasedownershipof automobilesin the wake of an increasingpropensityfor personal mobilityand travel. Thus, the contributionof transportto air pollution is likely to intensifyespecially in urbanizedareas. Meteorologicalconditionssuch as abundantsunshinein the Harare region couldbe criticalfactors in the formationof petrochemicalozone. Motor vehicleemissionsalso aggravatethe CO and NO, levels causedby emissionsfrom other energyuses. Dieselexhaustemissionsin particularadd materiallyto the particleload emittedby industriesand coal-firedpowerplants. By comparison,regional or even global problemsrelatedto emissionsin Zimbabweare quite minor. 7.3 Emissions are largely unmeasured, as is the disposal of waste oils and hazardous wastes.a/ Thus, the extent and costs of environmentaldamage associatedwith energy operations in Zimbabweare unknown.This is particularlyserious in those rural areas where most existingand future energyschemesare or will be located,and where the environmentis vulnerable. _Q/ However, at Hwangepower sation, electrostaic precipitatorsare wstalled so that there is hardly any emissionof particles. Ashdsposal representsHwange's most serious enironmentalprobkm. - 113- Institutional andPQlicvIssues action.A National has beenconsciousof the needfor environmental 7,4 The Government ConservationStrategywas formulatedalreadyin the mid-1980s,withthe aim to integratesustainable development. Maintaininga sustainablebalance resourceuse with every aspectof socio-economic betweenenvironment anddevelopment hasbeena majorobjectiveofthe 1986-90Five-YearDevelopment Plan. However,the legallregulatory/institutional frameworkis weak and policy action is hardly measuresareconceivedessentiallyas beingrelatedto natureprotectionand coordinated.Environmental notto encompassing problemsrelatedto humanhealthandamenityresultingfromeconomicactivities. Nocomprehensive environmental legislationexists:thereareonlydiverseregulations dealingwithhealth, labor,and naturalresources. Responseshave followeda piece-mealapproachand have seldombeen issues. Exisig formulaed in the contextof a policyframeworkaddressingoverallenvironmental standardsare rarelyenforced,andlittlecontrolis exercisedover potentiallyadverseimpactsemanating controlmeasuresoftenisnotclear,and fromenergyoperations.Therefore,the impactof environmental littlereliableinformationexistsabouttheircost-effectiveness. 7.5 A numberof Governmentinstitutionsare involved.n environmental matters,i.e. the Ministryof NaturalResourcesand Envirownent,the Ministryof Health,and MEWRD,but their responsibilities are not clearlydefinedandthey workoftenat cross-purposes.There is no high-level policymakingor advisorybody covering the wholespectrumof environmental issues,nor is there a coordinatedenforcementand monitoring system. Hazardous waste and air pollution procedures are tasksare small(theywere largelydelegatedto localauthorities.Budgetallocationsfor environmental justaboutZ$6.5mnfor the Department of NaturalResourcesin 1989).Whileknowledgeaboutecology in generalis adequateat the Government,University,andprivatesectorlevels,expertiseis lackingin monitoring, regulating, and controllingpollutants, and in identifyingthe links between pollution and human health. Environmentalmanagementskills both at the regulatoryand operationallevels are often weak. There is little expertise in rankingthe priority of alternativeenvironmentalactions. Therefore, selectingeconomicallyjustified and sociallyacceptableenvironmentalmeasuresmay prove problematic, partly becausethe magnitudeof the problem and its consequencesare not well understood. 7.6 Personneltrained and experiencedin environmentalmatters are leavingthe Government for the parastatal and/or private sector. Because of these and other constraints related to policy orientationand decisionmaking,environmentalconsiderationsstill carryrelativelylittleweightin project planning. Except for the petroleumproductspipeline,hardlyany impactassessmentsare undertakento analyzethe environmentalcosts and benefitsof large-scaleprojects, as a basis for Governmentdecisions. Given these weaknesseson the part of the Governmentinstitutions, a variety of non-governmental organizations,local-levelbodies, and even donor agencies have become significantfor environmental thinkingand actionsin Zimbabwe. -114 - Qgtionsto ImgrV= EnmironmentalManagmn In order to improvethe managementof the energy-environmentallinkages,a numberof 7.7 key conditionsneedto be met. Amongthem are: (a) higher energyefficiency,through pr;cingbased on economiccosts and market-relatednon pricingmeasures; (b) increaseduse of less polluting fuels, and applicaion of pollutioncontroltechnologies;and (c) structuralchangestowardsless energy-intensive,less polluting industries. Attainingthem will be facilitatedthrough upgrading managementand operating skills, evaluatingthe environmentalimpacts of energy operations through environmentalaudits, and Improvedaccountability.Regularplantand equipmentmaintenanceincludingfor boilers, and automobile tune-ups and traffic management will contribute to both higher energy efficiency and improved environmentalmanagement. 7.8 Because of economiesof scale, the unit costs of pollution control applications for relativelysmall-scaleand dispersedindustrialfirms tend to be relativelyhigh. The extensionof control technologiesto smaller installationsrequiresan approachwhich is more installation-specificand which impliesgreater uncertaintyabout the costs. Also, small and medium-sizedindustrialfirms may need specialassistancein the technical evaluationand financingof pollutionabatementsystems. In order to develop more cost-effectivestrategies, a broader approach is preferable based on the industry-wide analysisof alternativetechnologiesto reduceemissionsrather than source-by-sourcepollutionreduction strategies. Such an approachshould includethe optimizationof energy efficiencyand fuel mixes. Requirementsand Recommendations InstitutionalRequirements 7.9 Major improvementsare required in environmentalplanning, legislation/regulation,and control. A comprehensiveframework for promoting environmentalprotectionis needed based on a reviewof the adequacyand effectivenessof regulationsand their enforcement. Appropriatelegislation should be initiated, and regulatory proceduresand standards should be developed. The Mines and Minerals Act should be amended and environmentalimpact assessments be made mandatory for significantprojectsandoperations,especiallyenergy-relatedones. Cost-effectivecontrolstrategiesshould be preparedand their implementationmonitored. A mechanismis neededto ensure that responsibilities are better coordinatedand availableexpertise at the Governmentlevel is optimallyutilized while the parastatalbodies and the project proponentsthemselvesmaintaina proper involvement. The Ministry of Natural Resourcesand Environmentshould be given responsibilityfor regulationand monitoring, coveringair and water quality and hazardoussubstances. The capacity within the National Planning Agencyfor providingpolicy adviceon resourcemanagementand analyzingthe environmentalimpactof policies and programs should be strengthened. The Natural Resources Board should expand its disseminationfunctionsfor conservationconcerns. 7.10 Technical, economic/financial,and institutionalmeasures to deal with environmental problemsshould become an integralpart of the Government'senergy strategy. This includesdefining design, implementation,and operatingstandardsthatproject componentsmust meetto be environmentally - 115 aeptable (e.g., effluentdischargelimitations,air emissionand waterqualitystandards,and occupational health and safety requirements). Within the energy sector, environmental awareness should be strengthened nd In-houseenvironmentalexpertisebe developedat DOERD and the other sectoral and subsectora1institutions(as has been done already at ZESA). Specialistsneed to be prepared with a comprehensivefocus at the policyand opratonal levels, a pollutionmonitoringand controlprogrambe organized,and relatedhealth and enviromnentaltechuologyissuesbe addressed. Tne Governmentwill needtechnical assistancein strengtheningits environmentalassessmentand managementcapabilities. Polio Reguirments 7.11 In evaluatingenergyprojects, the costs of environmentaldamageand of its alleviation shouldbe consideredand be appropriatelycharged to the project beneficiaries. To the feasible extent, the prices of different forms of energyshould incorporatethe environmentalcosts associatedwith their production and use. The "polluterpays' principle should be clearly established. Since most energy efficiencymeasureswill also improveenvironmentalmanagement,they are of particularimportancefrom the energyas well as envir.inmentalpoint of view. Given the scarcity of investiblefunds, opportunities for multiplebenefits from environmentalprojects shouldbe pursued. A first requirementis to identify adverseImpactsof energ operationson the environmentand to evaluateoptionsto preventor ameliorate these impacts. Enviro. nental audits shouldbe made mandatory,especiallyon the entire Hwange area and major energy schemes, to determineany humanhealth or natural resource issues associatedwith existingoperationsor plannedexpansions. Measuringand emissioncontrolprogramsshouldbe initiated in the most affeted areas through assessmentsof the magnitudeof the pollution problem and the contributionmade by the major sources. Controlequipmentshould be made availablefor high-priority purposessuch as targetingpollutionareas and definingattainableemissionstandards, 7.12 In view of the high costs especiallyin foreign exchangeof manyof the ensuingprojects, least-costsolutionsshouldbe identifiedthat bear a reasonablerelationshipto the environmentaldamage to be mitigated. To justify the added costs, the environmentalbenefitsfrom abatementmeasuresmust be tangible and conmmensurate.Standards prescribed and regulated by the Governmentshould be equitablein their impacton energyconsumers,and shouldbe introducedwith sufficientleadtime to allow to adjustto the new requirements. Measuresthat are not excessivelycostly and are preventivein nature are likely to gain the greatest public acceptance. As a minimum, a comprehensiveenvironmental program should incorporate (a) a pollutantemissions inventory by major sources, even a crude one, but based on a minimal level of tests and measurementsand subjectiveassessments,to analyze the relative contributionof emittantsto overall pollution; (b) emissionstandardsderivedfrom a realisticevaluationof costs and expectedcompliance by equipmentmanufacturersand users; (c) identificationof specificproblemareas, selectionof appropriatecountermeasuresbased on their costs and likely effectiveness in the context of national technical and -116administrativecapabilities,and designof a policyframework- regulations,enforcement, fiscal measures- to ensure the successof an environmentalprogram; (d) appropriatelegislation,organization,administrativeprocedures,and funding sources to implementthe selectedprogram;and (e) a monitoringand evaluationmechanismto assess progressand recommendadjustments in the program. OperationalRequirements 7.13 ElectricitySubsector. The environmentalimpacts of the various hydropowerschemes should be assessedin ternis of (a) any habitat or other natural resource loss or communitydisturbance resultingfrom water inundationand dam construction;(b) changeswhich may occur in the downstream fluvial regime; and (c) exposureto diseasescausedby the creation of a new water body. Measuredby these criteria, KaribaSouthExtensionand Batokawouldhavefew adverseeffects (besidesa rise and fa1l in water levels at Batoka of approximately8 m which would leave a visual impact). In contrast, the LUperZambezi Scheme, through its effect on the water flow over the Victoria Falls, is likely to have considerableadverseimpactson the local habitatand the tourismpotentialof an importantlandmark.This couldcause controversy,with the consequentrisk of delaying its implementation69/ and of high costs to Zimbabwe of not having proceeded with an alternativeproject. Any extension of the coal-fired Hwne Stationposes the issues of (i) the efficientcollectionof dust removedfrom flue gases, (ii) the adequatedisposal of waste ash, and (iii) the additionalcontributionof gases to overall levelsof local air pollution. Therefore, any expansionat Hwangeshould includepollutioncontrol equipmentappropriate to the plants size and location. Becauseof the high sulphur contentof HPS coal used at Hwange, some form of flue gas desulphurizationshould be considered,even assumingthat effectivedispersionoccurs and that there are few other sourcesof pollutionin the surroundingarea. The natureof sulphurcontained in the coal should be examinedto assess the scope for reducingit in the coal preparationprocess prior to combustion. For controllingNO. emissions,retrofittinglow NOR-producing burners to existingplant would not be cost-effectivebut they should be installed in new boiler plant. The operation of the municipalthermalplants becauseof the age and type of the equipmentis bound to give rise to dust and effluentproblems. High efficiencydust removaland controlis essentialeven for relativelysmall units in urban locations. Any upgradingof thesestationsmighthaveto includenew cyclonesand precipitators whosecost is estimatedat US$2.5 mn. However,greater knowledgeis requiredof the local or regional impactof existingoperationsand possible modificationsbefore any decisionsare taken. Transmission line should be designedto minimizeenvironmentalintrusion. 7.14 In regard to coal, problems arise among others from the storage, handling and preparation,ash disposal, the use of substantialquantitiesof water, and atmosphericemissionsaffecting 69/ VictoriaFals was recentlydeclareda WorldHeritageSite, whichimpliesthat an environmentalimpactassessment has to bepreparedfor anyprojectswihin the area ofthe Falls. Also, in the Evaluationtean's assessment,the Upper Zambezischeme does notform part of the kast-cost programfor eketcity supplies - 117 - local communiies. Coal mining at Seng might producedust emissionsand ground water retention problenmrelated with overburdenremoval, which should be given proper consideration.2Q/Handling proceduresfor by-productsat the Wankie coke plant need to be improvedto minimizeenvironmental damage. Conversionschemesto produceammoniafrom coal wouldnot reduceexistingnitricoxidestack emissions,but the ash would needto be conditionedwith water to avoiddust problems in the causeof disposal. 7.15 No seriouslyadverseimpacts relatedto the proposalsin the liquid fuels subs_ctorhave been determined. Recommissi.-ningthe refinery would involve some emission of fuel gases. Their sulphur dioxide component is likely to be low, however, provided that operations are restricted to processinglow-sulphurnaphtha. The petroleumproductspipelinewould havenet environmentalbenefits through reducingthe risk of accidentsand the consequentrelease of toxic materials. However, the design, location, and operationsof the new transshipmentdepot withinthe greater Harare area require close environmentalmonitoring. Any expansionof the productionof ethanol needs careful evaluation becauseof its impacton local water requirements,as well as toxic effluentsand potentialuse of coal as energy source. However, increasing the use of ethanol as a relatively clean fuel would have environmentalbenefits. The environmentalimpacts of these schemesshould be reduced to the point where they are acceptablein relationto their economicbenefits. This is to be achievedthrough careful site selection, proper design and consultationwith those likely to be affected by the project, and appropriateoperation. 7.16 Trn rt Sector. A principalaim of air pollution abatementshould be to reduce and control emissionsfrom motor vehicles. Internationalexperiencecan serve as an importantguide. A furw-prongedapproachis neededthat encompasses (a) Energyefficientand clean vehicles: applytechnologicalinnovationsto reduce emissions in new vehicles, retrofit existing vehicles with emission control devices to the economicallyfeasibleextent,71/ and improvevehicleinspectionand maintenance; (b) Clean fuels: reduce or substitutethe use of lead and of other octane-boostingadditives in gasoline (e.g. through ethanol to the feasible extent) and of sulphur in diesel, particularly in captivevehicle fleets with high mileage and restricted operativerange, such as taxis and buses; (c) Traffic management:applyregulatoryand engineeringmeasuresto improvetraffic flow (e.g. controldevices, traffic restraints, and facilitiesto encouragemodal shifts); and (d) Policy framework: apply regulatory and pricing/taxation mechanisms, through ZQ/ there is already a considerableinflow of squaue Intothe Sengwa area which Is bound to operadonsstan. 7ZL/ h may inclue trap oidiing systems to reduce soot emissionfirom diesel vehicles. See: 1991. ensfy once minig TheEconomist, June 22nd, - 118appropriatelydesignedvehiclefueltaxesto (i) internalizeenvironmentalextemalities,and (ii) encouragethe use of efficient vehicles and clean fuels, restrict or ban the use of pollutingvehiclesand fuels, and modifytravel behavior and transportdemand. 7.17 The advances in vehicle emissioncontrol technology made internationallycould be adoptedto Zimbabwe'sspecificcircumstancesby requiringthat locallyassembledand importedvehicles meetspecifiedfuel consumptionand emissionstandards. However,introducingvehicleemissioncontrols imposessignificanteconomiccosts whilethe benefitsare amorphousand oftenunproven. As Zimbabwe has an ageingvehiclefleet with low turnover, it may take ten years or more beforethe entire fleet could confbrmto a given set of standards. - 119 - VIII. INVESWMENTANDFINANCING STRATEGY,1990-2010 Scope and Compositionof Investment 8.1 Investmentrequirementsto secureenergyfor the economyover the 1990-2010periodand beyonddependon increasesIn energy demnd, the compositionof that demand,and the extent to which least-costsolutionsto meetingenergydemandare implemented.Basedon the projects consideredin this Evaluation,the energy investmentprogram -wouldbe substantial: it couldtotal about Z$7.2 bn for the Base Case/Policy-activeScenarioand Z$7.6 bn for the Trend Case but nearly Z$9.5 bn for the Base Case/Policy-neutralScenario. This wouldcorrespondto 6.5-8.6% of GrossDomesticCapitalFormation and 1.6-2.2%of GDP throughoutthatperiod. AboutZ$1.7-2.3bn of projectedinvestmentwouldalready materializeduring 1990-95,and Z$3.5-5.I bn during 1990-2000dependingon the Scenariochosen. This comparesto an estimatedenergyinvestmenttotallingZ$2 bn for the wholeof 1980-89(all in 1989prices and exchangerates). Duringthe 2001-2010period, investmentto meet the post-2010energydemandwill also be needed. An investmentprogramof this size wouldinvolveconsiderableclaimson the economy's resources. Since close to two-thirds of energy-relatedinvestmentare foreign cost, it would result in oonsiderableclaims on foreign exchangeas well. 8.2 The investmentprofile of the Policy-neutralScenario is designedto satisfy increasesin demandarisingfrom 4.5% p.a. GDP growthduring 1990-2010withoutchangesin real energyprices or any other demandmeasures. However,energyprice increaseswill be criticalfor demandmanagement, maintaininginvestmentrequirementsin the energysectorwithinfinanceablebounds,and for meetingthe financialneeds of the operatingentities. Assumingthat real prices will be adjustedto cover economic costs, demand increasesfor both electricity and liquid fuels would be less than those underlyingthe unrestrainedPolicy-neutralScenario. Consequently,associatedinvestmentrequirementswill be over Z$2.2 bn less under the Policy-activeScenariothan under the Policy-neutralScenario. Subecoral Composition 8.3 As in the past, investmentrequirementsfor the el=igigy subsectorare likely to account for the bulk (85%) in the overall energy sector. Even under the least-costscenario - which implies electricity supplies from Zambia on a firm basis until 2010, 20 hrs/year LOLP, and an investnent sequenceconsistingof the Cahora Bassa interconnectionby 1995, gas turbine by 2000 and Batokaby 2002 or later - capital costs for generationand importsin 1990-2010wouldtotal Z$3.2 bn and related investmentsin commontransmissionand distribution,Z$2.9 bn. Electricity-relatedinvestmentprobably would even be higher than assumedby the Evaluationteam if the Batoka schemeis not completedby 2002, in which case additionalgeneratingcapacitywouldbe neededto meet supplyshortfalls,unlessload managementand other measuresobviatethe requirementfor additionalcapacity. - 120TIakIsJ - TOtl EeotdoltV Gewvatlo. Trnnsmlalon& &jbtvanam(.alot DIotributlon W Cow Wotie Snwa PROJECTEDERNY INVESTMENT. 1990.2010 UNRESTRANEDECTRICITY IMPORTS (1SOSZ*mIlIns L177 2.3 3.283.9 L,107.0 1.029.3 2,851.0 11,391.01 1400.0) f1.00.O0) e.s2.e 1480.0) 2.0t2.0 11.377.0) (230.0) (475.0) 100.7 197.21 (3.5) 123.7 1123.2) (0.5) 142.3 (141.01 (0.6) 300.7 e00. 1 W1 10.01 160.01 130.0 i. (50.0) 1(80.01 377.4 80.0 160.0 300.0 l(930.9) t21t.4) 187.4 (112.4) 126.0) 11 160.0) UqLddFuub Pipaltnw Streage Eth"tol Expledn I/ Ethanol- ~~~~~~ 6~~~~~~~~~0.0 8ASELASEOUCY NEUTRAL SCENARIO Tota 2.254.0 2S.82.7 4.322.6 9.4Ss 1,806.S (1.19.11 1219.4) (480.0) 2.080.0 11.871.0) (230.01 (475.0) 3,925.2 (2,365.2) 1460.0) I1.000.0) 8,301.; Coal WanIOS Songwa 100.7 197.2) 13.5) 123.7 (123.2) (O.5) 142.3 (141.9) 10.6) 30.7 LIquidFuel Pipeline Stara" EthanolExpbnlot 197.4 112.4) (25.0) 't' 99.0 (4.01 (21.0) (10.0) 491.4 (80.0) 195.0 I-l (75.01 '-' (120.0) 60.0 80.0 160.0 300.0 Eletrt Oanaiatlon Tran*mIon & Subtr Watribueton lf btnsm on 60.0) Mbtkeding k/ Evfifnno.lW nes BASE CASEIICY ACnVT,SCENARLO TOl EleotriIty Ganweatlon p TrfansmIkIn&Subtrsnsmbaon DiOtibu8tng/ coa Wankbe wngwa UqiudFuws PpefIne Estorege EfthnolExFimnson k/ MarketIngk/ Env Ifitolenb e 1.732.0 1.784.9 3.716.0 7.231.9 1,383.9 (685.5) (218.41 1480.0) 100.7 1,492.2 (77.2) 1230.0) (475.0) 3,237.7 t1.777.71 (480.0) (1.000.0) 0.113.8 142.3 (141.01 (0.5) 386.7 (97.21 (3.65 123.7 (123.21 (0.5) 197.4 (112.4) (25.0) W. 1(50.0) 176.0 (-) (75.01 W* 1100.01 451.4 (25.0) eo60.0 80.0 160.0 900.0 89.0 14.0) (10.01 (50.0) CORE ETMENTCASE Totd ElActubIty Geaton TrarnsmIson& Subtrsnamasilon 0lItuibufion_/ cow Wanldk swa UquidFues PIpeline Storae Etha#orPoduwton Marketin3 Eitifetnent Inclru ln stw . 1.480.0 1,165.6 1685.5) (150.0) (350.0) _ea. .S.218A 1,911.2 (711.2) 1400.0) 1800.0) 4,343.9 (2,083.9) (730.0) (1,530.0) 73.5 (70.0) (3.51 62.0 (60.0) (2.0) 1120.0) (2.0) 257.5 (260.0) (7.6) 107.0 (112.0) 126.0) 1-1 1300 50.0 .It (20.0) 1-1 (30.0) 100.0 -1) 135.0) (10.0) (55.0) 317.0 (112.0) (80.0) 110.0) (115.0) 60.0 80.0 160.0 300.0 n ata aeltdfloat bypdf 143S.,22 1,247.2 (687.2) 1180.0) 1380.0 LEE:tDOERD Zti At NOMu. Sout OERD:ZE6A; NOiM: WCC;EvaluatIon teameatimee 122.0 - 121 - 8.4 In order to maintainthe productivecapacityof WAoalwinine at WCC, the - essentially short-life- equipment both for open-castand undergroundoperationswillneedto be regularlyreplaced. In addition, the processingand coking plants will require major refurbishingby the ye ..-2000 at the latest; undergroundminingwill require mechanization; loadingfacili.ieswill need to be renewed; and a major investmentfor additionaloverburdenstrippingplant may be requiredaround 2007dependingon the increase in coal demand. At Sengwa, investnent requirementsare small by comparison for establishinga permanentmine, totallingabout Z$20 mn (Z$6.i mn in local currency)over the 20-year periodfor eithergrowthscenario. For a moreappropriatecontractingoperation,investmentrequirements wouldbe rather lower, i.e. Z$4.5 mn (Z$1.8 mn in local currency). Retrofittingthe ammoniaproduction facilitiesto use bluewatergasas energy sourcewouldentailinvestmentcosts of approximatelyZ$60 m. Improvingthe handlingand storageof liguidfuels may entail costsestimatedat Z$l00-150 mn over the wholeperiod. Energyefficiencyand environment-relatedexpendituresneedto be considerablyincreased from their presentnegligiblelevels, to at least Z$15-20 mn p.a., to address inefficienciesin energy use and inadequaciesin energy-relatedenviromnentalmanagement,especiallyin industryand transport. Financingof Investment Soe= and Sources 8.5 Te investmentunder the Policy-neutralScenario may be interpreted as satisfying maximumand unrestrainedenergy demandgrowth. If this level of investmentcan be financedwithout invalidatingthe impliedmacroeconomicgrowthassumptions,any lesser investmentcouldalso. However, the financingof energyinvestmentunder the Policy-neutralScenariowouldmostcertainlyinvalidatethese assumptions: indeed,energy investmentunder any Scenariois boundto exert a considerableburden on public finances, balanceof payments,and the externaldebt position. Financingthe projectedenergy investment,therefore, will be a major challenge,particularlyduring the next five years or so when the larger share of requiredfundinghas to be securedfor the projectsto be implementedduring the following five years. In addition, importsof petroleumproducts and of electricitywill preempt a growingshare of foreign exchange earnings unless the export capacity of the economy grows faster than energy imports.72/ In fact, steadily rising importsof liquid fuels will impose a considerablylarger burden on foreign exchangeearningsthan the externaldebt serviceon loans relatedto energy investment. 8.6 Sourcesof financingfor the energy sector's investmentprogramessentiallyare savings of the energy enterprises,equity contributionsand loans from the Central Government,and loans from other internaland from externalsources. The Evaluationteam assumesthat externalfundingwouldhave to meet about 75% of investmentcosts under the Trend Case and both Base Casesto coverthe elevated share of the projects' foreign costs. Financingrequirementswill be especiallylarge where investment is projectedto be relativelyhigher without being matchedby a concomitantincrease in energysector savings. 721 4ccording to the EvaNaJ teom's analys. importsof petrokeumproducus(whikhaccoaw for the bulk of energ morta) are projectedto mcieasefrom about US$210mnfor 0.98 mn ml in 1989to US$373mn #for1.35 ma mn)in 1995, USSS 716 mn (for 1.68 mu mi) in 2000, and US1. 5 bn (for2.65 minm3)in 2010 (allIn currentprices). the reevawt asswptions concerningprojectionsof internutional prices, GDPand sectoralgrowth,liqudfiels prices, and price elasticies of demand are listed above (ChaptersIV and 19. - 122 8.7 Borrowing and Debt Service. High investmentand low financial savings would necesitate subsntial additionalinteral and externa borrowingjust to meetthe debt serviceon previous loans, over and above the funding for investment. Since energy sector savings are projected to be negativein the Trend Case and Policy-neutralScenario,gross borrowingrequirementsare projectedto period. As an indication,debt repaymentsas be about 43% above actula investmentduring 1990-2010 a proportionof gmr externalborrowingrequirementsof the energy sector could increasefrom 45% in 1900-2000to 65% in 2001-2010. Expressedin current prices, net borrowingunder these Cases would have to total Z$52-68 bn for the 1990-2010period (Z$29-38bn from externalborrowing; Z$23-30bn from domestic borrowing). It is evident that investmentand indebtednessof this magnitudefor the energy sector alone are unattainableand unsustainable. 8.8 For macroeconomicreasons- i.e., limitingborrowingrequirementsto more manageable levels, so as to make it less likely that borrowing impedeseconomicgrowth - it is essential that the Policy-activerather than the Policy-neutralScenario be pursued. The former implies both relatively lower energydemandand investmentand higherfinancialsavingsby virtue of more activeenergypricing policies: investmentamounts to about 72% that in the Policy-neutralScenario whereas enterprise financial surpluses meet 24% of capital expenditure,compared to minus 40% in the Policy-neutral Scenario. Total gross borrowing requirementsover the planningperiod would be just 44% of those underthe Policy-neutralScenario,for bothunrestrainedand restrainedelectricityimports(Tables25; 27). The extentof exttal borrowingthis is availablefbr the energysectorwill be determined 8.9 by overall borrowingrequirementsof the economy,Zimbabwe'screditworthiness(whichwill influence termsand conditionsas wellas availableloanamounts),the Government'spolicyof maintainingprudent externalborrowinglimits, and last bu; not least, the soundnessof projectsfor whichexternalfunding is sought. At present, less than US$200 mn of externalfundinghave been securedfrom multilateraland bilateralsources,largelyfbr electricitydistribution. However,Zimbabwe'sprincipaldonorsareprepared to considerthe fimdingof majorgenerationand transmissionprojectsas well, providedthattheseprojects are economicallyviable. The Govermnentis tryingto obtainlow-costand grant financingfrom official sources and suppliers credits for turn-key projects such as the Cahora Bassa interconnectionand indicationsare favorablethat this may be achieved. MacroeconomicImWlications 8.10 The energy sector will continue to absorb a large share of both total investmentand foreign borrowing. Assumingthat gross domesticinvestmnent is raised from less than 20% of GDP in recent years to 25%, energy investmentstill will constitute14% of total investmentunder the PolicyactiveScenario. Evenassumingthat the energysector's retainedearningsimproveconsiderablyto reach 1.9% of GDP by 1995, energy sector debt would inevitablyincrease from 7.3% of GDP in 1990to exceed22% in 2001-03. Its externaldebt alonewouldrise from 1.8% to 10%of GDP over that period, assuming that the entire foreign exchange component of tew investment is financed by external borrowing. This might not create a major debt servicingproblem,given that present levelsof overall external debt are relatively low (even though energy-relatedexternal borrowing is not likely to be available at concessionalterms, with the possibleexceptionof the Mozambiqueportionof the Cabora - 123Bassainterconnection). However,energy-relatedexternalborrowingcouldbecomea serious constraint If the expectedrise in exportswere not to materialize:in this case, foreignexchangeavailableafter debt service would be insufficient,imports would inevitablybe compressed,and the projected economic growth would not be achievedfor lack of importedinputs. Zimbabwewould have borrowed to create excessenergy supplycapacityin the face of lower than expectedgrowth,entailinga costlymisallocation of resources. 8.11 Of pa.icular concern is that rising energyinvestmentwill likelypre-emptprivate sector investmentfrom the early and mid-1990sonwards. The danger is that private investmentwill not exceed 15%of GDP beforethe second half of the 1990swhereasit needs to attainthis level already in the early 1990s if the needed modernizationand export expansionof the economy is to occur. To make this investmentpossible, the Governmentshould be prepared to increase borrowing abroad starting in the early 1990s. Withoutincreasedforeign borrowing,overall investmentcannot reach the levels required to sustaineconomicgrowth envisagedunder the Base Casesand, possibly,not eventhat envisagedunder the Trend Case. Therefore, energy investmentin the early to mid-1990sshould be kept as low as is compatiblewith adequateenergysupplies, to avoid a crowdingout of investmentin other productive sectors. Otherwise,the casualtywouldbe otherprioritysectors and the economicgrowththey generate. 8.12 As it is, the projectedgrowthof energy investmentconsistentwith the overall financial resourceconstrainthinges on attainingexportgrowthof 5.5% p.a. after 1994, a reductionin the Central Governmentdeficit from 10.6% of GDP to 6.7% during 1990-95,and a doublingof retainedearnings by public enterprises. To generate the growth in exports, it may be necessaryto increase foreign borrowing particularly rapidly in the early stages of the 1990-2010period. While total public debt remainscloseto 100%of GDP throughoutthe 1990sand the externaldebt wouldrise from 33% to 47% of GDP during 1990-2000,the lattercanbe servicedrelativelycomfortablyas long as adequateGDP and exportgrowth are achieved. Core InvestmentProgram 8.13 Giventheseverefinancingconstraintsof the economyin the faceof substantialinvestment requirementsin the energy sector as well as in othei sectors, the efficiencyof investmentneeds to be improvedto attain the macroeconomicand sectoral growth targets. In the energy sector, it may be necessaryto compressinvestmentbeyond the levels projectedfor the Action-orientedScenario. The Evaluationteam has outlineda core investmentprogram,under which the numberand scope of projects is restrictedto the absolutelynecessaryand projectsare postponedto the extent that this is compatible with acceptablereliabilityof energysupplies. Postponinginvestmentreducesthe economiccostsin terms of the NPV of an investmentprogram,and by postponingborrowingrequirements,it reducesthe costs of finanginginvestmentis well. The core investmentprogram is projectedto total Z$5.2 bn over the 1990-2010period, i.e. about30% lessthan the investmentprojectedfor the Trend Case and Policy-active Scenariobut 45% less than that of the Policy-neutralScenario. The program includesthe following components: - 124 FINANCING,190-2010 Table 25: PROJECTED ENERGY IWNESTEINT UNRESTRAINED ELECTRICITY IMIPRTS-(Current ZS billions and Percent of Investment) 100 95 1996*~2000 (Percent) tZI.bn) 2012101oziU bn (Z1 a)ercenb) tRENDCALE Investment LocalCosts foreign Costs 3.8 100.0 1.'4) (35.8) (2.4) (64.2) 7.5 (3.5) (4.0) 100.0 (46.5) (53.5) 18.8 (6.5) (12.3) 100.0 (34.6) (65.4) 30.0 (11.3) (18.7) 100.0 (37.7) (62.3) -7.6 (-12.0) -25.5 (-40.0) Financed by: Energy Sector Savings Agencies' Surpluses gI Cente Goverinent Contribution _W -0.6 (-1.2) -15.1 (-31.8) -1.2 (-1.9) -7.1 (-26.0) -5.8 (-8.9) -31.0 (-47.2) (0.6) (16.7) (0.7) (8.9) (3.1) (16.2) (4.4) (14.5) Internal Borrowing, Gross External Borrowing, Gross 2.9 2.3 77.3 60.9 6.7 4.3 89.2 56.9 19.5 16.4 103.6 87.2 29.1 23.0 96.7 76.4 BASECASE/POLICY-NEUTRAL SCENARIO Investment Local Costs Foreign Costs 4.3 (1.6) (2.7) 100.0 (36.8) (63.2) 9.3 (4.0! (5.3) 100.0 (43.4) (56.6) 26.6 (8.4) (18.2) 100.0 (31.5) (68.5) 40.2 (14.0) (26.2) 100.0 (34.8) (65.2) -0.6 (-1.3) -14.5 (-29.9) -1.5 (-2.3) -16.6 (-24.8) -8.6 (-12.5) -32.0 (-46.8) -10.7 (-16.1) -26.6 (-39.9) (0.7) (15.4) (0.8) (8.2) (3.9) (14.8) (5.4) (13.3) 3.3 2.5 77.1 58.7 8.0 5.3 85.8 56.6 27.0 22.3 101.3 83.8 38.3 30.1 95.2 74.8 Financed by: Energy Sector Savings Agencies' Surpluses aJ Central Gowernment Contribution hr Internal Borrowing, Gross External Borrowing, Gross RASECASE/POLICY-ACTIVE SCENARIO Investment Local Costs Foreign Costs 3.3 (1.0) (2.3) 100.0 (30.4) (69.6) 5.9 (2.5) (3.4) 100.0 (40.0) (58.0) 19.7 (7.6) (12.1) 100.0 (38.5) (61.5) 28.9 (11.1) (17.8) 100.0 (38.4) (61.6) Energy Sector Savings Agencies' Surpluses a/ Centat Government Contribution k/ 1.0 (0.3) 28.9 (8.8) 1.9 (1.1) 32.2 (19.4) 9.9 (6.0) 45.2 (27.4) 12.8 (7.4) 41.0 (23.9) (0.7) (20.1) (0.8) (12.8) (3.9) (17.8) (5.4) (17.1) Internal Borrowing, Gross External Borrowing, Gross 0.5 1.8 15.2 54.5 2.2 3.7 37.2 62.3 6.1 14.8 27.8 75.1 9.3 20.7 29.9 71.6 2.5 (0.7) (1.8) 100.0 (31.0) (69.0) 4.0 (1.7) (2.3) 100.0 (43.2) (56.8) 12.8 (3.7) (9.1) 100.0 (28.9) (71.1) 19.3 (6.1) (13.2) 100.0 (31.6) (68.4) Energy Sector Savings Agencies' Surpluses g/ Central Government Contribution 1?/ 0.7 (0.3) 28.0 (12.0) 1.6 (1.1) 40.0 (22.5) 7.0 (6.0) 54.7 (46.9) 9.3 (7.4) 48.2 (38.3) (0.4) (16.0) (0.5) (12.5) (1.0) (7.8) (1.9) (9.9) Internal Borrowing, Gross Externat Borrowing, Gross 0.2 1.6 8.0 64.0 0.9 2.6 22.5 65.0 3.2 9.2 25.0 71.9 4.3 13.4 22.3 69.4 Financed by: COREINYESTMENT CASE Investment Local Foreign Financed by: II Sour: Net of interest payments. Equity and someLong term debt. Evaluation team estimates -125(a) In the elec iiy nbQto, the upgradingof KaribaSouth is well advancedand will be given high priority. Of the municipalthermal stations, only the larger units will be rehabilitated for peak loadingover the next ten years or so. Commontransmission, distribution,and rural electrificationwill be phased over a longer period. In regard to the mediumto longerterm, ZESA wiMl follow the least-ost supply expansionprogram consistentwith a 20 hrs/yearLOLP,which incorporatesthe CahoraBassainterconnection (1995), Batoka(2002or later), and activedemandmanagementthroughoutthis period, but postponesKSE beyond2010. (b) In the coal subsor. at Wankie, no major expansion will be undertaken beyond maintenanceand rehabilitationworks until after 2010. For Sengwa, investnent will be limited to that requiredfor a contractoroperation. (c) In the liquid fuels subsector,storage investmentwill be limited to a measuredincrease to three monthssuppliesand all availablecost savingson the Feruka-Hararepipelinewill be materializedto improveits economics.No investmentin either recommissioningthe existingrefinery or buildinga new refinery is consideredwith the possibleexceptionof a napththatreatmentfacility. Ethanolexpansionis to be postponedbeyondthe year2000 when relativeprices of petroleumproductsvs. molassesmay have improvedto benefit such a project. (d) Energy efficiencvand environment-relatedexpenditureswill be considerablyincreased but least-cost solutions commensuratewith the benefits to be derived will be chosen, especiallyin regard to expendituresin foreign exchange. 8.14 Gross borrowingrequirementsfor the core investmentprogram would be considerably less than in any other Case since both overall investmentand the resultingdebt service are assumedto be lower. At the same time, the enterprises'financialsurplusesand Central Governmentcontribu.;ons are assumedto be close to those in the Policy-activeScenario. Domesticborrowingin particularwould remainwithinmanageableproportions,thus ensuringthatthe energysectorwill not preemptthe financing capacityof the economyfor high-priorityinvestmentsin other sectors. Investmentand Financingunder RestrainedElectricityImports 8.15 The impactof energyinvestmentand financingrequirementson the mabroeconomywould be even stronger if electricityimportsfrom Zambiawere to be discontinuedafter 1999. Investments under all Scenarioswouldbe Z$150 mn higherthan in the case of continuedimports. Higher investment costs wouldonly be partly compensatedthrough lower outlaysfor electricityimports. - 126 - btIae Z6: PROJECTED ENERGY INVESTMENT, 1990-2010 -- RESTRAINED ELECTRICITY IMPORTS-(1989Zs mIl'lions) IASE CASE/POLICY-NEUTRAL SCENARIO Total ElectricIty Generation Other OtherSubsectors t990-95 1996-2000 2001-2010 2s1996 3.578.1 3.478.7 GrandTotat 190-2010 9.256.1 1,851.2 (1,143.2) (708.0) 3,285.4 (2,580.4) (705.0) 3,001.4 (1.541.4) (1,460.0) 8,138.0 (5,260.0) (2,873.0) 348.1 292.7 477.3 1,118.1 BASE CASE/POLICY ACTIVESCENARIO 1,961.4 2.652.3 2.760.2 7.3n.9 Generation 1,613.3 (914.9) (698.4) 2,359.6 (1,654.6) (705.0) 2,282.9 (822.9) (1,460.0) 6,255.8 (3,392.4) (2,863.4) OtherSubsectors 348.1 292.7 477.3 1,118.1 Total Electricity Other i8erc:DOERD;ZESA;NOCZIN;UCC;Evaluation team estimates. 8.16 As in the caseof electricityimportsforZambiacontinuinguntil2010,the Policy-neutral Scenario would imply substantiallyhigher investmentand debt service requirements,lower generation of financialsurplusesdue to pricing inadequacies,and higher requirementsfor additionaldomesticand external borrowing, in comparisonto the Action-orientedScenario and Core Investment Case. The energysector's claimson financialresourcesunderthe Policy-neutralScenariowouldsurpassany prudent lilits and would be unmanageable. Thus, the prospect of electricity imports from Zambia being discontinuedafter 1999 reinforcesthe need to pursue a least-coststrategy in the energy sector. Requirementsand Recommendations 8.17 The magnitude of the investmentand financing requirements in the energy sector highlightsthe importanceof increasingpublic savingsand implementingleast-costsolutionsto meeting energydemandif Zimbabwe'slong-termGDP growthtarget of 4.5% p.a. is to be met and energy is not to become a constraint on economicgrowth. This needs to be achieved within the frameworkof economicpolicyreform conduciveto increasingboth investmentand productivity. To be effective,this reform must embracetrade liberalization,a progressivereductionin the fiscal deficit, and a relaxation of controls over the domestic economy, supported by concurrent action in the individualproduction sectors. In the energysector, the key initiativesneededto support economicgrowth and the financing of a major expansionof investmentare: (a) establish prices of electricity, liquid fuels, and coal at levels at which they cover economiccosts and allowthe enterprisesto generatefinancialsurplusesequivalentto at least 25-30%of their investment,and a higherproportionin outer years; - 127 - (b) postpone largescale investmentsto the extent consistent with reliable supplies, and extend the economiclife of existing insallations, so as to release financing neededfor expansionin other sectors; (e) attach highestpriorityto energyefficiencyimprovements,as a meansboth to meet future energy requirementsat lesser cost than through expanding supplies and to improve environmentalmanagement;and (d) create a sector- and economy-wideunified systemof project appraisal, implementation, and monitoring so as to ensure the economicjustification of investmentsand their effcient implementationand operation. Table 27: PROJECTED ENERGYINVESTMENT FINANCING, 1990-2010 -- RESTRAIKEDELECTRICITYIMPORTS -(CurrentZS biltionsand Percent) 1990-95 (ZS bn) (Percent) 1996-2000 2001-10 Grand Total 1990-2010 (ZS bn) (Percent) QS bn) (Percent) (ZS bn) (Percent) BASE CASE/POLICY-NEUTRAL SCENARIO Investment LocalCosts Foreign Costs 4.2 (1.4) (2.8) 100.0 (32.4) (67.6) 12.1 (4.2) (7.9) 100.0 (34.6) (65.4) 1.0 (0.2) (0.8) 23.8 (4.8) (19.0) -2.2 (-3.3) -18.2 (-27.3) 1.5 1.9 35.7 45.2 10.5 5.3 86.8 43.8 20.7 (8.1) (12.6) 100.0 (39.3) (60.7) 37.0 (13.7) (23.3) 100.0 37.0) (63.0) -24.0 -116.0 (-28.4) (-137.8) (4.4) (21.2) -25.2 (-31.5) (6.3) -68.1 (-85.1) (17.0) 62.3 16.9 168.4 45.7 Fineced by: Energy Sector Savings Agencies' Surpluses I GoverrmentContribution Wl Internal Borrowing, Gross External Borrowing, Gross (1.1) (9.1) 50.3 9.7 243.0 46.9 BASE CASE/POLICY-ACTIVESCENARIO tnvestment Local Costs 3.7 100.0 (1.2) Foreign Costs 9.0 100.0 18.3 100.0 (5.6) (62.6) (12.4) (67.8) (20.5) (66.1) 1.2 (0.1) (1.1) 13.3 (1.5) (11.8) 1.3 (-3.6) (4.9) 6.8 (-19.9) (26.7) 4.2 (-2.6) 6.8) 13.5 (-8.4) (21.9) 3.8 4.8 41.7 53.0 16.5 8.3 90.0 45.4 20.6 14.8 66.6 47.7 (2.5) (32.4) (67.6) (3.4) 1.7 (0.9) (0.8) 45.9 (23.7) (22.2) 0.3 1.7 8.9 46.2 (37.4) (5.9) (32.2) 31.0 (10.5) 100.0 (33.9) Financedby: Energy Sector Savings Agencies' Surpluses So GovernmentContribution Internal Borrowing, Gross External Borrowing, Gross t/ Not of interestpayments. Equity and same long-term debt. Source: DOERD;ZESA; NOCZIN; UCC; Evaluation team estimates. - 128to raisingfinancialsavingsand Theseinitiativeswouldmakean importantcontribution 8.18 improvingthe economicviabilityof the energysector. Althoughthe energy enterprisescannotbe expectedto fundthe bulk of their investmentfrom retainedearnings,they shouldaim at containing investmentcosts, increasingfinancialsurpluses,andservicingtheir debt from retainedearnings. The callson privatesavingsto financepublicinvestmentin the energysectorneedto be keptto a minimum to facilitatemuchneededproductiveinvestmentelsewherein the economy. Given the magnitudeof fundingrequirementsfor energy developmentas well as 8.19 competingrequirementselsewherein the economy,the Governmentshouldpursuea core investment programthatis basedon least-costsolutionsto meetingfutureenergyneedsandto financingtheseneeds, programshouldhave thereliabilityof supplies.Atthe sametime,this investment subjectto safeguarding so that additionalhighsufficientflexibilityto takeaccountof unforeseenrisks,as wellas opportunities, priorityprojectscan be reinstatedin the programoncethe financialpositionof the economyimproves. programshouldalsofacilitateattractingprivatefinancing,includingfrom Theinvestment 8.20 abroad. This may be neededto complementpublic sector investment,especiallyin the electricity subsector. Attractingprivate investmentto the energy sector would mobilizeadditionalfinancial resourcesand strengthenthe managementof the sector agenciesthrough new conceptsbased on internationalexperience. The financingof energyinvestmentmay includethe judicioususe of local privatesectorfundsthroughequityandbondissuesandotherfinancialinstrumentsto coverlocalcosts. worthof furtherevaluationincludedivestiture, Possiblemechanismsfor privatefinancialparticipation lease-back,joint venturesthroughfranchises,BOT/BOOschemes,and, possibly,openingZESA and NOCZIMto privateownership. However,privatizationwouldrequiremajor legislative/regulatory wouldrequiretechnical of theprincipalenterprises,for whichtheGovernment changesandrestructuring assistance. PutqreApproachesto EnergyStrategyEvaluation The analysisin this StrategyEvaluationof the medium-to longerterm investment 8.21 energysectorby necessityis limitedin scopeand its degreeof detail. in the Zimbabwean requiremenits Refinementsof the investmentanalysisare desirable,giventhe large scale,complexnature,and long projectsshould andimportation gestationof mostenergyprojectsunderconsideration.Energyinvestment evaluatedandbe sequencedin sucha wayas to minimizetheircosts,whileaccounting be simultaneously for a rangeof financial,technological,and otherconstraints. A possibleapproachto evaluatingthe frameworkthat analyzesthe investmentoptionsandassociateduncertaintiesis throughan optimization of alternativeintegratedstrategies linkagesbetweenthe individualenergysubsectorsandthe implications sequence. The sequenceof all major supplyprojects(national for the combinedinvestment/import subjectto constraintssuch productionandimports)requiredto meetenergydemandshouldbeestablished, factors, anddebtlimits,gestationlags,andtechnological targets,financingpossibilities asself-sufficiency of the risks inherentin differentstrategies.This analysiscan be formally and underdue consideration modelto determinein moredetailthe impactof alternativeenergy integratedwith a macroeconomic strategieson publicfinances,balanceof payments,and externaldebt. In view of the high degreeof uncertaintysurroundingimportantdecisionparameters,the supplystrategyneeds to be regularly -129reappraised and adjusted, in the light of additional information and new developments, so that uncertaintiescometo be resolvedand new optionsare identified. Technical Assistanceand Trainins 8.22 Considerabletechnicalassistancehas alreadybeenextendedto Zimbabwe'senergysector, starting with the 1982 World Bank/UNDP Energy Assessment.73/ Subsequently, two ESMAP activitieswere carried out, i.e. (i) the PowerSectorManagementAssistanceProgramwhich assistedthe Governmentin the fonnationof ZESA; and (ii)the PetroleumManagementAssistanceProjectto enhance the capabilitiesof NOCZIM to monitor petroleumstocks, procure petroleum imports, and prepare a contingencyplan in caseof supplydisruptions. AnongoingESMAPactivityis supportingthe preparation of an energy strategy for urban and rural low-income groups, covering mainly traditional fuels. Technicalassistancealso has been extendedfor a comprehensiveenergypricing study under the World Bank Power I project, from SIDA for energy demand analysis, from the U.S. Governmentfor the preparation of a long-term electricity generation expansion plan, and from GTZ for preparing an electricitysupply master plan for remote and low-incomegroups and for establishinga nationalenergy data base. Assistanceto ZESA in electricity pricing and transmissionplanning is currently being providedthrough CIDA and Scandinaviandonors. On a SADCClevel, CIDA has funded an industrial energyconservationactivityincludingfor Zimbabwe,whiletheEuropeanCommunityhas supportedother energyrelatedprojects. Thus, the ongoingEnergyStrategyEvaluationis buildingon the resultsof welldevelopedprevious efforts. 8.23 Preparingand implementingan energydevelopmentstrategyover the mediumto longer term will tax the planningand managerialcapacitiesof the governmentallparastatalinstitutionsand will makecontinuedtechnicalassistancenecessary. DOERDas an importantentityfor energysectorplanning and policy coordinationwill need further technical assistanceto strengthenits capacity for policy and project analysisincludingenergydemand management,and for regular re-evaluationof energy supply and investmentstrategies. In addition, continuedeffortsare requiredto improvethe operatingagencies' planning and project evaluationand preparationcapabilities. Under the Energy Strategy Evaluation, workshopsand technicalseminarsfor the professionalstaff of DOERDand of other relevant institutions have addressedthe principalissues relatedto energy sector analysis,as well as the specific aspectsof energy planning and operationsand the applicationof analyticaltools. An ongoing GTZ activity is directed at systematicallyidentifyingtraining requirementsfor DOERD staff, with a view to preparing a human resourcesdevelopmentprogram. 8.24 The Evaluationteam has identifiedadditionaltechnicalassistancerequirements,whose costs are preliminarilyestimatedat about Z$10 mn, for considerationby the donors community: (a) 731 in the electricitysubsector: (i) specializedassistance to ZESA in load forecasting, demand management,and corporate financing strategies; (ii) applicationof screening modelsfor generationplanning,includingWASP;upgradingZESA's rural electrification Zimbabwe: Issues and Options in rheEnerev Sector. - 130 plamningand managementcapabilities;(iii) evaluationof institutionalissuesrelatedto the Batokaproject; (b) in the petroleumsubsector: (i) assistanceto NOCZIM in market evaluation(including product specificationsrequired and the use of benzol as gasoline blender), project analysis, and pipeline and storage management;(ii) technical and economic/financial evaluationof the naphthaprocessingoption; (c) in the coal subsector:(i) assistanceto WCC in computerizinginvestmentand operational planning under uncertainty (through application of comprehensivemining software packages);(ii)a feasibilitystudyon mechanizingWCC's undergroundminingoperations, and on the implicationsfor WCC's overall operationsand the nationalcoal supply; (iii) a study on domestic coal markets, to evaluate the scope for expanding residential consumptionof coal and reducingdeforestation,and on export coal markets; and (iv) an evaluationof potentiallyviable optionsfor coal-basedammoniaproduction(includingthe conversionat SableChemicalsto operateon hydrogenproducedfrom coke in "blue-water gas" generators); (d) in energy efficiency: preparing (i) a National Energy Efficiency Program including institutionalstrengtheningthrough staff training and 'ovision of equipment; and CHi) energy audits and follow-up measures includingfinancing in industry, transport, and public bvildings; (e) in the environmentalarea: preparing a program that includes (i) strengtheningthe institutional links between DOERD and the institutions primarily responsible for environmentalmatters;(ii) measuring,monitoring,and regulatingpollutantsfrom energy (and other) operations;(iii) studyingthe links betweenpollutionand human health, and handlingthe related technologyto eliminateor reduce environmentallyadverseeffects; and (iv) trainingspecialistswith a comprehensiveenvironmentalfocus at the policyand operationallevel; and (f) in energyplanning,policycoordination,and institutionalmatters: (i) continuationof the assistancein establishinga database initiatedby GTZ; (ii) establishingenergy demand forecasting programs; (iii) investmentproject and program appraisal, including the optimizationof the combinedinvestmentin the electricityand coal subsectors;and (iv) evaluatingthe scope and requirementsfor enhancing private investmentin the energy sector. 8.25 The proposalslisted aboveare consistentwith previous technicalassistanceefforts and form part of an integralprogramto reinforceenergysectorinstitutionsand policies.Their implementation shouldbe a continuousprocess: the technicalassistancerequirementsshouldbe periodicallyreassessed and the resulting program adjusted as appropriateso as to enstureits relevanceto the objectivesand strategy of energy sector development. pfe I of 6 ZIMBABWE STRATEGYEVALUATION Summaryof Isss. Issues Specific Problems becgives,and Recommended ios Objecfives Measures Recommended Pdorty Responsibe ItAtutions I. Macroeconomic/Enev Sector-wide Issues Pricing; 1. Energy Demand Energy Management 2. Energy Conservation andSubstitutin Prices of electricity and some liquid fuels do not cover economic costs whereas coal prices rents for generate monopolistic producer, causingineffrcientresouree albcation,affectingenegy efficiency, weakening ZESA and NOCZIM finances, balance of payments, and public finuances Inefrfiient energy use causedby (a) low energy prices, (b) outmoded equipment and technologies, (c) lacking awarenessof efficiencyopportunities, (d) comptxity of energyeff¢icecyprojects, (e) barrirs to competion and to structuralchange. and (f) lack of policyand botitutionalsuppot Energy pricing based on economiccoststo improve economic efficiency; generation of fnancial surplusesat the operating entities;and strengthening of public fiances and the balanceof paynents Energyefficiencyimprovemwntsof at least20% over present levels through economicallyviable conseraion and substiuion lncrease prices of I. liquid fuelsand dectricity so that they cover their economic costs; realign relativeprices Immediat MFED; MEWRDI DOERD;ZESA, NOCZ1I 2. Establishpri of coal in tine with their LRMC (fordomesticuse)and with international prices (for cxpotts) Shortterm MPED;WMintyofMinea* WCC Providc larger 3. autonomytoeatprises for pricesenting Shotttomedimterm MEWRD; MPED; Ministryof Mines;ZESA, WCC, NOCZIM, 1. Prpre NationalEnergy EffciencyProgram Shortto mediumterm DOERD 2. Enrg audits of industrial firms and public buildings and atendant feasibiitystudies,as basis for effticencymeasures Short to mediumterm DOERD;Ministryof Tradeand Industry efficiency Ener 3. programsin transpotation includingobigatory vebick maintenance, drier education,uban transport anagement,and tranpot Mediumterm SENCOL DOE"RD;Ministryof Trnspot Pagp 2 Iof 6 Am Issues Speific Prblm Masures c ibjcWe Priority Responsible ntttn sector planningconsistcnA wih fuele$ficiencygoals 4. lncorporae energy effciency sandards into BuildingCode Medumtam DOERD;Ministryof Housing S. Facilitatefinancig for engeffcecymeasures Shortto mediumtem DOERD; Zimbwe DovelopmetBank 6. StrengthenDOERDas coordintinginstition Mediumterm DOERD ll. ElectricitvSubsector 1. Z.ApansionofElectrici- Goverment's power cxty Suppes panuion progam is basd on stringent ceria regardingoperatingcapacity installd in Zimbabwe, LOLW, and eldrcity inports. Panting programs wth KSE as early project in expansion sequencedo no meet kastcost rteti 2. TransmissionandDistribution Sytem needsurgent rei foce.t and upgmding. Back-log of distribution connections estmated at S0,O00nationwide Ieastcost expansioncornpatiblewth optmalsystn reliability Inpoved and expanded Snmison and d;StdbUsystem to provide qo mor rib sevice 1. Reviewand adjust as aropiate ZESAs developfect plan,based on (i) in the short term, active loadmanagemnt,resumption of importsfrom Zambia, KaribaSouthupgrading, and rehabilitationof municipalthermal plants; and (ii) over the medium to Songerterm, conted load managemnt, electrity purchases from HCB, gas tu*bies for peaking as appropriateor KSE. and Batoka Shortterm ZESA;DOERD;NPA 2. Concludepower purchas agreementwithHCB Shortterm ZESA;DOERD;NPA 1. MOdiUm term ZESA;DOERD;NPA Install eww300 kV lines Pagp3 of 6 Specific Probems lssues Measures Recommnded Objec Rspoble 1tiuto Proritry 2. Replae xisting66 kV and U8kV voltageby 132 kYV voltage Mediumto bnger term 3. Reinforcedistribution system; instaU up to Shortto mediumtam ZESA;DOERD;NPA 10,000 new connections p.a. over the am fiv yeas or so 3. RuralElectrification ium term ZESA; DOERD; HPA; bistiRurl Dedopeit 1. Priorty rnking often not based on economic Gradualexpansionof rural ekctricity systans, based 1. Prepe viable rual program clectrification Short to 2. Build up capabitilies for designingand managing R.E. systems Short to mediumterm 2. Progrm staled for lck of funding prioritiesand in line with Goveimnent's financing possibies 3. Secure concessional for R.E.projects finamcing fromexternaldonors Shoa to medim tm MFED; DOERD; NPA.), ZESA 1. Mobilize efrictency reserves at Wankie Colli[ry Co. (WCC) and imrove niway tanspost of coal term Short,tomedium SENCOL; Ministry of M"nes 2. PrepareflxAblemining planfor WCC,ddermiined by future HPS coal requirements for thermal powergeneraion Short.medium,and longer tenn WCC; ZESA;DOERD 3. Operat. Sengwacoat nge on a campaignbasis in line with market re- Shottto medim term viabilty critea on economically sound 3. ZESA has to absorb losses of running ral systems tutions ZESA mll. a Subto 1. Restrictedmatketsand occmional deficienciesin rail transportaffectoperationalefficiency 1. Coal Mining 2. Complexproblemsof achieving opml outpt mix of power station (HPS) and coking (WC) coab dependingon fiutur HPS coal requianents for themal power 1. Leastcost output in line with market requirenmes -ntion 3. moptationof coalthat could be producedlocally - 2. Substtution of coal to the economicalimpoWts ly feasibleexten ~~~~~~~~~~~~~~~~~quitemesb SENCOL; Miisty Mines;DOERD of Pag 4 of 6 lssues 2. Coal Converion Spooefic Probleims Most opio coalbasedproductionof mmoni and liquidfuelsarenot iely to be viable Maes Recommended Objecvs Econonmiagysound dccisimo coal gasification and lquefactio, basedon ecormic costs of petro- [am inport and other substitutionoptin 1. n meteaaion of blue wate gas option for ammoni pro- Proriy Respons_e hlntkriioP Mediumt SableChwmicalCo; IDC; DOED Medum to longerterm IDC; DOERT 1. Support Beia port improvements and the securityof the Beim supply rote but attin reduction in port charges Shoittomediumlerm NOCZIM; MEWRD 2. rase storagcapaity and strategic stocks gradually,basodon leastcostsolutions Short to mediumterm 3. Construct FerukaHame pettoleumproducts pipelinebasedon least-cost solution,and ensureproper Shontto modimm term 1. Pre-invesbent aealuationof naphthapoessming option Short tomediumtem NOCZIM; DOERD; MEWRD;NPA 2. Disontinue prmnvestment evaliation of other refinng optionsbut review stuation in line with future refinin ecoo- Mediumto ngerterm NOCZIM; DOERD; MEWRD;NPA duction 2. Discontinw active evation of coad iqufacton optionsbut review them occasionay in the light of marketand technologkaldevelopments IV. Lnauid Fuels 1. Procurement; Transpor;Strage High corts due to Zimbabs land-locked position and htvely smi volums shipped Improve efficiency of procuramt and secur adequacyof soge DOERD; a NOCZIM;DOERD; MEWRD;NPA NOCZIM;DOER!) MEWRD;NPA regulation 2. Petrokm Refining Rewommissinngof existing refery or consrction of new gassroots refiny are uneonomic, except pahaps e fomer for limited naphdia treament to psoduce gsolne and LPG Economicallysound decision consistentwib lacstcost and reliable supphes of iquid fiels Annex I Pag S of 6 Spcifi Problews tssues Production at presen is ibernat al prces economic only from surts saignaphusmolase. tion or redution will dmixu restcdehal with asoline 3. Ethanol Production Measures Recommnxded Objepive Economically sound decision on scope of dOanol production imiGgt Respon5iblc Priority ns_to 1. thanol production to feasible economically exat only Short, modium,and lnger term Triengle Co.; NOCZIM; DOERD; NPA 2. In cases of shortages, admixture with gaso. Bne to Ras close to edtanol production Short. medium, and longer tem NOCZIM;DOERD 1. Reduction of enrgydeforestation related through dissaneation of stoves. more effica e chacoal proip duction and marketing, rufbrestationand susainedyield forestry devdop- Short to moedin term DOERD; Forstty mssion 2. Pollution masurement program for Wankie, Sable, and majormmicipal environmental centers; audits and imapectassessments for al noraener projects; contol of vehicl emissions Short to medium tem Ministy of Natural Resources and Tourism; DOERD; NPA; Municipalities V. 92mcmdMnuaInlMkSi* 1. Environmental Impact of Energy-related Acviti gI Tteed more related to Deforation woodfucls uws; gI enissions from thermal power plants, coal mining. indusand usban veickle tris, transpot sustainEnvironmnty able cnrgy sector munagement _xtesive fortcoming ESMAP epot on lw-icom howehold naeW use in Zinmbabwe. Con- Page6o6. Issua 2. LepVregudtory/ insdtutil and policy frmwortk Specific Ptobls Measures Recommended Objecives Lewk of (i) modem envi ronmental legislation, (ii) omprehnsivc monitoring and enforemient system, and (iii) ewonmea expatise at the administrative and plat Upgraded and moderized envionmeta egislation regulation, insiAutions,and policies 3. Review and revision of environmtal leiatio regulation; rview end redefnition of tasks of institutions; improved allocation of resources to nvimetal instiutions Sholt to mediurmtrm Legislate; Ministerial Council; Minty of Netial R res and Edviomt; DOERD; NPA Envroment costs are not asessed nor incorporated into projects or cnergy prices Ener policisconit with sustabed environmental management 4. Incorporation of environmnentalcosts and benefits in poject appraisal and eneg pricing Medium term DOERD; NPA levels VI. Medium- to longer tenm ivesent program Lack of cohmhensve imvtment program for energy sctor and principal subsectors that is Ieast-cost and ensures optimal supply reliability Investmen d TechnialAssisane Least-costoptimal reliability invesent program consistent with financial equilibrium of the economy and sustained eavironmental management Investment requiremens projected to be at kast ZS7.2 bn are lrge-scale relative to absorptive capaciky and finacing esources of the economy, and may not be feasible Technial Assistance Reposle Prioity T.A. uncoordneand often focusedon aleviating emergencics at the neglct of addressing cor needs of instil strengthening. Limted awareness of sector agencies about their T.A needs T.A. psogram in support of instiution-building and of the preparation and implementation of energy sector stmtegics, policies, andivestments 1. Comprehensand dotied developmnt xpenditur plan coverg overal! eneWrgy sector, principal subsectors, and energy efficiencymeasures for the next five years (and indicatively, the followingfifteen years). Short term (gular ing requid) 2. Realistic francing plan to seure project fundingat optimal conditions. including through enhanced private sector participation Short term (regular updating equired) MFED; DOERD; opeating agencis 1. Review and finalize T.A. progrmmpmposed by Evaluation Immediate 2. Approach donors for energy and environmentrelated T.A. for sectoral instutions and operating agencics Short teem NPA; DOERD; Mnisry of Natura Resources and Envirotnme; oprating agencies. - ditto - updat- NPA; DOERD;Weraig, agncis - 137 - ADJJ-2 Page 1 of 6 CONCPS AND METHODOLOGY UNDERLYINGTHE ENERGYSTRATEGY INTEGRATED This annexdescribesthe processof obtainingthe least-costintegratedenergy strategyfor 1. Zimbabwe. Ratherthan leavingimplicitthe methodologyused to obtainthe strategy, it seeks to lay out the mediodologyin a series of steps which can be applied when the strategy needs to be updated in future. The steps also highlighthow the technologicallinkages(Step 5) and economiclinkages(Step7) beteen sectorsare analyzedand combinedwith considerationspertainingto environmnental management (Step6) and energydemand management(Step 8) to producethe required integratedstrategy. 2. Step 8 is the processof ensuringthatthe various componemsof the strategyare mutually consistentwith one another. In practice,several iterationsmay be required to achievethat consistency. The order of the steps that are involvedis thus not as rigid as the followingitem-by-itemdescription might imply. at 1 Obiecives. Resoures ad Problem Definition Theproblem faced is to identifya strategywhich will providethe requiredlevel of security of energy supplies for economicdevelopmentand personal welfare. The strategy should also be conduciveto minimizingthe resourcecosts of providingsecureenergy suppliesand ensuring,on the demandside, efficientuse and hence minimumfeasibleenergyrequirementsto meet specific objectivesand end-usesin the energy-consumingsectorsof the economy. Ste 2 EconomicScenarios As energy-relatedinvestmentis onlyjustified to avert a future shortfallbetweenenergydemand and supply, and energy demand is determinedby economic growth, the starting point is to considerpossible paths of economicgrowth which the economymight follow. Each path is developed as a "scenario".j/ These scenarios are not 'projections' of wbat is thought will happenin the future,but are viewsof possibleoutcomeswhichare useful in strategyformulation. St 3: EnergyDemand The next, and in manywaysmost criticalstep, is to projectfuturedemandfor the differentforms of energy consequenton the levels of macroeconomicand sectoral activity in the economic scenarios. St= 4: SuIl Seqences For any particularscenario, comparingthe already insWlledsupplycapacitywith the future level of demad will revealsupplyshortfals for whichplanningprovisionwi!l haveto be made: either 'LI This tenr denotesan LternalA couste set of assumptionsandprjected otcomes whichwiUallowalternaves to be consideredin a system<akwq In the planningprocess. - 138 - Annex2 Page 2 of 6 throughhigher imports,or new investmentprojectsto be initiatedsufficiendyfar in advancethat the poteial shortfa can be averted through increaseddomesticproduction, or a combination of the two. For this step, existing supply capacity and feasible future projects need to be examinedin detail. The choicebetweenincreasedimportsand increasedinvestment,and between alternativeinvestmentprojects,shouldbe madeso as to minimizeeconomiccosts over the entire planningperiod, while taking into accountother factors such as risk and the need for sustained eovironmenal management(Steps6 and 9 below). Technical issuesare also to be considered, such as the allocationof base and peak load betweenalternativeelectricitygenerationsources. SteW0: TechnologicalInte8rationAcross Energy Subsectors In order to go beyondthe optimizationof supplyfrom each energysubsectortaken in isolation, it is necessaryto explore the implicationsthat decisions in one subsector would have for other subsectors,andthen determinewhetherthe ramificationsare seriousenoughto warrantmodifying the intendeddecisions. This appliesin particularto the implicationsfor coal and liquidfuels of the indicatedinvestment-importsequencein the electricitysubsector. New technologieswhich offer the potentialfor further optimizationacross subsectorsare also to be considered. Given Zimbabwe'sresourcebase, possibilitiesthat may be exploredare those involvingthe utilization of coal for the productionof liquid fuels, gas and other petrochemicals.Z/ Stp 6: Eavironmentl Considerations In identifyinginvestmentpossibilitieswithinthe traditionallydemarcatedenergysubsectors(Step 4) or optionswhich cut acrosssubsectors(Step5), environmentalconsiderationsneedto be taken into account. Where negative environmentalimpacts prove unavoidable,the project design should be oriented to keepingthe impacts to a minimum. The environmentalaspects of the uWliatlonof energymayjustifypricingor other policymeasuresto be takento mitigatenegative effects. In particular, policiesthat changethe costs of environmentaldegradationat source, to ensure that "the polluter pays" may needto be designed. As such chargesmay affect demand, this introducesa link betweenSteps6 and 8. Step 7: Macro-EconomicIntegration Having derived a feasible import-investmentstrategy, it remains to be determinedwhetherthe impliedinvestment,import, and foreign borrowingrequirementscan in fact be accommodated without prejudicinggrowth elsewhere in the economy. The "Macro-economicConsistency Frameworkfor Zimbabwe"2/dev ,Ioped by the World Bank and made operationalthrough the RMSM model is used for this purpose. 1, Howewr, in this Evaluaulon,no coal utiiauon technologywasfound to be sfficiensty promisbngin economictenns to be incled at kisstage. Thisstp shouldbe retained,however,forfuaure reviewsof the strategywhennewcost and demand&.ctures may result in a nwdifiedassessmentof such technologies. AlX¶hadr and KkausSchmidt-Hebbel,WorldBank, 199). - 139 - Annex2 Page 3 of 6 Step 8: Iteraion to Attan Consincy It needs to be ascertainedwhether the economicimplicationsof the strategy derived in the previousstep are consistentwith the assumptionsof the economicscenario specifiedat Step 2. Iterationmay be requiredto obtainconsistencybetweenthe economicgrowth path assumed,the consequentenergy demand and the attendantcosts of investmentin supply or importationof energyto meet that demand. In Zimbabwe,no correspondingmodel (such as a detailed inputoutputmodel) is availablewhich would enable the adequacyof projected energy supply to be checkedagainst energyrequirementsfor the levelsof productionenvisaged. In the absenceof a quantitativecheck, consistencyin this respect shouldat least be consideredqualiatively, with cross-checksbeing carried out wherevertherc i,ssome relevantdata available. Anotheraspectrequiring consistencycheckingis the pricingof energyon the basis of the longrun marginal cost (Step 9) which is a functionof the optimal investmentsequences. Ceteris gadbu,a rise in prices would reduce demand somewhat(Steps9 and 3), which may allow a sufficientdelay in investmentto revise LRMCdownwards,this processbeing continueduntil a consistencypoint is reached. If the energystrategyto meetdemandwouldabsorban excessiveshare of resources,prejudicing growth elsewherein the economy,the assumptionsaboutreliabilityof energysuppliesmay need to be reviewed. There is a trade-off between reliability and cost, particularly when the opportunitycost for the rest of the economyof over-investmentin energy is considered. It is difficultfor policy-makersto specifyin the abstract what reliabilitystandardsshouldbe used for planningpurposes. By the time Step 1W(Risk Analysis)is reached, however, the analysiscan indicate quantitativelythe implicationsof choosing different reliability standards on macroeconomiccosts, allowingan informedchoiceto be made. A changein reliabDitystandardsagain requiresthe steps to be iterated until there is full consistencybetweenthem.4/ Ste 9: EnerrDmand Managment In order to achieveefficientallocationof resources, pricesshouldbe set to inform consumersof the real economiccosts of using energy. Prices should thereforereflectthe costs that will have to be incurredin the futureto meet additionaldemand, i.e. CIF import costs for internationally traded energyproducts (e.g. liquidfuels) and LRMCfor energylargelyor entirelyproducedand consumedwithin the country. Being based on the costs of future supply, LRMC is itself a functionof the investmentsequence,the appropriatelevel correspondingto the optimalsequence. Modificationsmay be required, for exampleto meet financialtargets of the energy enterprises. The price required(whetherthis be based on LRMCor a modificationthereof)is derivedat Step 7 and fed back, through the pricing module,to the demandmodule(Step 3). This is part of the process of achievingconsistency(Step 8). Besidespricing and environmentalconcerns,there may be other justificationsand mechanisms through which higher efficiency in energy production, transformation,and end-use can be Themainfeedbackoop is takento be to Step4 (Supply Sequences). althoughinprinciplea changein relabiltymay alsoqffect helewvel of eonomk growhandhencethe demandforenergy. - 140 -~we0f Annex2 Page4 of 6 achieved, and these are also consideredin the strategy. On the supply side, finding ways of reducingenery lossesis also important. A related importantissue in the coal and liquid fuels subsectorsis the tariff structurefor tranuportingthese fuels, this being relatedto the capacityof trapor systems,particularlythe railways, to performadequately. Step 10: Risk Analysis All nationalenergy strategieshave to take risks into account, but often simple sensitivitytests, in which the effect of varying key parameterson the chosen strategy are measured,would be sufficient. In Zimbabwe'scase, however, the context is one of unusuallyhigh risk, and a more careful analysis,in which probabilitiesare assignedand outcomescalculated,is appropriate. In principle,it is not just a questionof takinginto account issuessuch as reliability(Step 8), but of goingbeyondthe conventionalscenarioapproachof assumingsmoothgrowthrates extendinginto the future. The objective should eventuallybe to consider more "real world" futures of fluctuatinggrowth, possiblypunctuatedby quiteseveredisruptionsto energy supplysystems,as has occurredin the past. Step 11: InstitutionalStructurefor Strate2yImplementation The 'output' of the technicalprocess describedabove is not only the recommendedinvestment sequenceand the associatedresource requirements,but also policy orientationsin the areas of energy pricing, conservationand substitution,and the energy-environmentinterlinks. Where importsenter into the recommendedstrategy,the positionsto be adoptedin the negotiationswith neighboringcountriesneedto be indicated. In order to ensure that all aspectsof the strategycan be smootly implemented,the institutionalstructure for managingthe energy sector needs also to be evaluatedand recommendationsmade, where necessary,to strengthenthat structure. MacroeconomicScenariosxamined 3. At Step 2, three macroeconomicscenariosfor the 1990 - 2010 period were chosen for detailedinvestigation: (a) Trend-basedScenario: GDP growthof 3% p.a. and no activeenergydemandmanagement.This follows the pattern that prevailedduring the 1980- 90 period. (b) Base Case/Policy-neutralScenario: GDP growthof 4.5% p.a. from 1991- 2010 and no change in energydemandmanagementpolicies. (c) Base Case/Policy-activeScenario: GDP growthof 4.5% pa from 1990- 2010 and activeenergy demandmanagementthrough both price and non-pricepoliciesto enhance energyefficiency. 4. Underthe Trend-BasedScenario,the aggregateeconomicgrowthperformanceof the past ten years is assumed to continue, while the Base Cases allow for higher growth following the implementationof the structuraladjustmentprogramand the Government'scommitmentto accelerated economicdevelopment.While economicgrowth of 4.5% p.a. is close to what is expectedfor the five years immediatelyahead,growthmightaccelerateoncetheperiodof transitionhas beencompleted: from that viewpoint,the Base Case assumptionscan be regarded as conservative. On the other hand, drought - 141 - Annex 2 Page S of 6 or other externalfactors may well affect the economyin certain years, so that 4.5% p.a. growthas an averageover a 20-yearperiod is considereda reasonableassumption. 5. Using the sectoral growth rates underlyingthese scenariosto generate energy demand sequences(Step 3), modified in the case of the Policy-ActiveScenario by the influenceof demand managementpolicies (Step 9), and ascertainingthe least-costinvestmentsequenceto meet the required demands(Steps4, 5 and 6), leads to a positionwhere the economicconsequencesof the scenarioscan be examinedand the consistencyof the results checked. - 142 Annex2 - Page 6 of 6 INTEGRATEDENERGYSUPPLYSTRATEGY | |. Objectives, Resources and Dentition Problem t0. | . 0 InssiutionalStructure strategyImplementain I. | Consslenesy2. Economic Scenarios Scenarios 3. Energy Demand ; Cwsernand 4. Supply Shtlatis . _ and 8. Pricing ~~Consistency C__n|vaio 10. _ ._. I', Possibililies for Integralicn acrossStctors t. Dynamic 1(-_OpS_misabon Model 9. Risk Analysis _ Policy Pricing Cor>setatnMeasures Project DesignStudies ImportNegotiations 6. Environmental Considerations 5. Resource Requirements of Strategy .____________________________ . Environmentl Measures substitution Measures& |Ivsmn Investment Seuec Contingency Measures Z_... xAnnex 3 ragejrn 'aww Bdvm 1990 Cool Cs SUPMDR P_ ORL 28u UM b"Poct 6018 -566 _o. 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Us -12i 74? hlbO - 154 - AwmnL Page I of 7 SUMMARYOF ASSUMPTOONS USED FOR DEMANDFORECASTING Inlaitio 1. 'Me incomeand price elasticityassumptionsused for the energy demandforecastswere primarilybased on econometricmodelsthat estimatedelasticitiesover the 1970-1989period. In most cases, the estimatesfor incomeelasticitieswere statisticallysignificant,whilethose for price elasticities were not and thus requiredadditionalassumptionsconcerningthe natureof energyand price relationships in Zimbabwe. The detailed econometricmodelsare summarizedhere. Liquid Fuels Su tor 2. The analysisfocussedon the demandfor diesel and gasolineblendsince these two fuels accountfor over 80% of liquid fuels consumptionin Zimbabwe.However, becausedata for the 1970s was generallyunreliable,the analysiswas limitedto ten observationsfrom 1980-1989.The econometric analysisutilized GDP, liquid fuels prices, a dummyvariable for the pipeline disruption in 1983, and lagged consumptionas explanatoryvariables. 3. For diesel, the estimatedGDP elasticityrangedfrom 1.4-2.0 for eightdifferentequations (averagingaround 1.6), while for gasoline blend it ranged from 0.5-0.9 for four different equations (averagingaround0.6). In all equations,the coefficientsfor GDPelasticitieswere statisticallysignificant. For diesel, the estimated price elasticity ranged from +0.2 to +0.5, but was never statistically significant.However, becauseall of the estimatesof price elasticitieswere consideredto be unreliable and too low based on experiencein other countries,a long-runprice elasticityof -0.6 was used. For the other petroleum products, GDP elasticitieswere estimatedbased on the following assumptionsand observations: (i) LPG is mainly consumedin industry, and a long-runGDP elasticityof 1.0 with respect to industrialenergyconsumptionwas assumed: (ii) kerosenedemandgrowthduringthe 1980swasprimarilydue to increaseduse for lighting in peri-urban areas, and was thus given an elasticity of 1.1 with respect to urban populationgrowth; and (iii) jet fuel is almost entirelyused for internationalflights using the Harare airport. 'Me refuellingof internationalflightsin Zimbabweis competitivewith other countries. Thus, it was assumedthat demandfor jet fuel would grow in line with GDP. 4. The table below summarizesthe GDP and price elasticityassumptionsusedfor the liquid fuels demandforecasts. - Diesel GasolineBlend Jet Fuel Kerosene LPG 155 - Atmex Page 2 of 7 GDP Elasticity Long-run Price Elasticity 1.6 0.6 1.0 1.11/ 1.0 -0.6 -0.6 -0.6 -0.6 -0.6 Total (Dieseland GasolineBlend) 1.4 5. It should be poined out that the GDP and populationelasticitieswere assumedto apply instantaneously(i.e. the short-runand long-runincomeelasticitiesare equal) sincethere is no reason to believe that income effects on liquid fuels demand are phased in over time. For long-run price elasticies, however, it is importantto reflectthat consumers'demandresponsesto changingliquidfuels prices (either in the form of fuel substitutionor reductions/increasesin demand)is gradual. Thus, it was assnumed that 1/20thof the long-termeffects of any price changewould be realised in each year of the forecast, so that the full long-run effect of any price change in 1990would only be realized by the end of the forecastperiod. Finally,for the demandforecasts,it was assumedthat 25% of the displaceddiesel consumptiondue to higherdieselprices wouldbe attributableto substitutionof gasolineblendin transport uses. EJetriciq Subsector 6. Qeneral. Numerous econometricstudies have been conducted in OECD countries examiningoverall changes in the demand for electricity in relation to changes in price (Bohi and Zimmerman,1984),mainly in relationto the EgIaL5sec. Whilein the U.S.A., the long-runprice elasticity is typically estimated to be about -0.70, there is considerablevariation in the elasticities estimatedin different studies, dependingon the methodologyused, the type of data, and other factors. In JhpMn,a study showed long-run electricity price elasticities in the residential sector for the 1967-79 period of -0.31 to -1.44 depeding on the geographicregion (Tsuchiya,1984), with an average for nine regions of -0.90. High elasticities in Japan compared to the U.S.A. are not surprising given the outstandingenergy efficiencyimprovementsin the forme country. In the industrial and commercial sectors, electricityprice elasticitiesare muchmore uncertain. A comprehensivereview concludedthat no consesu exists regardingprice elasticitiesin these sectors in the U.S.A. An analysisof electricity denand, incomeand prices in Japan and SouthKorea between1965and 1981showedrelativelylow price elasticitiesfor the industrialsector (-0.06in Japan and -0.01 in Korea; Kim, 1983). Theselow elasticities are attributedto the rapid industrializationthat occurred in these countriesand the fact that electricity representsa small fraction of total productioncost. '1 1.1 representsthe elasticityof kerosenedemandwith respectto urban populationgrowth. - 156 - AnnexS Page 3 of 7 Some caveatsare neededregarding earlier econometricstudies of responsesto changes 7. in electricityprices. Since these studies were undertaken, new technologiesdeveloped in responseto previousprice hikes havebeen reachingthe marketplaceduring the 1980s. Consumerawarenessas well as policies and programs to encourageelectricityconservationhave been increasingover time. Also, price and income elasticitiesare likely to be somewhatcountry-specific,dependingon the nature of an economy,equipmentsaturaions, lifestylepreferences,and other factors. An importantquestionis how muchof the electricityconservationthat has occurred has been due to price effectsand how much has been due to govermnentaland utility actions. 'here has been some analysisof general factors leading to reductionsin overall energy consumptionin the U.S.A., but apparentlylittle or no analysis of the factors causing elMkici conservation. According to one estimate, about 61% of the energy conservationthat occurredin 1980in the U.S.A. was price-induced(Morlan, 1981). About two-thirds of this was a short-runprice responseinvolvingoperationalchanges(e.g., less use of spaceheating, air conditioning, or automobiles),while one-third was attributed to technical improvements. Of the remaining39% of the energysavings in 1980, 8% was attributedto a slight decline in GNP, and 31% to structural changes in the economyas well as non-marketforces such as governmentaland utility programs. Accordingto another estimate, about 69% of energy savings not due to lower economic growth in the US during 1973-82was due to higher energy prices and about 31% to conservation programs and other non-marketforces (Hirst et al., 1983). 8. ZimbabweSituation. The Evaluationteam's analysiswasbased on the periodfrom 19701988,with GDP, prices, laggedconsumption,and dummyvariablesbeingused as explanatoryvariables. One dummy variable for drought was used in the agriculturaldemand forecast to reflect the fact that demand for irrigation pumping would be higher in years with low rainfall, while a second dummy variable for years after 1980 was used in the other sector forecasts to reflect a more stable postindependenceeconomicclimate. As was the case with the liquid fuels forecasts, estimatesof income elasticitieswere statisticallysignificant,whilethose for price elasticitieswere generallyinsignificantand unreliable. 9. For agriculture,the estimatesof GDP elasticityranged from 1.0-1.4 for five different equations, while the price elasticity estimate ranged from -0.21 to -0.27, but was only statistically significantin two of the equations. For the miningsector, the GDP elasticitywas consistentlyestimated at 1.25 in five equations, while the price elasticity ranged from -0.20 to +0.03, but was statistically significantin only one equation. For industry, the GDP elasticity was consistentlyestimatedin five different equationsat 1.17, while the price elasticitywas estimatedfrom -0.02 to -0.16, but was never stadsticallysignificant. Finally, in the residentialsector, GDP elasticitywas estimatedat 0.87, while price elasticityranged from -0.11 to 0.14. The estimatesof price and incomeelasticitiesused for the electricitydemand forecasts 10. are summarizesbelow. Once again, beause price elasticityestimateswere generally unreliable(since theywere sometimespositiveand oftenstatisticallyinsignificant),the price elasticityestimatesare largely based on experiencein other countries. - GDPElasticity Long-in PriceElasticity 1.15 1.25 1.17 0.85 0.92 I -05. -0.6 -0.6 -0.5 -0.5 Agricultre Mining Industry Services Residential Total m 5 Page 4 of 7 157 - 1.09 II. For alldemandforecastsit was assumedthat 1120of the long-mnpriceelasticitywould be realizedin eachyearof theforecast,so thatthe fulllong-runeffectwouldonlybe realizedby the end of the forecastperiod,i.e. 2O0I. In regardto GDPandpopulationimpacts,the effectis assumedto be instantaneous. jimitations of PricingMeasures 12. Thepricingpolicythat isadvocatedin thisEvaluationin regardto domestically produced energyIs basedon the theoryof long-runmarginalcosts(LRMC).It is assumedthat by settingprices equalto L;RMC,the consumerwillbe givenan appropriatesignalaboutthe costsinvolvedin supplying the lastunitof consumption.The long-runaspectis necessarybecauseof the largediscreteinvestments, withlonggestationperiods,whicharetypicalin the energysector.In contrast,a short-runcostformula wouldresultin wildlygyratingprices. Whiledivergences fromstrictLRMCareallowedunderparticular conditons,the overallrecommendations are as follows: (a) raisepricesof eachenergytype at leastto the levelof the relevantLRMC. (b) evenhigherpricesmaybe requiredto meetthe financingneedsof the energyproducers or, in thecaseof liquidfuels,to makea necessarycontribution to publicfinancesthrough excisetaxes;but (c) lowerpricesmaybe justifiedfor certaincategoriesof consumerson thegroundsof social equity.In suchcases,it is preferableandless cosdyto the economyto extendtargeted subsidiesratherthan loweringthepricesfor all consumers.However,subsidiesshould be stricedytemporaryand be madetransparentthroughtheir inclusionin the budget, ratherthanbeingleviedon the energyenterprises. 13. In adaptingenergypricesbasedon economiccosts,two questionsarise: (a) 2t whetheradoptionof therecommended pricesfor thedifferentformsof energywouldin fact reducedemandto the extentindicatedin the differencebetweendemandin the Policy-neutral andPolicy-Active Scenarios;and 0.92 representsthe elasticityof residentialelectricitydemandwithrespectto population growth. - (1) 158 - Annex Page 5 of 7 whetherthe reductionsin growth of energyconsumptionenvisagedin the Policy-active Scenariowould be possible withoutin fact reducingeconomicactivitiesbelow the level required to achievethe projectedgrowth of GDP. 14. In the Policy-neutralScenario, the infeasibility arises because of crowding out of investment. However, the Policy-activeScenariowouldalso be infeasibleif energy demand cannot be reducedas envisagedor can only be reduced at the expenseof overall economicgrowth. The issue of feasibilityis tied up with technologicalquestionsfor which no precise data or models are available. Nevertheless,it canbe safelyassumedthat higherenergyprices willleadto moreefficientenergyend-use so that growingoutputs shouldbecomeavailablewith relativelyfewer energy inputs. TeclinologIAl-Constraintson EMUergyn DeM= 15. ForeignExchangeShortagesand SuppressedDemand. The answerto (a) aboverequires specificationof price elasticitiesof demand. Statisticallyvalid results could not be obtained from econometric analysis of Zimbabweandata because (a) energy prices were held unchanged by the Governmentover extendedperiods, which has prevented meaningfulprice-demandrelationshipsfrom emerging, and (b) the responseof Zimbabweanconsumersto changesin energyprices was inhibitedby the lack of alternativeend-usedevicesand of more energy-efficientequipment,which themselvesare a result of foreign exchangeshortages. This shortageis also at the root of the problemsof undersupply (due to inadequateproducrivecapacity) in various energy markets, and hence of suppresseddemand, especiallyfor electricity. Affectingmainly the liquid fuels sector is suppresseddemand for transport services, both in the urban and rural areas. Dependingon the consumers' willingnessto pay, a price increaseis more likelyto reducethe suppressedthan actualdemandif suppresseddemandis concentrated among lower-incomeor lower-productivitysegmentsof energy consumers. In that case, consumption may remain constant or even rise if supply constraintsare simultaneouslyreduced, despite increased prices. 16. EJecty Rigidities. Demandresponsivenessto price may also be limited by specific technologicalrigidities faced by the largest users, such as Sable Chemicals. 24 As many obvious opportunitiesfor improvingenergyefficiencyhave been exploited,increasedelectricitytariffs may not lead to any reductionof demand, unless the price rises were so large that production becamewholly uneconomicand the plant wasshut down. SableChemicalsis guaranteedby the Governmenta fixedpretax return (i.e. 22.5% on fixed assets), Becauseof this institutionalrigiditythere have been delays in passing on electricitycost increases:consumersof nitrogenousfertilizersare being charged excessively relative to importedfertilizer.4/ a/ Ihis companyproducesnitrogenousfertilizers, using a process based on the hydrolysis of water, with the associateddemand being70 MW with a near-unityload factor. 4/ One optionto consideris the closureof Sableas a meansof releasingelectricitysupplies needed to sustain economicgrowth for the mid-1990s, pending the electricitysupply projects comingon stream. One immediatedifficultywith such a strategy, however, is that Sable suppliesthe iron and steel plant, Zisco, with oxygen, and its closure would make the installationof an air separationplant at Zisco necessary. - 159 - Annea 5 Page 6 of 7 17, In ferochrome smelting- another electricityintensive activity- there may likewisebe litte scope to reduce per-unit electicity consumption, except through major investments in new technologies(e.g. for recycling waste gases to pre-heat the charge entering the furnaces). In other activiies, such as miningand iron and steel, there is more scope for efficiencyimprovements(perhaps in the range of 5-13%) but in most cases, these can only be brought about through major invesunents. Electricityconsumptionin the residentialand commercialsectors constitutesonly 25% (16% + 9%) of total demand, slightly less than the 28% total for the three largest individualconsumets (i.e. Sable, Zimasco, and Zimalloys; 11% + 10% + 7%). Of the remainingconsumption,some portion may be quite sensitiveto price increases,but major segmentsof agriculture,mining, and industrymight not be ableto conservemuch electricitywithoutsignificantinvestment. Althoughenergy efficiencymay often be a low priority for an investor,it is to be expectedthat new equipmentwill incorporateenergy-efficient technologiesso that energy intensity will fall as the investmentexpansiongathers momentum. 18. The above discussion refers to energy. In terms of capacity, the price-induced conservationeffect is likely to be more modestas the power factors for the price-sensitivesectors are much lower than for the price-insensitivesectors. The reduction in peak power and hence savings in termsof delayedinvestmentand importsis thus less than wouldbe indicatedfrom the reductionin energy demand. 19. Liquid Fuels Rigidities.The main liquid fuels consumedin Zimbabwe are diesel and gasolinefor transport. A price differenti has been maintainedbetweenthese fuels, the price of diesel at present being only 53% that of gasoline. The rationale for this that diesel is used mainly for productivepurposes(e.g. in agriculture)and publictransportwhereasgasolineis used mainly by private car owners and should be more heavilytaxed withina progressivetax regime. In attemptingto narrow the price gap betweenthese fuels, it must be recognizedthat the responseby the transport users would be impededby the Govenment's policyon the supplyof vehicles, which relies largelyon local assembly of kits. Y A substantialproportionof diesel units are now being assembleddue to the relativelylower price of diesel. Fully built-upvehiclescanbe imported,subjectto substantialimportduties. The number of fully built-up vehicles importedat present is quite limited. Those who do import cars directly have the option of choosihiga diesel car, which wouldprovide them with a windfallprofit due to the lower diesel price. Users of diesel driven-vehiclesmay not contributeadequatelyto coveringroad user costs, especiallyof heavy-dutyvehicleswhichproducethe heaviestwear and tear on the roads. To compensate for this, the users of dieselvehiclescouldbe madesubjectto higherroad licencefees. However, levying road user chargesvia taxes on fuels is preferable as this would be proportionalto the actual road use, as indicatedby fuel consumption.Sincediesel-poweredvehiclesare more energyefficient,an additional incentiveto maintainor expandtheir share in the transport fleet via a lower price does Dotseem to be required. Af Three main plantsassemble.vehicles from kits. 'Te Government'spolicy is to limit the numberof modelsbeingassembled,amongothers to limit the importationof spares, and to assist in the developmentof a local spares industry.This policy also aims at exercising control over the type of vehcles assembledfor differentpurposes,i.e. passengercars are to be gasoline-poweredwhileheavygoods vehiclesand buses are to be diesel-powered. Pickups and light trucks fall betweenthese extremes, as customerscan choose the type of engine to be installed. - 160 - Page 7 of 7 20. Ihe abovediscunsion pointsto th imponantareaof techndology choicewhichispresently weakin the Governmet'sinvestment approvalmchiny. Energyefficiencyis an importantbutnotthe only aspectof technologychoice:it wouldneedto be evaluatd amongotherswhetherenergyefficient technologicsare also appropriatein terms of labor intity and suitabilityfor loca operationand maintenance.Te Government alsoneedsto takeintoaccountthewiderimplications ofrelevantpolicies, particularlywhereinteracting policiesfal underdifferentdomainsof responsibility.lhis iswidenedby theimplications of thepresentpolicieson vehicles(Ministryof IndustryandCommerce)andfuelpricing (Ministryof Energy,WaterResourcesand Development) for the diesel-gasoline price ratio, and the additionalrisks thatthis impliesfor futurefuelprocurement. _ 161l - ELECMRICITYDEMAND,BY CONSUMINGSECTOR, 19090 (GWh) Year 1980 1981 1982 1983 1984 1985 1986 198? 1988 1989 Pretm. 1990 501 541 673 650 670 710 833 679 698 698 804 Nining 1,302 1,360 1,333 1,272 1,328 1,408 1,439 1,501 1,499 1,499 1,510 Industry 3,518 3,516 3,558 3,464 3,773 3,910 3,943 4,000 4,150 4,150 4,100 Residentlat 928 991 988 926 1,222 1,278 1.299 1,308 1,420 1,420 1,528 Servfces 693 729 765 959 669 690 733 748 784 784 990 7,137 7,137 7,213 7,662 7,996 8,247 8,236 8,551 8,351 8,977 AgrIculture Total Scurma 6,942 ZESA;DOERD - 162 Ane PETROLEUMPRODUCTSIMPORTS, 1980-90 (X000m) Yesr 1960 1961 1982 1983 1964 1985 1986 1987 1988 1969 Pretim. 1990 of esel 371.1 520.7 340.9 419.0 468.6 490.3 476.8 496.3 582.9 565.0 654.7 Gasoline 254.3 254.2 229.9 28S.1 231.9 248.8 266.9 223.0 255.8 257.0 321.2 Jet Fuet 48.4 49.2 53.5 25.2 75.0 85.9 94.? 73.9 84.8 84.4 112.8W/ Kerosene 24.6 26.6 26.1 36.4 35.6 40.4 51.2 42.1 4S.6 S2.6 59.02/ LPG 10.0 6.8 9.5 7.9 8.4 11.0 10.0 8.9 11.4 10.4 10.6 7.0 7.5 7.2 3.4 0.0 4.1 3.6 4.6 7.1 6.5 6.3 715.4 865.0 667.1 827.0 819.5 880.5 903.2 848.8 987.6 975.9 1,164.6 AvGas Total SBreak-dimnbetweenjet fuel and kerosene has been estimated. Sum DOER; =OCZtN - 163- Anne 8 UQUIDFUELSSALES,BYPRODUCTANDCONSUMING SECTOR,1980-90 (in '000) 1980 1981 1982 1983 1984 1988 1986 l987 1988 1989 1990 1s. 24.8 28.6 27.9 39.3 31.0 32.0 33.9 40.0 44.9 47.3 18.7 0.9 23.9 0.7 26.7 0.8 27.1 0.8 0.8 28.4 29.8 1.2 31.3 0.7 32.7 1.2 38.6 1.4 43.8 1.1 46.1 1.2 563.6 636.3 661.6 68e.7 673.3 69a.6 716.1 728.s 780.3 804.4 926.6 252.3 229.3 29.9 46.3 6.7 288.8 250.1 38.1 54.0 8.3 307.7 245.5 38.6 64.6 5.1 328.3 21s.8 36.3 68.s 4.8 320.8 235.1 39.5 73.0 4.9 334.0 243.6 39.1 77.3 4.6 352.6 247.1 41.4 70.1 4.3 364.2 2s2.s9 37.4 70.1 3.9 387.9 271. 29.3 87.6 4.0 403.0 381.7 30.2 8s.0 8.0 461.5 314.8 38.7 106.6 75.0 70.0 65.0 67.8 78.1 81.5 80.7 78.1 83.3 86.0 91.0 DIs"l 7S.0 70.0 65.0 67.8 78.1 81.6 80.7 78.1 83.3 86.0 91.0 tS9#bivenMhX 41.8 44.1 47.3 49.4 61.1 56.9 66.0 67.7 61.3 64.8 71.2 DCSel ohrlne Ethanl Kerofse LPG 26.6 2.3 0.3 4.3 8.3 29.1 2.5 0.4 6.3 6.8 31.3 2.4 0.4 5.8 7.4 33.0 2.3 0.4 6.0 7.7 34.0 2.4 0.4 6.3 8.0 35.6 2.5 0.4 6.6 11.0 36.8 2.5 0.4 6.9 8.4 38.4 2.6 0.4 7.2 9.2 40.7 2.7 0.4 8.5 9.1 42.8 2.8 0.3 9.2 9.4 48.4 2.8 0.3 9.7 10.0 Coin r"wcbUCth n.a. n.a. n.a. 6.6 10.9 10.3 20.7 30.8 31.3 33.7 38.1 6.5 10.9 10.3 20.7 30.8 31.3 33.) 38.1 #Z7 461.3 246.1 39.5 77.3 36.3 12.2 4.6 SC)D4 929.0 480.8 249.6 41.8 70.7 38.2 9.1 4.3 511.6 256.4 37.8 70.1 39.9 10.4 3.9 Keraone UPB Dis"l 8asolIn Ethwno Jet Fue AvGa. SS31||z DiS"e zamitl.Jaw Oh"sl Gasole Ethlol Jet Fuel Kesene LPO AvGee : 8ej: Sectr 699.9 363.9 231.6 30.2 45.3 23.0 9.2 6.7 we sotime 775.0 308!3 83 357.9 252.6 35.5 54.0 29.2 7.5 5.3 404.0 247.9 39.2 64.5 31.5 8.2 4.8 435.8 221.1 38.7 68.5 33.1 8.5 4.8 estimated. DOERD:NOCZIM:Evakuatonteam Anamtes. 839.6 440.8 237.6 39.9 73.0 7.1 36.4 4.9 996.2 543.2 274.2 29.6 87.6 47.1 10.6 4.0 6.0 1.033.S LU1-76 656.6 639.0 284.5 318.1 30.5 38.7 88.0 106.6 63.0 66.8 10.5 11.2 4.5 5.0 PROJECTEDELECTCrY DEMAND,1990-2010 (GWh) 1990 1901 1992 1993 1994 1995 1990 1997 1998 804 738 760 781 804 827 851 875 900 926 WhOiNg 1,610 1.533 1,S62 1,72 1,591 1,011 1,041 1,072 1,704 1.736 Induty 4,100 4,497 4,681 4,873 6,072 5.280 5,490 5,709 6,930 0.172 R.IdentI 1.520 1,681 1.097 1,000 1,921 2.050 2,133 2,221 2.311 990 827 840 071 894 917 942 900 Yost 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 953 980 1,009 1,037 1,007 1,098 1,129 11402 1.708 1.801 1,836 1,889 1,904 1,940 1.970 t013 0,417 0,673 0,939 7,214 7,901 7,799 8.109 2.405 2,504 Z6O 2,713 2,824 2,939 3,059 992 1018 1,045 1,072 1,101 1,130 1,169 11.443 11.843 12.268 JjJ8l7 2009 2010 1.195 1.230 1,285 2.051 2,090 2.19 6,432 8,768 5,116 9,478 3.108 3.314 3.449 3,590 3.737 1.190 1.221 1,253 1.280 1,320 t.3S5 14.670 lS.098 1S.019 .170 18.0749 1.427 1. TIIENO CASE Agdmituro 8avIn.. Total 8.997 9.17t L9S2 9.097 10.282 1805 ll.§7 AS9 CASEiOCY.4fEUTRA U. Ag"iut 747 778 011 )u*g 1,S40 1,683 1,019 Industry 4.898 4.894 RgWdmntI 1.501 0837 Servic. Totdl 044 14j074 1.340 17985 SC 879 912 947 883 1020 1059 1,099 1,141 1,164 1,229 1.276 1,324 1,374 1,05 1,641 1,735 1.7"8 1,822 1.869 1,915 1,903 2.012 2,82 2,113 2,160 2.220 2,270 2.333 2.391 2.451 6.209 5.S44 6,901 0,287 6,055 7,008 7,500 7,972 8,406 8,991 9,649 10,141 10,770 11.437 12.140 12.O0 13,700 14,S49 1,087 1,800 1.921 2.050 2,13M 2,230 2,320 2.420 2.530 2,639 2,752 2,870 2,994 3,123 3.257 3,397 3.543 3,891 3.854 870 904 939 978 1,014 1.054 1,095 1.138 1,182 1.228 1,270 1,326 1.378 1,432 1488 1540l 100 1.6089 1.735 10.172 18.991 17.8SS 19.720 20.739 21.M09 9L.31 LM 745 773 JO.343 10.903 11.499 12.088 2.04 13.294 1I. Agsuletur 13.132 13.569 13.968 14.05 15.396 19.7 1,481 2.30 1.S37 LI I ASEC9ASEfoUCY.ACTCVE SCEVAMiO 801 828 857 082 906 931 954 978 1,003 1.029 1,056 1,001 '09 1.137 1,108 MlIng 1.185 1,220 1.Ul 1,5609 1,595 1,619 1.041 1.005 1.687 1,700 1.724 1,741 1,758 1,778 1,794 1,812 ,831 1Q49 1.988 1,987 1.900 1.925 IdtrV 4.578 4.851 5.133 5.424 5.722 8,015 0,314 8,818 0.920 7.248 75080 7.939 8,309 8.609 9,101 9,525 9.09 10,433 10.919 11.427 PAgidmntl 1.675 1.875 1,778 1.88 1,998 2.060 2.134 2.201 2,208 2,337 2.408 2,401 2,560 2,034 2,714 2,790 2,881 2.901 3,o09 3,152 834 803 951 980 1,008 1,030 1064 1,092 1.121 1.161 1,101 1,212 1,244 1.277 1,311 1.340 1.382 1.410 12.049 12.492 12.930 13.390 13.870 14.370 14.89 5 1S-436 10.684 17.195 Servie. Totbl : L9. 9.7 DOERO: ZE8Z Eviwdun trn-m 803 10.20 mmAn. 922 10.680 11.189 1P80 MMf 170 1.257 1t8.492 19.t70 PROJECTEDLIQUIDFUELSDEMAND,19902010 (m3 '000) PI". o9901991 YOU 1992 1993 1994 199s 19S9 1997 80 839.0 366.8 106.6 65.0 5.0 11.2 1,1744 Told 033.8 012.a 323.2 322.7 08.4 88.2 64.0 80.0 S.0 5.0 11.9 10.9 1.0994A 27.3 a64.6 324.7 90.5 69.0 4.9 11.8 676.9 327.2 90,6 73.0 4.9 11.7 3,16sj 1.184.3 700.8 328.5 91.6 78.0 4.9 12.5 1.216 72S.2 329.8 92.0 82.9 4.9 12.6 247.0 749.2 331.9 93.6 86.0 4.9 13.4 1.278.9 798.0 330.0 95.1 94.0 4.8 14.3 773.6 334.0 94.0 90.0 4.8 13.4 1.310.2 041.2 327.0 91.2 60.0 5.0 11.9 077.8 332.1 93.3 64.0 6.0 11.0 j438.st 1.193.9 TotWl 717.7 337.4 96.3 69.0 4.9 12.8 759.9 341.0 99.2 76.0 4.9 13.7 804.3 340.7 100.1 78.0 4.9 13. jJ2M.3fj347Jj Il1 652.9 351.6 102.8 82.0 4.9 15.4 1408.7 902.7 357.4 105.4 s6.0 4.9 16.4 .4f7l 965.6 363.1 108.0 90.0 4.8 16.3 1.7?L 2004 2006 2006 2007 2009 2009 2010 849.0 340.0 96.5 103.0 4.8 15.1 874.4 342.3 9.i 108.0 4.9 15.0 900.2 344.9 96.7 113.0 4.8 14.9 928.6 347.4 97.2 119.0 4.7 Its 957.2 349.7 07.7 123.0 4.7 15.6 s89.3 352.0 9e.1 128.0 4.7 16.3 1017.7 354.1 98.4 134.0 4.7 10A 1060.5 367.2 98.7 140.0 4.7 17.3 1003.6 359.1 9.8. 146.0 4.6 18.2 1118.8 301.s 100.0 153.0 4.6 18.0 t.40B.0 1,440A. 1.611.1 t.a 48.0 1J.11.3 1.786.4 1867.7 452.56 142.8 153.0 4.6 27.6 1080.3 1129.2 382.1 374.9 116.0 113.8 103.0 99s0 4.8 4.8 17.9 18.0 .4 1to79s. 1.762.0 Mlt.BASECASWCY-ACTIVE Dso_ Guaon Bland M Fud Kene AvG. to 663.0 332.9 90.7 63.9 4.9 11.7 1,131.0 j4f Tatotal ~ 036.4 328.1 90.0 60.2 5.0 11.9 0ERD; NOCA 692.0 338.6 91.0 67.2 4.9 12.4 07.7 Edkw6on tamn o_o,t. 729.0 346.7 94.6 72.1 4.0 13.3 L3 786.2 365.3 9.0 75.9 4.8 13. 1,31I.3 807.8 364.0 90.8 79.8 4.8 13.9 849.9 374.1 101.3 82.7 4.8 14.7 Li3PAZ1.427.5 893.1 384.1 103.6 86.6 4.7 15.5 14L77 1.4774.S 1.6.6 1.82562.a 1J§.2 SCENARIO MS"POUCYNEJTAL 1011.4 36A. 110.4 s4.0 4.8 17.2 t 2003 924.0 337.6 95.0 99.0 4.8 14.2 37 t342.8 H. MASECA Oh"e OusabhnO9lnd jotFut Kaooowo AvG.. LPG 2002 TRENDCA t. aoWn sblnd ot Ful Konoe AvG*s LPG. 2001 2000 1999 1998 937.2 393.8 106.8 90.3 4.7 10.3 1S47.0 1191.9 30s.t 118.1 108. 4.8 18.8 126s.6 . 395.0 121.2 113.0 4.9 19.7 1330.8 402.7 124.1 118.0 4.7 20.5 1406.9 402.7 1t.-1 118.0 4.7 21.4 1487.4 417.4 129.5 129.0 4.7 23.2 1674.6 420.5 133.0 134.0 4.7 24.1 166.0 4V4.4 130.4 140.0 4.7 24.9 1763.8 443.0 139.7 148.0 4.6 25.7 UIL! 1.912.1 2t0008. 2J92A 2.1SO.3 LZZ!U 2.408.3 2.0 *2L 1304.7 468.4 122.3 118. 4. 20.2 1370.4 480.2 125.5 125.5 4.6 21. 1439.4 402.6 128.6 129.1 4.5 22.4 161t.7 506.S. 131.6 133.7 4.4 23.0 1689.3 19.6 134.3 i39.4 4.4 23.7 2A231& 24121 Z2414 2La_. 2.410. 2mI SCoENAi 1243.8 456.7 120.0 114.2 4. 19.5 982.9 407.1 108.0 97.7 4.7 16.1 1029.7 416.4 110.7 97.7 4.7 16.7 1079.0 426.2 112.4 101.3 4.0 17.4 1130.6 430.0 116.1 100.0 4.6 18.1 1195.6 44a.6 117.6 109.5 4.6 18.8 1.812.? .6875.7 1.741.1 1,8 1 10.42.0as.0 F. Annex Tl PROJECTED CoAL InmAND .1990-2010 two U"09_ * ~~~~~~_~~~g _ ~~~*w ~~~~~4It Je bisC*eisj*%.bp l..4..4 e~~~~~~~~~4 b_ _ _ ~.se 4~4*3.w394 **1-'l 14"I 3I t- jb too o ~~~~~~~~~~ n 0 *1 to- 4 AW tO0 .ies 4 130 A.-. 1131 o..u~~ 1*04 6092 t-" rV *0.1 . S$1 ,..1o am0 o A 43 SO tavol lso 412" 4t off issi 1301 *2 S 114 241 ttn ina 4$D W 0 we iss a 4144 201 Is *Is 1394 6391 410 0Me 13f toot an f4at ItoD 001 %a in lot to 2)0 mw h. u5)s on 34* Su Om O09 m1, 13 sose 44*4 lot n to 214 s *-^ XJo is i at W 3,1 lilt Ot W 311ii tI Sti n II b to 0 609s t0 435 02 0 F 1411 Ms to 919 12.39 hn H 44 s In *) ' 30 to to *1, S. to Pat#1 10 it010 0 so $0 100 0 IN e to toil so lt if W s303o * n no go *so. PI job m Jt"2" h*10 to ah"t444O11 9t O It 21 a J1 itZ " ha3 ~~~~~~~~lst loop 2o fe Jo ams S,-it s ni _~~~~~~~~~~~~~h tWO £204 MP1 , 20~~~~~S No ua2 ut' )*_* lzt431 o1u Mt4k ja ) as z10 1o 11 a h6 &M - - g ae~~~~~~~ e"_~~~~~~~~4 t~1 PI m 19,46 s ft 12 0 so *5 263 Js 1 M* 0 No to 3p in 46pt 0049 m fla I9 1 50 16 5*to it to 6110 h *anz so a 0to" 11 3 la so .0,it 1sJ sit to 6132 ht bt slitn P^ lb" t op to 402. snb iO ton h. 1 40 451 jet . to OD A"1 los 433 t0 4Ott In04.It 0a 0 to ID la *D situ 30 91 W n t4 . ^ to 404 f s Sao et is" to0 V0 4*3 i tz *WI 33 ^ as m 11 ts ato *4.04 Jo* 40 . 90 to tAn sas 191 so e de sU. off to 44 ssnS*n 401t%"9, S# Wt $ 0212 W1 n to W to 3114 m *J2? m r M ou so * *Wt ts at 0o6 3 to la tOsO l 23 n 31 to to 10 30 OA to 349 41S MI 0313 JO. s0 423 to 314 6*6 Mr so lii to *0 0D 01o9go so *n m* * 10 1914 90b 0 "tl 1 so Dl 0*13 do D0 9401 out to I a Ot so ^ all 39 024 2032 bs s t 114t hS, ^s XP 2s0 $41 to tD tA to 20 104 100 J0 to Sio 21* e 0131 to 13, so to so SW 411 3910 3 to tWm " 666 1W 145 14O Pt 16*6 Nil otot ato Iu* Nsl Ewe mu .es miS lie. 1 *5 gm (11 Io*r sit gm on5 E "of6 Smf 6*w9 mu w t em 141 tss is SI sag t0411 *%Ot so No*ul tY# t4We t eof 4t Ott su Om4 its itZ tC "St 1tt 94*o CIOt ffto oft 446 IOS "a tt0 691 6 UN PS I_St gm Om5 "so Pa Om w9es"et Mt m MPt Ott Vo Us M5 US so Mt Ur sin one #u us ttStofn,1sn OO;t su $4t i.e. NMlSt t aftt en 't un I gort 5 It5i W IC$ Ws 0ii 651 t66 4am* M1 505 W" als 61 l o wt a tet sno W61 outS WI tg g1 w t oft 666 tp 6615 t IS t mto VW " soet Wu s got *16 66t "I U1 WAM* IS $ C11 t4 t t gm t* 1 so Se 9.u6 got W "aq 56 wa tt mm ma . 11 l tos M1t tot fr. *441 v..,11, w41 PCO. ue gw one o 61 cc we-. our out6 ON$ Ong les mA. sU 9a n65 50 t. t-. i*nio *u sit .*q *. * aw me flXOUUV? .~ we ~~~~~~~~O" ~ I zsot it ,n .e w s ttS W" W8n Uu moo " Z- -- - - 168 - Annex 13 ENERGYPRICES, 1980-90 Electricity Year Diosel (Zcents/kWh) PetrolBlend | Kerosene (Zcents/liter) Cow (SZ/M.T.) Cu£ntE Pries 1980 1.41 34.20 46.50 28.9S 8.94 1981 1.65 34.20 S9.29 29.53 10.28 1982 1.77 35.03 69.62 31.06 12.94 1983 2.58 5G.41 95.25 35.26 12.68 1984 4.32 50.41 100.13 35.33 18.74 1985 4.16 52.95 103.80 35.55 21.45 1986 4.91 54.25 116.84 35.55 22.03 1987 4.56 63.00 115.00 59.00 21.46 1988 4.94 63.00 115.00 59.00 20.88 1989 5.67 63.00 115.00 62.00 1990(Aug.-Dec.) 6.10 91.35 166.75 71.00 45.18 Constant1980 PEices 1980 1.41 34.20 46.50 28.95 8.94 1981 1.44 29.87 51.79 25.79 8.98 1982 1.36 27.00 53.65 23.94 9.97 1983 1.64 32.12 60.69 22.47 8.08 1984 2.71 31.59 62.75 22.14 11.74 1985 2.54 32.29 63.31 21.68 13.08 1986 2.73 30.20 65.04 32.89 12.26 1987 2.41 33.33 60.85 31.22 11.35 1988 2.41 30.76 56.15 28.81 10.19 1989 2.41 26.75 48.83 26.32 Source: DOERD; ZESA;NOCZIM;WCC. - Annex 14 - 169 ECONOMIC SUBSIDIES ON ENERGY CONSUMPTION, 1989-90 (Z. and Z$/Unit; Z$ millions) Retail Price Economic Costs A/ Consumption Economic Subsidy (2$ mn) 989 Grand Total Petroleum Products Diesel Kerosene Electricitv Residential Low Voltage-Agriculture Low Voltage-Other High Voltage Special Industry 364.0 (a3 '000) 65.1 73.95 -6.95 565.5 53.0 61.9 3.2 l-- Z0/kWh --) 5.67 9.07 (GWh) 8,551 290.9 7.53 6.92 7.16 6.09 3.70 1,515 691 919 2,494 2,933 123.6 20.5 16.4 38.0 92.4 Zo/1 --- ) (--- 63.00 71.00 15.69 9.89 8.95 7.61 6.85 Z$/M.T. -- ) (-- ^;oal HPS Coal b/ 9.00 (M.T. mn) 17.00 1.0 8.0 8.0 1990 Grand Total PetroleumProducts £/ Diesel Kerosene Electricity Residential Low Voltage-Agriculture Low Voltage-Other High Voltage Special Industry HPS Coal p/ kl £/ (--- 91.40 71.00 Z¢/l --- ) ( '000) 1438 113.52 127.29 603.3 57.0 99.1 44.7 (-- Z¢/kWh --) 5.67 9.07 (GWh) 8,838 300.7 7.53 6.92 7.16 6.09 3.70 1,566 714 950 2,577 3,031 127.8 21.2 17.0 39.2 95.5 15.69 9.89 8.95 7.61 6.85 (Z$/M.T.) Coal a/ 452.5 9.00 17.00 (M.T. mn) 1.0 80Q 8.0 Based on shadow exchange rate conversion factor of 1.5 Subsidy applicable to second tranche of HPS cool consumption Projected subsidies are based on September 1990 domestic liquid fuels prices for 1/3 of the year, and on 1989 prices for 2/3 of the year. 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St offX OC 'ot Xft Ita 0t- C ltt9 ist t St" It ls O9t .1 tXdef It4 SIt cc}bU I'll~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~"t S.4 VI"e out tow, efS" e sw SI" all tno 441 1114 Voe Due tm SXsti It GM 44" 618 696* 9466% e to"0 VS Ot IW is §9 6out ert It"6 It I e t4 11 *9ws tW 4,161 t t0oo tet 149 St *609 Go' t Goteu * et & C * * st S ronU 6 tS"m 6 9 9X41 Om Mil befs rim1 etIXu :169 I"` sc Ot f n~ f i t es e Sol effl S 0*4 t *a te2 0g s a" Soo 6466 0tl fN *14t SU St# ts e 144, 11 W; Im ca t 001 r go,s 9 Css a 0 eC ee M 4 4I es set~~~~~~~~~~~g ts 90 6 Ott *@t VIC 1*V oft St on 9 beO oft Ott si elt, §fet Is t%S a" 401 reu gm mg ox *tot tm 9-1 xanuiu§ XX tSo 4 t SeT Ci 966*I 4Stc rtc Ia * roos 1 9 N6 ?I ^ It t *w *t; 409 _,"*,, S X It Ott v *" 6004 et St 9 l ftNo% 9¢Iot 9 9e S 9 t It Ws stot *tt t'u e" u 4 99 @t 6109 s *60 See 4taS .t 1 t 6 0t '*tS 0 rA tUStt U O*l e * tic 900 Xt 646* G 601" * eM wit 9t 9et" Slo ft tt 6t C S C Mt> C| 4491 glUt St C itt 9 IC t o& di 111 t tt 1 *t r u S t t t90s 9$COs 4 ent a * t tt-t O§ 009U f ti tvs 61 4'woo 5 $s 1t *to M 0113, ftS A %IC cs etP st 996 fat 90 SO *9 .4 nit 9 9114 tt 1 e9 s n glu SU Wtg K eS 0 SU *g *sot St" e60 tn its tX §§l fG~~~~~~~~~~~~~~~~~~~Vt CtX *1 0 CUU VMSc "t 11 tt 46l[ sag 9 *¢ but-to else "-t- fe tog s*t S U% t9 t O t WIj t0 tor 9 **e 0 it t of 1, oil ft See <40 SC4 gtt tt {tc tt 4m C*X Ott$ Stet nua "aZ nut' $M "ZGs so , AD=a-iZ Page 1 of4 - 173 - UNDP/WORD BANK ENERGY SECTOR MANAGEMENTASSISTANCEPROGRAM ZIMBABVWE arintiggJ aeNitionaLEnerg Effjciecy Prgm for Zmab Introd.gsti2n 1. The Governmentof Zimbabweand ESMAPhave recendyundertakenan EnergyStrategy Evaluationfor Zimbabwe,which amongothers assessedthe optionsand requirementsfor improvingthe eficiency of energyend-usein majoreconomicactivities. Accordingto the Evaluation'sestimates,there is an economicallyfeasible potentialfor energy savingsof at least 15-20%in the industrial,transport, and commercialbuildingssectors, i.e. in the order of 0.3-0.5 mn toe p.a. and worth US$40-65million at 1989prices. The benefits of improved energy efficiency include reduced costs to energy users, 2. enhancedindustrialproductivity,deferredinvestmentrequirementsfor the energysector, and savingsin energy importsand foreign exchange, in additionto reducingadverseimpactsof energyoperationson the environment. However, little has been done in Zimbabweto date to promoteenergy efficiencyin a systematicmanner. Becauseof policy, institutional,and technical/logisticalconstraints,few, if any, projectsto promoteenergyefficiencyhave resulted. Some industrialenergyauditson smallto mediumsized firms have been undertaken as part of a SADCCproject funded by CIDA. Besides the Energy StrategyEvaluation,no workhas beendone on energyefficiencyissuesin the transportationor buildings sectors, and thus little is knownabouttheir savingspotential. 3. In order to mobilizethis potential,the institutionsdealing with energy efficiencyissues in Zimbabweneedto be considerablystrengtheaedand supportingpoliciesimproved. Achievinghigher energy efficiency requires a program which (a) addresses the technical, economic/financial,and institutional/regulatoryllegal barriers to improvedenergy efficencyin Zimnbabwe;and (b) comprisesa comprehensivestrategy for proposing,implementing,and monitoringprograms and measuresthat will improveenergy efficiency. Objectiveand Scope of Activity 4. The proposed Activityaims at cooperatingwith the Governmentin the preparationof a NationalEnergyEfficiencyProgramin Zimbabwe,through addressingthe relevantconstraintsto higher - 174 - AnAL7 Page 2 of 4 energy efficiency,and followingup on the options identifiedin the EnergyStrategy Evaluation. The Activity would reinforce ongoingand future programs to increase efficiencythroughoutthe economy, and would complementthe Government'sstrategyof expansionof energy supplies. 5. The NationalEnergyEfficiencyprogramwould include:(i) policyreforms which would strengthenprice and non-priceincentivesfor improvingthe efficiencyof energyend-use;(ii) institutional strengthening;(iii) increasingthe awarenessof the benefits of improved energy efficieizcyin both the public and private sectors through promotioncampaigns;(iv) training of governmental,parastatal and privatesectorstaff in energyefficiencymatters;(v) improvingenergyefficiencymanagementin all major energy-consumingsectors; (vi) identificationof investmentsthat will require provision of spare parts and/or replacementof outmodedequipmentand technologies;and (vii)an evaluationof financingoptions for energy efficiencymeasuresespeciallyfor foreign exchangefinanciing,and preparationof specific recommendations. SpecificTasks 6. Institutionaland PolicyReform. An in-depthreviewof the institutional,legal, and policy frameworkimpactingon energy efficiencyinitiativeswould be undertaken,based on the results of the EnergyStrategyEvaluation. Specifically,the effectsof the costsand pricingof petroleumproducts,coal, and electricityon the economicsof energy efficiencyinvestmentswill be examined. The implications of non-price measures such as regulations and energy conservationtargets will also be examined. Recommendationswill be made in regard to policy reforms and institutional, legal, and regulatory changesthat will promote energy efficiency. The Activitywould evaluatethe feasibilityof creatinga small Energy EfficiencyUnit in charge of organizingenergy efficiency campaigns,providingenergy audits, organizing training programs, and liaising with other governmental and private sector organizationsto increasetheir awarenessof the benefitsof promotingenergyefficiency. 7. Industry. Energyuse in representativeindustrialsubsectorsis40-80%abovethat in more developedeconomies. If all efficiencyoptionswere to be implemented,savingsin the order of 0.2440.38 mn are possible. Roughly80% of the value of savingswould be mobilizedthrough reduced electicity demand (800-1,200Gwh), and the remainderthrough reducedcoal use (0.27-0.44 tnn tpy). To realize these benefits,the Activityproposesto coordinatewith, and followup on the ongoingSADCCIndustrial EnergyAuditingProgramthrough:(i) supportingindustrialenergyaudits,possiblycarried out by energy service companies,which would focus on the major industrial energyusers such as Sable Chemicals, ZIMALLOYS,and ZISCO; (ii) conductingtraining courses for plant engineers in energy management to improvehousekeepingand operationand maintenanceprocedures;and (iii) identifyinga package of priority investmentmeasures(e.g., spare parts, replacementof inefficientequipment,and new equipment for such measuresas waste heat and gas recovery)for considerationfor financing. 8. Transportation. The low efficiencyof energy use is primarily attributableto: (i) the compositionof the vehiclefleet, over one thirdof which is nearly 10 years old; (ii) the shortageof spare - 175 - Aunex 17 Page 3 of 4 parts and lack of measuring and control equipment affecting repair and leading to below-standard maintenance;and (iii) the lack of training in energyefficientdriving. Possibleenergysavingsare in the order of 0.4-0.07 mn toe, or $US 10-17mn, with dieselaccountingfor 70-75% and petrol blend for the remainder. The Activity will seek to improveenergy efficiencyin the transport sectorby: (i) assisting the Governmentin developinga programof regular vehicle inspectionsto ensure proper maintenance; (ii) identifyingspare parts and vehicleretrofittingrequirements(especiallyin freight and publictransport) to be consideredfor financing;and (iii) evaluatingthe potentialfor reducingenergy use in the transport sector through improveddriver traininig. 9. Commercial Buildings. This group (including office buildings, commercial establishments,and hospitals)accountsfor an estimated5% of the energysavingspotential. Total savings of 0.02-0.04 mn toe, worth $US 2-3 mn p.a., are feasiblethroughmeasuresto reducecoal and electricity consumption.To date, only two hotelsin Harare haveenergymanagementsystems. The Activitywould seek to: (i) promote energy managementof large buildings;and (ii) establishregulationsand standards within the existing building code to include energy efficiencyguidelines. Effective liaison between DOERD and the Ministry of PublicHousingand Constructionand o.her relevantinstitutionswill be an importantrequirementfor this approachto be successful. 10. EinancingOptions. Specificproposalsfor financingof energyefficiencyinvestmentsand programs will be evaluated. The objective is to develop a package of financial instrumentsand arrangementsfor promotingindustrialenergyefficiencywhich can be adaptedto the particularneeds of Zimbabwe. Equityfinancing,suppliers' credits, and otherkindsof lendinginstrumentswill be examined. In addition, the feasibility of setting up an energy service company assisting in the funding and implementingof energy efficiencymeasureswill be explored. 11. Trairing. This wouldtake accountof the spr.ific requirementsof the policy-makingas well as operationalentities,and wouldinclude:(i) trainingof governmental,parastatal,and privatesector rsaff(in particularplant, transport,and buildingmanagers),and somestaff of financialintermediariesin economic and financial analysis of energy efficiency measures; (ii) training of a small group (2-3 individuals)at an appropriateinstitutionin the designand managementof an energy efficiencyprogram which they could effectivelycarry out after completionof the activity; (iii) training of ZESA staff in energy conservationmeasnreswhich could be promotedby ZESA, and ultimatelyhelp to reduce load growth and investmentrequirementsin the power sector; and (iv) seminarsfor senior policy makersand managersto increasetheir awarenessof the importanceof improvedenergy efficiency. Activity Scheduleand Costs 12. The proposedactivitywouldtake about30 monListo complete,and be conductedin three phases. Under Phase I, implementableactivitieswouldbe identifiedand local counterpartscommitted. This phase would take aboutthree monthsto complete. Under Phase II, the NationalEnergyEfficienrProgram and its principal componentswould be developed. This would entail a short-termmissionof - 176 - Annex 127Page 4 of 4 speciaists, for etailed analysisof policy and institutionalissues,and a preliminaryappraisalof possible investmentmeasures, as well as initial training seminars. Phase II would take approximatelytwelve monthsincludingthe preparationof a report. Under Phase III, the priority measuresidentifiedunder Phase II would be implementedincludingtraining, energy audis, and energy efficie-Iy demonstration projects, and wouldtake approximately15 monthsto complete. It is envisagedthat the activity would begin in mid-1991and be completedby end-1993. Thetotal costof the proposedactivityis preliminarilyestimatedat US $750,000of which 13. $700,000 are expectedto be externally funded, $25,000 be contributed in-kind from ESMAP, and $25,000 equivalentbe contributedin-kindfrom the Government. - 177 - INVESTMENT INTHE COALSUBSECTOR, 1980-89 (Curfentand1989Z$ millions) Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 Total Current ZS mn Wankie 119.7 Open-CostMining/ Drag-Line 119.7 - - - - - 41.1 Ovens Sengwa 150.8 119.7 Rehabilitationof Coke Total 31.1 - 31.1 4.0 - 119.7 _ -31.1 4 4.0 154.8 1989 Z$ mn Wankie 270.0 Open-CostMining/ Drag-Line 270.0 - - - - - 38.4 38.4 Sengwa 308.4 270.0 Rehabilitationof Coke Ovens Total 38.4 - - 238.4 Source: DOERD;WCC; SENCOL;Evaluationteam estimates. - - - - 4.0 4.0 4.0 312.4 Annexl - 178 - INVESTMENTIN THE LIQUIDFUELSSUBSECTOR,1980-89 (Current and 1989Z$ millions) Year 1980 1981 1982 1983 198" 1985 1986 1987 1988 1989 Total 14.0 15.4 65.4 CurrentZ$ mn Ethanol 4.0 Marketing 4.2 Rehabilitation of CAPREF TankFarm Total 8.2 3.8 3.8 1.3 1.3 5.1 5.1 3.7 3.1 3.6 7.0 6.8 2.6 37 3.1 7.0 68 14 0 15.4 72.0 9.4 8.4 15.7 15.4 92.5 1989Z$ mn Ethanol 10.4 Marketing 10.9 Rehabilitation of CAPREF TankFarm Total 8.6 7.5 2.9 2.5 21.3 11.5 10.0 6.1 4.9 5.6 5.4 6.1 Source DOERD; NOCZIM;Evaluationteamestimates. 4.9 9.4 84 . 15.7 15.4 108.3 UACItCtn Pm9t OePem, ts9s-2010 IMPORTS UllESt1EID ELECTUIcITY SCERO *-tEASTCOSTAAYSIS: BAsECASE/PIICY-ACTIVE (1989 ZS on) s 2002 VPV of Progrm (1919 s DP) Cowlaslnlng (Veer) 19 1996 1997 1998 1999 2000 3.856 2001 ( P 3,776 NM MMC KSE gsg SAtI 2002 2003 2004 - 5 2005 l1 -. 3,409 e 3,615 3,758 3,758 3,627 3,627 3,529 3,458 NIM *C C H MMC H MH4 CS KSE KSE KuS KSE 1.13 3,836 3.836 3.615 NcM Heg KSE KSE KSE S! "C3 l 20 3002 20 2005 Ka8 .--........ P P2p1............ BAIl 2070 P-*)-------P3 .----------- (- 1 3 1C3 811 BAT1 SAI MC NMc IKSE KSE ( UZAII SAI StA BATA . 011 6T1 C12 6T2 8ATI VICF VIef BAtT 2006 ) KW3 GTI 5 20DS 20 2002 Zo 2002 t........... ( 5 2002 s 2005 5 200D ) CA5EIII: It-as MC8/SEAnn/AT 5 2002 5 2002 SCS s8T1 CA /OAI 20 2005 011T/62 BATI 200s 70 2ut, cM/M CASEIt-A: CAe Is VWIKSEe*61/BAT LOLP(ri/year) SatokNAvelable (fear) UZA* c73 CT4 NCt/SAT 20 2002 4 -- - 20 2005 - 3,413 3,350 MS MCI Ct1 CT1 6tt Gt2 CT3 BATI 8*11 BAll BATI 2008 2009 2010 _ CASE IV--8 CASEIV-A: NCB/NC3/"BAT(KSE LOLPthrs/yesr) Bttoka Avaitable (Year) WV of Program (1989 ZS am) Coeanlsioning (Year) 1995 1996 1997 1998 2002 20 S 2002 200s PS ... .----.------- Z0 2005 ... 4,058 3,74? 1,7kZ S ( MCB 2003 2004 2002 20 2005 2002 3,731 3,731 3,9S2 Hs NO3 18C3 1413 5 s 2002 MCs MCB 20 ( . 2005 4,022 20 .P 2002 3,851 CT1/Gt2 Ct1CT22 G11/612 C13 3TS 13 14 GT C4 W43 6S 6T4 113 1413 20 2005 ) 3,e91 s 2002 4,02 s 2005 E/K#EBAT 20 2002 P.......) .--. 5.931 4,062 G11/1T2 CTt/GT2 W1/G12 611/t2 GT3 613 03 6T4 6T4 6T3 614 Htr3 1TS 14113 6T5 13 6T4 13 CASEVI-: #CM/T/M/T 20 20 2005 2005 (Ps) 3,931 3,879 611/12 HCS 6T3 614 C1 1W43 -N4; GT3;Gt4; N13 A"l' 2006 2007 2008 2009 AtIl KSE Ctl 5*11 Ut1 A De-couisslonlng ZESA;Evaluation team estiemtes. DOERO; KSE 1T1 S*Al 6T6 8*11 BAIT GIS 5*11 KSE KSE KSE kS 8A1 OBAI 5*118 *T 6t5 111 O1d 00 2010 Sourc: 200s CASEV-A: Gf/m1131BATA71SE I/M13/ASE/MA SY5 INC3 2005 8/ 5 c3 1999 2000 2001 2002 Ks 5 CASEV-B: I/MNUS 2 1 F~~~~~~~~~~~~~~~ 0 0 tO 0) ELECTRICITYSUPPLY OPTIOHS, 1991-2010 -- LEAST COST ANALYSISt BASECASE/POLICY-NEUTRAL SCENARIO-(1989 Z$ un) CASE I: NCB/K;E/GT/BAT LOLP (hrs/year) Batoka Available 5 2002 5 2005 NPV of Program a t0% 1989 ZS miltion 4,474 4,750 4,373 4,631 20 2002 20 2005 CASE Il-A: HCO/KSE/NWG3/BAT CASE II-B: HCB/KSE/UZAMS/AT CASE III: HCB/GT/BAT 5 2002 5 200? 5 2002 4,377 4,203 4,694 Comissioning Dates 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 HCB "CB "CB NCO NCB HCB HCB KSE KSE KSE KSE KSE KSE GT1&2 GT1&2 GT1&2 MWG3 UZAN GT3 BATI GT3 GT4 G75 BATJ BAT2 HWG3 BAT2 GT1 BATI GTl&2 GT3 GT4 BAT1 BAT2 NWG3 Source: DOERD; ZESA; Evaluationteam estimates. BAT2 BATi BATl CT4 BATI BATI BAT2 BAT2 GT1 BAT2 GTS GT6 F o ELECTRICITYSUPPLY OPTIONS, 1991-2010 CAPACITY CASE --- LEAST COST ANALYSIS: INTERNAAL (1989 ZS in) - POLICYACTIVE CASE BASE FORECAST INTERNALCAPACITYASE GOVERNMENT CASE BASE FORECAST - POLIOCY-NEUTRAL INTERNALCAPACITYCASE GOVERNMENT LOLP (hrs/year) Batoka Available 5 2002 5 2002 NPV of Program (1989 ZS mn) 3,757 4,6O CommissioningDates 1994/95 1995/96 1996/97 "Cs KSE HCs KSE GT4&2 1997/98 1998/99 1999/2000 GT1 2000/01 2001/02 2002/03 BAT1 GR3 BATI 2003/04 2004/05 2005/06 BAT2 2006/07 2007/08 2008109 GT4 BAT2 2009/10 Source: DOERD;ZESA; Evaluation GT5 team estimates. Cm 2AMAW G083(RASk* * I I I* ;I I I " 1988j91 I I* 8 I8. I 1 0$9Ol1 )991,21 W2/30 1 3,3941 1"994953 1995Se9s 6996P?t % 1 16997f81 I I 1 I 1 I 1 I 1 I 1 I - f0 1998jp9I s9/f2GcOI 2000i3 I 2001p2e0 2002,i31 2003P41 2004JCS1 20056 2006pb71 200W7Xi 2008J9. 20091;38 19902010 UOCRN P3 . 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I 9441.9 1 1 9753.11 60237.11 10733.01 11240.21 66758.01 12285.71 12768.31 '135.31 I 13740.9 hMWo I , 1 I8 1 1 1 HcS KSf 1 14228.6 I 14735. I 15263.61 1S81211I 163d4A 1 16979.31 17S98.5I 18242.91 18913.91 1941231 20339.5I 21096881 Ciol0 Gl1 SATO IA12 500 800 N0 00 8o0 938 938 1738 1738 t738 1738 373e 3738 1678 1738 2138 1EsEfa I101A FIJ 1N8GY I CAPACWY 1 1 4161 a 41663 A16) t 4161 41631 5189 t 5189 1 t 10739 10739 t 10739t 10739 1 10739 1 107398 107391 l0739 1 11902 1 MWa. % Tom GM"* 875S.0 325.3 22.8% 175S.0 2055.0 21390 2041.5 2119 26250 29250 288S.0 288S.0 286S.0 3003.0 3003.0 3803.0 38030 38030 38030 3d030 38030 38030 38030 4203.0 270.5 495.0 s0).5 324.6 3209 743.9 972.1 859.9 68.2% 9U44.1 31.7% 12403.2 30.6% 12799.6 18.9% 12289A A.8% 127053 39.S% 16893.0 49.8% 16893.0 42.5% 16560A. 37.6%3 1650.1 32.1% 16393.7 33.8% 17421.2 29.3% 17J21.2 58.2% 22971.2 52.9% 22971.2 47.7% 22973.2 42.7% 22971.2 37.8% 22971.2 33.1% 22971.2 28.5% 2211.2 24.08% 21.2 32.3% 24134.2 7a7.7 69S.5 758.S 660.7 1399.8 13157 12282 1%37.3 10430 944.9 8428 7367 1026.3 I sW1f I GW Ihin 94*.1 o0.83 *m9. 1 2164.1 20666 t 10A9.AI 97.7 I 46073 ; 4124.7 8 30. 1' 2819.21 -' 216S1I1 265.5 t 21.74 716.431 6588 t s599.98 532.7 1 *7283 1 *0573! 335891 2631.71 3037.A I GUV8NPrt* CAPM RIM 4EW30 M,W10 IL KARA SOUYEN KSE CAHOASASSAL " 8KO tSAIIA O0ESMK AI2C WATOKA GORGE STAGE I SAl RAlMCoOb STGS;E A 12 f0MU64t EOM tAt ZMWAZI WNZM "WANGESTAGEi tM'3 GASS IN* COT GWHse 300 SW 500 800 AOO IC0 300 420 138 0 4166 *s 63 e. 90WI5 SOS g*. f a e.g 445GU 113 pl ** 2w9OGM% 832 fKCA3DA 1116 2798 1028 QC i 4 o° 0 Z90SAffAI BERZEM IUSAHM 51A301US * GIERAUCtv I - 4Lo *W4441 URGA6 Al IOCS P0K ; 3C 75 1"/0 A4 DE" 902010 o 11S0 tM MAD I 8.1 G!93'U?4 00 17S694. C~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 463 ICAYC WIEU44 CAPAOIY32C3SE2. 8A9454.H2002 9"6 tmCS IS 12/31 MW SO. GWI* 51988(194 1979.0 9444.8 S1994/10 1 1755O 0 94 7 * 399/96 u 378550 99074.6 3191"/V?21 16390 1030309 IV1992/9:5 1801.5 102923 MOMS93943879.0 307087 .1 99*/20S 18850 1073487 I2990/Yb I 1885.0 10734.7 1200199/0276 38450 10140. * 20399718 19050 10903.2 *12008/9; l3850 10734.7 I99200405 I 885.O 10734.7 * 2000/) 8506 m 507347 * 2006/021 18830 107347 I 2007/03 38850SS10734.7 5 2003(914 58850 307347 I 2009/308 1805.0 307347 2W0A G1A'3G 2041V 200 0.07 21"5. 20.0 0"? 2175.0 2A0O 2*96. 2055.0 300.0 24966 233.0 210.0 1997. 20.81.0 200 1A997.3 2019.0 240.0 1990. 2765.0 240.0 149970 2125.0 240.0 14997.3 2085.0 3800 5A98.0 2005.0 180.0 14980.0 2065.0 1800 3498.0 2065.0 580.0 54980 2045.0 5800 14980 2065.0 1800 14980 2065.0 1600 3498. 2065.0 3800 -14980 20650 1229. 3 MW..1 1W9S tA,. Q#80 6. 20@ & 301.3 173 325.0 22.0% 4. 01"9.6 3. 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I 3A095 I 2A32.9 I s 25482.33 7237.6 I 7236345 7404092 12232.71 3978.8 24538.43 18047 1 19.5% 3761.15t 6 15 2690 S '755,0 A6 411 1 4755.0 776.2 30299.5 CAPAO1Y FAM£8001 KAR15A SOUM1MXN C.At$*A BASSA IDE SIATOMC GOUGE STA0GE 8AIOKAGOUGE StAiGE I ECVA*E UIYIRZAMBEZI t&VWASG SIACEU GAS 1Ut*tCS MSE NCO gAllI 8A12 1CMA ILIAM18 teNG) 01 300 500 800 AOO 0 4)161w 5505 eke 4 4450W4o 1163 (mm MISBA 83 1116 279 1026 ICV) 300 420 138 , *: WCCdVEXOAf0 D4EE SIUAIEGY STUCY ACTRIAY S%WSECIO U4VESMEI1I SIOWN0 Coilshmcmo w~If" LAWE FZCAS POUCV ACWtICASE CAISa LOs 20Htv - IIATOKAIN2000 9 &iWNgkdIS MiSis P#ojodwI. *&sbab.oSodthmi, A 5 1990 W99 1992 1993 I1 1.* 27.1 42.3 114. I I 1. t# 0.6 I 5 2.1 444 0.5 36.4 10 ~~~~~~~ 0 2 ~~~I1 3.0 9.7 ~~~~~~~~~~~I 5 56 30.1 72.0 * * Uprtig ofKodb.5.Wh OoTWUR.#3 1994 25.2 1)5.0 jq6 5995 199? We9 1999 200 17.9 74.4 31.5 44 9 32.4 .3 LI G,7uim.02 II %xI3SMW .3 Cal. II lsou impoe 'U 5 I TOTAl ...... 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I8.0 IA 40.7~~~~~~~~~~~~~~~~~~~~~~~O 6*?2 6 6 831.5 3*447 34* 2 22.9 3134 52.5 652 1075 524 Al.5 17.1 86~~~~~~~~~~~~~~~~~6 1840 229.9 2497 93.9 50.0 3.4 25 S9 7.5 87 30.71489 0 as 3.5 107 396 66.4 33 2 75.0 309.5 3904 21$.) -..--...-...-...-..-. 7.2 J.7 30.9 7.7 *1.9 19.5 15.6 31.9 55.? 7Z.6 46 1520 7).1 53.6 122.7 246.7 252. 206.0 204.9 117.9 147A6 93.2 32.3 1939 92.6 69.3 354.6 3044 225.0 236.3 A42.2 352.5 23111 60..7. 77.3 383. 262.9-314. 34)'' 8.7 2-7-6...2). 31.2 4.6 183.& 1239 163.1 266.2 '239 3276 280.7 254.3 149.0 3~ 91.0 12.3 260.5 337.3 '27.9 580.7 581.S 93.3 429.3 530.4 359.3 231.1 -....-. ..-..--.--.-..… aukdm tAok. WA9 *1 5~~~~~~~4.6 1350 809 ....... Somxe. Stmsoa Wq ij 200 ~~~~~~~~~~~~~~~~~~~~~~~~88.2 6.8 .32.4 935.2 fI0 2002 2002 2004 2005 2006 200 6 3 38.0 1.4 ~~~~~~~~~~~~~~~~~~~~40.7 88-2 6.6 F34 0~1~&05 00 3*0 14 ~~~~~~~~~~~~~~~~~40.? 882 8.8 13 UIX38IA 200 80 13 I,e3 3997 1996 i9 375 I1 ljg)35&6I 399 56.S 179 744A Iit Ig .* GM1 *AS( FORCASTPOtIY ACWVE CASt CASE VI OP2#Y SOO ATOKA 04 2005 HCd1" AVAUAI* 3*13 RAY2003 OtWZ$wmO c~aw4ssimwd ab 2010.2 .0 00 00 00 0.0 00 0.0 0.0 0.0 00 0@4 003 0~I 00 0q * MIGCIAIO EMOMYPTRGY S1UY 1185KIt NW S041I PICIC U U1tuOl OMASE fORECAST - POlC ACTIVE CASE PSOWAM P2 - V Wt2 Cisafiroemiai 0 V89 fIuw.d IS miSa.. RA4oge.kif bI.mn It_South .4 Ce_eea%m om lmpo - SaokeCGo.geSmgmS 420W TOTF4 . K. _ 99 1993 09 473 9.7 1145 21.3 565 17.9 74.A 30.1 n.o 13s.8 995 36.2 18.3 * . 2.9 0.6 3.7 196 99 __ 19 1999 71.5 987 3I 107 S.0 O109.S 54.6 135.0 89.0 46.0 53.3 27.6 3.4 2.5 5.9 7.2 3.7 10V 7.? 4A I2.3 154.1 42.1 196.3 . 4 _ _ ._ 2002 20 _ _ w 204 _ _ 2000 200W 20W ..._ ..._ 2008 & * - _~~~~~~~~~~~~~~~~~~~~~~~ 2009 76.2 19.5 95.7 38.0 $.2 43.2 0.0 5S2.6 63.2 67.6 220.3 15.8 89.0 134.1 126 16.4 23.1 204 105.4 IS7.2 0.7 104.0 41.9 152.0 193.9 19.5 73.1 92. 15.6 31.9 S5.7 72.6 "6.0 2049 117.9 53.6 122.7 240.7 252.5 136.3 1476 93.3 69.1 354. 30.4 3250 A42.2 352.5 211.1 57.7 108.4 149.7IOB.1 93.7 726 206.0 2049 llt9 16"6 89.6 76.6 142.2 2539 252.5 236.3 147.6 93.3 222.3 198.0 226.3 250.3 347.6 325.0 A42.2 3S2.S 2%1.1 .. Owa. puc~awu.W _ 201 20 364 .0 37.5 8.S 10.8 o ' -.. t 271 30 _ _ _ f t t t a II t 11 i . S2.2 1 tI T I f t Woe.: uiactudj t^ . I I I. I 1 S o - _ 1 f I 1.5 44.4 6.6~~~~~~~ 06 0.5 T I 2.1 44.9 - *- ihis _ 99 *AIWhUF Il t I 6.2 1 I 16 Upi'.u&mg of g&.oS.wh s *_ I .Peojed y 00 00 00 00 40 0.0 00 00 00 0.0 00 00 .. 2010 ~~~ ~~~ ~ ~ ~ ~ ~ 0 ~ ~ ~ ~ ~ ~ ~ . -$ OC 00 00 -. IotWAiRDCzOV STUfCY SrlOV aUCTOMr SMCM IWSTA4 SEIAUC Coki W "s 19"6miu Pf*dftth Ru1 ofcI * , Kam sot* ; A41Smt41fIshiW Iau.lmpa'l Boi&0or.SsogsI 4.200MW IBtak 2x2WAW 27.1 62.3 0.2 3.0 9.7 1.4 301 726 t I 71 , Cob" 1992 fdwmb P t 1.4 * A i*9m 1"9 .d t*,W"of BA fMCASI - POUdEICE GPOAUM la UXI 2ml2ft3 . eStage a 1XI3mW I5 0.4 2.1 44.4 0.5 449 I"? 199 134.1 76.2 360 200 2001 22 203 1 1011 36.2 7.2 3.7 10.9 IS.8 16.4 23.1 19.5 S.2 OS.4 IS7.2 9SJ 43.2 69.0 53.3 54A '46.0 135.0 7.7 4.6 41.9 152.0 123 90 12.6 28.4 1939 19.5 73.1 92.6 15. 534 Noe. eadms ut.*awi 67 3T2.4 702 83 180 *0.7 8B2 tI TI 74.9 1059 4.0 14.4 809 120.4 1604 S37 2134 20.1. 2285 431.4 141.7 117.1 278.9 1497 786 2263 144.7 142.2 BS.2 107 5 l64.0 229.9 2497 108.1 937 I050 2742 210.3 811.9 1422 253.9 260.7 2542 149.0 93.3 250.3 347.6 35.7 530.4 359.3 211.1 00 00 00 00 49.9 177.2 223.7 191.0 00 S8.5 79.9 113.7 119.4 0.0 1283 257.1 337.3 310.4 coaam.m.edAet 2010 .5 ~~~~~~~~~~~~~~~~~~~~~~~~ 4 * 52.4 41.5 929 S4 1.4 6.8 SiuWuNo0mo C~ 200 45.7 78.9 48.8 27.4 28 116 73.1 107.4 606 35.2 1131 31 A S2. fI m pq 206 I 34. 27.0 61. 2.9 18 3.7 20 49.1 154A 304.4 325.0 A42.2 3525 21 1 TI t 1 200 31.9 55.7 72.6 206.0 204.9 117.9 I 122.7 246.7 252.5 236.3 167.6 9133 F *, t. 1 f I 20 27.6 80.9 fmwo * I t4 I 204 1.4 3.5 f :I tt18.3 t * 5.9 k99 34.4 6.S 10.8 3.4 2.5 199 114.3 56.5 21.3 17.9 *35. 74.4 2.2 f I t 1 t e IW94 Ti1 fhoslq Slog II 2W~2Z0MW Go$IbD.e * *t tI1 I f 1 I I I 9 CASE 524o 41.5 93.9 -188MMSUOAECASTf * POICY ACtIVE CASE *uaagssm~uuea...e....a..g CASEVII * ..... nnx3 PAPe1 of 20 11CRUNPWbIGS/BA LW ONP lMTm I !ATOkAIN 2005 lCIC NOTAVAILASLE AftEE JULY2001 11116?ALLOCATION & CAPACITY FACTORS Enerly fIlut.s V1A* TOTAL 1991 10241.9 MgE 2.05 C 3) 1,2 SOMAs. 4.79 C .6) 1993 11224.S 17.41 C 213) 199 11731.9 .00 C .0) 199 12294.5 .00 C.0) ¶996 12776.? .00 1.0) 199? 13261.0 .00 C .0)1 199 13741.3 .00 c .0) iWai MMi a.43 C .) 5.26 (1.2) 17.06 C 3.8) .00 C .0) .00 C .0) .00 C .0) .00 C.0) .00 IK& 6.z8 C .9) 12.70 C 1.9) 37.50 C5.6) .00 C .0) .00 C .0) .00 C .) .00 C .0) .00 304.23 C 7.6) 785.34 (19.?) 1724.60 (43.2) 2171.19 (54.4) 128.79 C 3.2) 214.80 C 5.4) 328.98 C 8.2) 1230.41 C .0) C .0) (30.8) in CIA. capcity factors 11"ll .00 C .0) .00 C .0) .00 c75.0) C .0) 2759.40 £L2.94 (75.0) C 5.) 1937.34 .73 (54.18) C .1) 2376.31 1.75 (66.6) C .2) 21'S3.1S 3.80 (74.3) c .5) 2758.76 13.88 IZ 2759.26 (73.0) 2759.40 (7n.0) 3759.40 (75.0) C 1.6) .00 .00 .00 1658.52 2759.19 c .0) C .0) C .0) C41.S) (75.0) 200 14735.2 .00 .00 .00 2080.76 759.39 C .0) C 0) C *0) "(SI.1) (75.0) 1001 15367.2 .00 .00 .00 2484.81 2759.40 C .0 C 0) C .0) (63.2) (750) 20m 15811.7 .00 .00 .00 298.32 3759.40 C .0) C .0) c .0) (74.6) (75.0) 200 16373.4 .00 .00 .00 2987.27 2759.40 C .0) C .0) C .0) (74.8) (15.0) am0 116980.6 .00 .00 .00 2991.58 2759.40 C .0) C.0) C .0) (74.9) (75.0) 200 17811.2 .00 .00 .00 2.31.50 2306.12 C .0) C .0) C .0) C 5.8) (62.7) 2006 1824.6 .00 .00 -. 00 393.63 2759.4-0 C .0) C .0) C .0) C 9.9) (75.0) 2007 10024.6 .00 .00 .00 1013.72 2759.40 C .0) C .0) C .0) (25.4) (75.0) a00 19621.9 .00 .00 .00 1638.02 2159.40 C.0) C .0) C .0) (40.8) (75.0) M00 2034.7 .00 .00 .00 2224.05 2759.40 C .0) C .0) C .0) (55.?) (75.0) 21010*1102.3 .00 .00 .00 2707.52 2759.40 C .0) C .0) C .0) (69.8) (75.0) 22.43 C 2.9) 37.T C 4.8) 58.95 C 7.5) 187.17 (23.9) '455.88 (58.3) 628.75 (80.4) 7.92 C 1.0) 15.16 C 1.9) 27.37 C 3.Sj 46.'v C 6.0) 74.9`1 C 9.6) 145.49 (08.6) 1999 14220.2 SZ hownin brackets. tuCa iW63 zmIS NCE .00 .00 2496.60 .00 -.) .0) MM.0 C .0) .00 .00 2496.60 .00 C .0) C .0) (95.0) C .0) *00 .00 1997.28 .C0 C .0)c C .0 C0) mc9.) Cm.0 66.2?' 23.5? .00 199748 .00 C 8.9) C 3.2) C .0) (99.0) C .0) 1.61 is' .00 1997.28 U01'.43 C .2) C.0) .0) (95.0) (80.1) 3.58 .73 .00 1997.28 3511.25 C .5) (.1) C.0) (95.0) (80.2) 7.24 1.71 .00 197.28 3517.8 C1.0) c .2) C .0) (49.0) (80.3) 21.65 0.52 .Co 1497.46 3541.92 C2.9) C .9) C .0) (95.0) (80.9) 35.63 12.08 .00 1497.96 3563.13 C 4.8) C 1.0) c .0) (95.0) (81.1) 56.25 21.29 .00 1497.93 3592.30 C 7.63 C 2.9) C .0) (95.0) (82.0) 83.94 35.72 .00 1497.96 3629.46 (11.3) C 4.8) C .0) (95.0) (82.5) 49677 137.57 2759.'0 1497.96 .00 (66.7) (18.53 (75.0) (95.) 1 .0) 600.88 177.72 2759.40 1497.96 .00 (80J7) (23.9) (75.0) (95.0) ( .0) 605.54 396.9? 2759.40 1497.96 .00 (81.3) C53.3) (73.0) (95.0) C .0) 12.6? 4.30 2759.40 1497.96 .00 C 1.7) C .6) (7.0 (5.0) C"O C.0) 22.92 1.74 2759.40 14-97.96 .00 c 3.1) C 1.2) (IS.0) 199.0) C .0) 39.25 16.69 2159.40 1497.96 .00 C 5.3) C 2.2) (75.0) (95.0) C .) 63.00 30i.00 2159.40 1497,.96 .00 (.8.5) C 4.0) (15.0) (95.0) C .0) 96.94 50.70 2759.40 1497.96 .00 (11.0) C 6.8) (75.0) (95.0) C .0) 106.73 80.47 2759.40 1497.96 .00 (14.3) (10.8) (15.0) (OS.0) C .0) "MotR .00 C .0)t .00 C .0) .00 6 MM*a .00 4671.0 C .0) (34.4) C00 '671.00 C .0) (34.4) .00 4671.00 C0) (34.4) .00 4671.00 C .0) (34.4) .00 4671.00 C .0) (34.4) .00 4671.00 C .0) (34.4) .00 4671.00 C .0) (3' .00 46?. C .0) (34.41r .00 4671.0 C .0) (34.4) 18.94 4671.00 ( 1.6) C34.4) 45.73 4.671.00 C 1.9) (34.4) 322.11 4671.00 C 8.7) (34.4) 463.90 4671.00 C 9.6) (34.4) 670.04 4671.00 (11.1) (34.4) 4.99 10766.00 C .1) (79.4) 11.43 1078.00 C .2) (79.4) 24.63 10m8.00 C .4) (79.4) 50.84 10766.00 C .8) (79.4) 98.32 10786.00 C 1.6) (79.4) 179.53 10Q86.09 C3.0) Cm tRon $s*t,t. . * *. * v . ** P!5z L SL. t (4 <~ '-..-j -, v'64) (CI ) 0-9210t Z9t o64) Cs, ) 921oS Wt 99 V60 ) r) °99Oit it L ~~~~8 /t -s t2'ZO)tO'Sb)(O' ) srof009f cc-so) t'Z91 CO) W 0v9fst V60 ct, 0'99*O01 1'60 cO 3 0'9UOt*W, It." to- 96-16% C Co'6) (0t 96.6fl 00 C036) 0 ) 96'L6fl ttO 0*IA91 Cv'Oq) COC6) CO, ) Ot-OZSC96'L67L 00' 6t Cr09) Wr56) (O- I IS'ttIt w n oo' (L00) COr to, C' Wr Ot'1OSt9%`10 00' C-9 S1 CZ ) CrO6) COc9) ' 10-9iZ - 4-61LP 96ff-67 00- VIVO CZ'It ) 0't-199 IrOSL 0-9U01 It. 1). ) O-tL97 9f-7) dI* Olt ) 60C9 W6'i 3 V3 W, V.'9) VtW9" t9-1 Vflt) 0*1L97 9'9i) Ct'061 cOZ Z6 4 S'u) 9*t1 (0'- 3 00' CO' ) (O' ) 96wLStl WWI 0 00 Co, 00' '197 to 00'* t shI CW") CtV ) £1' WW61 *K1 WoUCL) W69£) to' 3 CZOC tS-I 00' ) t*- 00' 2S9 ) tt' I?4166 00'(036: to, ) IZp.OZ *O, tO56I CO' ) C*'96 1? 00' B00to, Go. 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CASE I IOUSE/8AT- lOSt 2.1/R ISICA I 2005 *FIOU ACMACASE ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.. .* I 6 I. * * I (MtMrt CEtA IlAlW$lMQ tlO0 I3 ZSCO mvo GV o MWso GV*to ~~~I 3 1968/891 * t19q9%) 6 S. 37SS 9444.1 17550 94441 3990/910 ,7SSO I 1991/f2t I f339.0 I 192A3 . 6403.5 I 1993/94 1879.0 1 1994/951 8S.0 ; 3995/961 ?885.0 1 3996/#976 1835.0 I 1997/985 38U50 I * 1 199899 904.6 103030 10792.3 107095 107347 107347 10403.9 16901.2 13885.010734J 1)999/20C00 1885.0 10734.7 * 2000/011 188S.0 10731.7 : 2001/03I 18S.0 1073a.7 1 2002/031 1885.0 10734.7 * 2003/WI 1685.0 10734.7 I 2004/St 168850 10734.7 3 2005S/Cst 1865.0 1073A.? I 2006/07i 1885.0 10734*. I 200W7/6I 16850 10734.7 I 20/0961 13885.0 107347 * 2009/310 1865.0 10734.7 0.0 00 30.0 3000 2400 2400 240.0 240.0 240.0 160.0 1800 180.0 180.0 180.0 180.0 180.0 1800 180.0 1800 1800 180.0 180 0.0 1F% ANi 175S.0 0.0 1755.0 2496.6 2055.0 2496.6 2739.0 199.3 7W0.5 997.3 2119.0 997.3 2)25.0 n99.3 2125.0 199t3 2125.0 14980 2065.0 UO9.0 2065.0 1498.0*5. 2W0 1U980 1498.0 1498.0 1498.0 t498.0 14980 14980 34980 3498.0 14980 2065.0 2065.0 7065.0 2065.0 2065.0 2065.0 2065.0 2065.0 Vco I ER I NW O4MAbO6 RJEM GVUl ARM& 9444.1 1429.7 I 9444.16 14845 12401.21 1560.0 12799.4 1 91637.5 1229.6A 6716.9 12705.7 1796.) 12732.0 1681.1 12732.01 1952.9 12399. 1 2025.1 12399.1 1 2097.3 12232.71 1222.7 14735.76 K 2858.1 18913.9t 12232.71 2960.2 19632.31 206.0 12232.71 30663 20339.5 1 2065.0 12232.71 3176.7 210968 tc 9 hp ftmfB tOM loMb l7SS.0 325.3 22.6% 94A4.1 270.5 S00 So0 t3 4161 t 4161 t 416) 6 4161 1 1755.0 205S0 2139.0 2041.5 2339.0 26250 26250 2625.0 2565.0 4950 501.5 3246 320.9 743.9 672.1 599.9 461.? 18.&2* 317% 30.6% 18.9% 17.8% 3.5% 34.4% 29.% 22.3% I1? 124012 440 1279.6 20.51 122896 46$6 1270.7 0.8 16893.0 0.72 6493.0 1.78 16560.1 8.08 16560.1 800 316)1 2865.0 670.5 27.6% 3 3 97531 I 10237.11 10733.01 tt240271 1758.0 1226S.7I 34 12766.3i500 132S3.7I 13740.91 12232.71 2322.3 152634I 0232.7 1 2403.2 IS812.8I 122323I 2487.3 16384.4t 12232.71 2574.6 16979.3I GTI 12232. t 2665.7 17598.SS I AT) 12232.71 2760.0 18242.96 12232.7 1 Ws MI f OtAL eew tNOY Ir-PAC"Y GWHWI n<MWoI^W ANNo 9444.91 2169.5 142268.6 2244.5 CAAU t 1 1 1 S0 5 80 8C0 800 938 1736 3738 1738 173 1738 1738 41611 2565.0 4161 t 41611 416 5189I 107391 10739t 107391 107391 107391 107391 395.5 2865.0 542.7 2865.0 461.8 2865.0 377.7 3003.0 428.2 3803.0 1137.3 38030 3043.0 3803.0 9 4.9 2803.0 8A2.8 3803.0 3803.0 736.7 626.3 18.2% 23.4% 19.2% I52% 16.EAb 42.7% 37.8% 33 1% 28 !'% 24t% 39.7% 94.r KA3A SO3 EX3 IS CAIOtAASSAtE tHC8 SATCEA GC*CESTAGE ) BATOKA GORGE StGE SAT? (CMLINK (C UWM ZMAVZ teA8 tM/ANGE STAGES *A 3 GAS18ES CI 1.02 2.70 7.10 18IS OC0 000 0.02 16393.7 300 1 103 300 420 1338 0 4161 5)05 A w 445*J 1363p3. *e 290G0M 832 1146 2798 1028 Ew KAA 2~~~ . 4 .I 216 2CM 1OE 94: 460: 412. 330; 281' 165 16393.7 13-.1 . 16393.7 SS 16393.7 tO 17421.2 44 ° 22971.2 S37 22976.2 472 0.06 22971.2 *OS 025 22971.2 33S 0.95 22971.2 263 345 22971.2 38? MM fENEGY s50 800 AO0 4W. 38.26 16393.7 216' G84"R1)ON onlow. CAPAO1 St a * 2&WABAM IRGVY SWAtGY SfM ELEcT0crnSes.ECIOS mC* Slo-Slo I * * * CAEGW"M.BE/S C 101?2O/ - ATOVAIN 2002 4 Ia S I ......... 1 t * 1-2010 ASEFMCICASI POlCYACWECASE X* 4 . W*? I E eusIwbo z4T I..... e. 988/89S MW .......... GWlbo &Sz WWbfRU ZESCO MW4, ..........- 17550 9444.1 0.0 S 1989/901 1755.0 * 10991/91 17t5 0 S 199192. 1839.0 t 192/931 1801 S 1993/941 1879.0 1 1994/955 tiss0 1995/961 1865.6 I 1996/7t5 188S0 I t9 I7/9aIaskso t 1998/951 38850 11999/2000 5885.0 1 2000/011 1885.0 a 2001/021 1685.0 I 200W2/:. 5885.0 1 2003104 5d85.0 I1 2004/051 188S.0 I 2005/061 1885.0 I 2006/071 1880 * 2007/0,i 186S0 1 2008/0?1 18S60 1 20091$10 1885.0 9444.1 9904 6 10303.0 10292.3 )07085 10738.7 107347 10401.9 10901.2 1073A7 10734.7 1073A.7 10734.7 10734.7 10734.7 10734.7 10i73.7 073i 7 107347 507)4.7 107347 0.0 300.0 3000 2400 2400 2400 2400 2400 1800 160.0 580.0 180.0 180.0 5800 180.0 180.0 180.0 5800 1800 5800 180.0 * ) . TOTL OWIto 0.0 0.0 2496.6 2496.6 199.3 997.3 IW.3 197.3 199.3 1498.0 14980 14980. 14980 1498.0 1498.0 1498.0 54980 )4980 5898.0 14980 1498.0 1498.0 I0 R IEOMS W,.o A4ANs 6755.0 17550 2055.0 2139.0 2041.5 21)9.0 2525.0 2125.0 2125.0 2065.0 2065.0 2065.0 2065.0 2063.0 2065.0 206S.0 2065.0 206S.0 2065.0 206S.0 206S.0 2065.0 oWlwoI fffcGY I NW OCMAtDlI`O£CTS G%%t. S S 9444.11t 429.7 9444.9 I 5 ) 9444.1 1 14843 9753.1 t 1201.2 0 1560.0 t0237.1 I 1279.61 * 1637.5 10733.01 17289.6 I 1716.9 11240.2 I 12705.73I 79.1) 578.05 127320 S 881.1 12285.7 NOIC 12732.01 1952.9 12768.31 12399.1t 2025.1 13253.75 12399.15 2097.3 13740.91 12232.7t 2169.5 14228.61 12232.7 2244.5 14135.71 VE 12i32.7 1 2322.3 15263.6 12232.7 I 240!.2 15812.81 12232.71 2487.3 16384.45 12232.71 2S74.8 16979.3 SI1 12232:73 26657 17598.5 5 52232.71 2760.0 58242.91 52232.7t 2858 1 18953.95 1223'.71 2960.2 19632.3S 122323 S 306.3 20339 5 1 12232.71 31767 21096.81 CAPAOIY PU I TOTAL qte9GY COAM A mAWs 0WlmI MWs. . I I 5 I I 1 SW0 S00 50s SO0 So0 800 800 800 8C0 1600 1600 1600 1600 1600 1600 1600 3 4161 5 4161 1 4161 4161 1 4161 t A4165 461 1 4161 1 4561 1 9711 97)1 5 9711i 1 97)1 9711 5 911 1 97511 57550 175.0 20550 21390 2041.5 2119.0 2625.0 26250 2620 2565.0 25650 28650 2865.0 2865.0 2865.0 36650 . 3665.0 3665.0 3665,0 3665.0 366S.0 366S.0 tOat ANSNA Ao . 325.3 2705 495.0 501.5 3246 3209 7439 672.1 599.9 467.7 395S 620.S 5427 461.8 377.7 10902 999.3 905.0 806.9 7048 S98.7 4883 ASt IA s OWIw 226% 941".5 182% 31.2% 30EM 10.9% 17.% 39.5% 3.4% 296% 22.3% 58.2%4 27.6% 23.4% 192% 152% 2 3% 375% 32D% 28.2% 23.8% 19.5% 55.4% 1.7 *AO 20.51 86.56 0.28 0o.n 1.78 8.0o 18.26 1.02 2.70 7.10 t8.1S 0.00 0003 0.02 006 0.25 0.9S 2.45 SPACILY GVa S 9<4.1 12401.2 1279.6 12289.A 12705.7 1689.0 168930 16540.5 16360.1 1639).? 163931 hS9).? .309 2168 M0 1045 9J 460. 4I*17 330( 831% 216! 165i 553t 16393) Si", 16393.7 21943J7 2t9437 21943.7 21943).7 21943.7 219'3.7 21943J 496. 434 37G. 302? 233 160 84 GENRATONCP110NS. CAPAM Ak%% KARA SOUtHEJe' KSE CAHO9ASSSIW :Co BAIOrA GOGE STAGE LAS, SATOKA GOCGE STAGE At2 EMU4NK (DM UPPER ZAMI U2AMI IhlWANGE S3AGE 0 41 03 GASPAS"$ Of f(lM fRGY GVAo 300 SO 800 400 300 300 420 138 0 4161 5050 F&a J4"5SGWI 1363p w 2901& 832 1116 279 5028 I 0,o 40 F * 1MA6'WI1 EW*GY SIRtIGY SI3AY * CsERAWN POw4t FROMWE SW USE CAST * ; 6 1I 3 ; 1 ........ 19898691 ..- _.... _.,... 155.0 t Is6909t0o6 ; - P * - rA4* Ith/Ke,9At * wL 20"1iY - ATOCKA IN2005 CAM * ElsWtJ ZESA APOI FRCA VW$ ZE 3 %VWW. GM-be WA. I*--I,_---.......... .-..- | 19902010 . . .... 9444.1 ....... TOTA 9 .-.. 1 Z.|._ ..... ................. 0.0 I7SS0 9444.A 0.0 I 1990I 1I 175S0 990486 300.0 I 3993/921* 18390 103030 Xo00 I 1992) 180o 1025 9M.3 2400 1 I 993j9* 18790 10706.5 240. 3I IM994/956 80 107347 2400 I 39S9/6f tso 30734.7 2*0.0 1396/9? 388.0 60*03.9 2400 I 1I 971veI 85so 10903.2 180.0 I I63999I 18850 30734.7 1800 131999/20006 185SO 10734.7 1800 1 2000JD11 s88S0 10734.7 180.0 1 20013/26 3850 10734.7 380.0 I 2002/J31 18850 10734.7 180.0 1 2003/841 3805.0 10734.7 180.0 1 2004JD5 188S0 107347 380. 1 2005G61 13885.0 10734.7 1800 1 2006/071 38850 10734.7 180.0 1 2007)8B 388SO 10734.7 380.0 1 200eJ0 I 1885.0 10734.7 180.0 I 2009130 38850 107347 180.0 I GW1IS 00 0.0 2496.6 2496.6 1997.3 1997.3 399.3 3997.3 1997.3 1498.0 3498.0 1498.0 1498.0 1498.0 1498.0 1498.0 1498.0 3498.0 1498.0 1*98.0 1498.0 1498.0 . ?fPOWER 8IUY3 IEw C.PA01Y FAN I TOTAL RESERVE I OEIMIO CEMAIO6PROJECTS ENEGY I CAPAMY A. OWib. MW.. GaW%oI MWmG WA. s 94*4. 1 '1755.0 9444.1 142.7 17$5.0 20S5.0 2139.0 2041.5 2119.0 2125.0 2123.0 2125.0 2065.0 2065.0 2065.0 2065.0 2065.0 2063.0 2065.0 2063.0 2065.0 2065.0 2065.0 2065.0 2065.0 9444.1 1 12401.21 12799.6 1 12289.61 12705Z I 62732.01 12732.01 12399.3 1239.3 I 12232.7 I 12232.7I 12232.-71 12232.t7 12232.7 12232.71 12232.7 t 12232.71 12232.7I 12232.7I 12232.71 12232.76 1434.5 1560.0 16375 1716.9 1798.1 1881.3 1932.9 2025.1 2097.3 2169.3 2244.5 2322.3 2403.2 2487.3 2574.8 2663.? 2760.0 2858.3 2960.2 3066.3 3176). ......... __ . 9t53.1 1 10237.l t 10733.0 1 11240.21 1)758.06 12285.761 Hl 12768.3 1 13753.7 13740.91 342286 14735.71 ICE 15263.6 1 15612.8 6 16384.4 1 16979.3 1 37598.3 I 18242.91 18913.91 19612.31 20339.S 21096.80 GTI WI 500 sc0 So00 300 sc 5 800 80 800 80o 938 1738 3738 1738 1738 3738 1738 . ... .|----__-______-_ 1t? A9*.Ool Ii t 75S0 325.3 22.8% I l7S5.C 270.5 495.0 501.5 324.6 3209 7439 672.1 599.9 *67.7 395.5 620.5 542.7 461.8 377.7 428.2 11373 1043.0 9JJ 9 842.6 726.7 626.3 18.2% 31.7% 30.6% V9 17.8% 39.5% 34.4% 29.6% 22.3% 18.2% 27.8% 23.4% 19.2% 15.2% 16.6% 42.7% 37.8% 33.1% 28.5% 24.04 .19.7% I 1 6 41631 6136 1 4363 6 4161 1 461 I 4161 1 4163 4361 4161 1 5189 1 1073f 9 10739 1 107390 30739) 10739 1 107)9 1 20350 2139.0 2041.5 2339.0 2625.0 2625.0 2625.0 25S5.0 2365.0 2865.0 2845.0 2865.0 2865.0 3003.0 38030 3803.0 3803.0 38030 3803.0 3803.0 1M E7( TOIA). 56R 0PA 944. 1.73 4.40 20.53 4.56 028 0.72 1.78 8.06 18.26 1.02 2.70 7.10 18.S 10.65 0.00 0.00 0.01 0.03 0.21 0.82 *30 9444.1 12A01.2 12799. 12)89A. 32705? 168930 168930 16S60.3 36560.1 16393.7 3433.) 16393.7 16393.7 16393.7 17421.2 22973.2 22971.2 22971.2 22971.2 22971.2 22971.2 216 206 10* 94 A60 412 330 281 211 l6" l1i 56 4AA. S37 6 47; 40! 33! 26 1O GEEW~OPI104: CAPACIIY fRM ENERGY t,. KARsaS EN K5E CAHIOASSA UtX to SATO4A CIGE STAGE BAT MAJOKA 0bGE STAGE BAt2 ODM VWX EOMA 3JUPE~~~~~~~~~~~~~~W RZA~AA2I UWAM4 mWAYGE STAGE 3 hV3 GAST3RtS GI 300 SGO 00So 400 300 300 420 138 0 4316 5305 ph* .*oe 445GVM 1363 o iwe 2900 832 bamKAb8 1336 2798 t 1028 lb I 0I . l. .e 0 . %., . .~~ ZAi&SE . Et4kGVSfIoAhG S e ' 0&tUA0 ~V~0ftl&1U906MlM~190.2010 SASE 9CWSf ;a I *8 UESMA131* zeCo MiW. fMW, GY4te 1988j; 17SS0 94441 00 00 1 1989/90 I 1990/ill. 1755.0 9444.1 99046 00 3000 00a 24966 24966 205S.0 2400 2400 2400 1800 8800 1800 1000 1600 1800 1800 81bOO 8800 1600 1800 1800 8800 19973 19973 89913 140a 84980 14980' 14980 1498.0 149.0 14980 14980 149d0 84980 14840 14980 84980 2125.0 2125.0 21250 20650 206S.0 2065.0 265.0 2065.0 2065.0 2065.0 20S60 2065.0 2065.0 205.0 2065.0 2065.0 I 8 58M"t . A1A N 2002 AC . I i~iEt8 1XRi CASEIA 0 HCOEAMPW$)8A 0 -11 1755.0 8 189/921 8839 10303.0 I 9m/931 teots 80292.3 t 993/941 18790 10708S I 899:4s 1 1885.0 *; 1 )995V61 18$85.0 3 19619?' 1AS.o ; 8997/96 1a IS 0 I 1998/998 88U50 18999/20004 885.0 sI 2000/1I 1885.0 1 2001/028 168S.0 1 2002/031 1885.0 * 2003/040 I85.0 I 2004/05 1885.0 a 200SJCo1 1885.0 1 2006/01 10850 1 2007/Gd '885.0 * 2008/0 1 88850 1 2009/101 1S85 107347 10734.t 10401.9 80901.2 10734 7 10734.7 10836.7 10734.7 10734.7 80734.7 101347 1Z3427 107s: 107:147 1073:) -3A7 CW,1mMWe GW,. 3000 2400 2400 I POI I ZMID 0W8*@8 ll fr1Vt CA0Af (ESMiO1 I ROACTS 0Y48o 13t.o MW,. FRM I TOTAL &E*0 I CAPAIT GWMb.I3VQ f oSM MWA 1 0? % FW 17550 9444.1 1 1429.7 944.91 1 1755. 32S. 22.8% 755 9444.1 1 1464S 9753.881 1 I75S0 270.5 18.2% 2625.0 2625.0 2625.) 2865.0 28$6.0 2865.0 2850 3265.0 3285.0 328so 3285.0 408S.0 4085C 408S0 4085.0 4085 0 7 3.9 672.1 S99.9 767.7 695.5 620.5 542.7 881.8 797.7 710.2 689.3 1325.0 1226.9 1124.8 l0o887 90.3 39.5% 34.4% ".6% 36.6% 32.1% 27.6% 23.A% 36.7% 32.1% 27.6% 23.2% 48A0 42.9% 36.08 33.2% 20.6% .401.21 21390 127"61: 99?3 2041.5 12289.61 1997.3 2119.0 12705.71 12732.00 12732.0t 1239.8 12399.1 8 12232.71 12232.14 82232.71 12232.78 12232.76 12232.70 12232. a 12232., 12232.11 82232.7? 12232.71 12232.71 IW0 16375 1764.9 8798.1 188181 19S2.9 2025.1 2097.3 2169.5 2244.5 7322.3 2403.2 2487.3 2574.8 2665.7 2760.0 2858.1 2960.2 3066.3 3176.7 80237.81 10733.0. 11240.21 11758.01 12285.71 " 12768.3I 13253.7I 13740.91 KSE 84228.6 I 14735.7 85263.68 15812.88 8tW3 11684.41 16979.31 17S98.58 18242.9 AIT 88913.91 89612.38 20339.54 21096.81 S0 Soo 00 80 o00 s8 6S 8220 1220 1220 122b 2020 2020 2020 2020 20 QTNRATCHN OZ(K)M: KMA SOUEXIM OMI SE CAJOtA6ASSAINt HC kAcKA C0oGEsraGE Wl MWOKA GOGWE1AGE MU EWUA 1UN M)2 4JPFEZAM4Z t"WAGW SIAGE0 GASPAMNIES 147M4 11VG3 GI 1 2055.0 1 2139.0 8 2041.5 1 2119.0 4161 1 4161 1 4161 4W I 48613 A161 I 4868 8 6959 l 6959 1 6959 I 69598 125091 125091 125094 12S094 128208 495.0 Sol5 324.6 3209 31.7% 30.6% 18.9% 17.% faM tOlk Q4. IOtGY S1ftl 91 4 444.I I." 440 20.3 4.5 02d 0.? 8.78 0.4 0.37 1.02 2.70 OC 0.04 1.25 3.47 000 0.00 0.00 002 007 9444.1 200 12401.2 2164 121994 206c 32289. 1044 12t70S1 94: 16893-0 t6893.0 16560.1 865608. 16393. 16393.7 16393.7 19191.7 19191.7 19891.7 19891.7 24741 24741J 24?74. 24741.7 24748.7 46. 412320 21.8 216: 86S18); 337. 8 280 t228 ' l59 649 1 582 5812 440 364 CADAOW IPM 000 heN GYZ4 300 S00 800 400 800 0 4186 1 505 O4M 18613Om .* 420 138 2798 1028 300 1816 49sm 290CV1 sC emX Vt : z O Ct .~~~~~~~~~~~~~~~~~~~~~ 0 * 38A~ 2U, UGYSJfAEGY51W C*SU0fNMftOGMME eC0fVAII4 MSAf*CA5T 3 * I ; * . I 173 ECI S 4%o o 1988/11 17550 I ....-...--...--- GV91b C WORTRtom ZESCO 9444.1 19/901 U7SSO 9444.1 1 199 I0/ tS1 350 S 99,4.6 6 191/921 . 1839.0 10303.0 ; I . IM2/3I 1801.5 * 13993941 16790 I 1SP4/tS III885.0 I W,'961 - 1885.0 1 6/971 1885.0 I 1971983I 8850 t 3998/9e *199/20.oI 1 2000P/3 I 2001026 * 2OQ0731 3 2002/9d MU200M/5 I I 2005$04 1 2006917 'I 2007/086 1 2008d9et 1 2009/101 CASE U -.1101AR"AM - tt "l W420 - LAI( tO ACIE CAse 6 *i.--...-~~.......t ; . 199O2010 3I85.0 t885.0 1868S.0 18850 1885.0 1885.0 885.0 1685.0 16850 1885.0 10292,3 00700.5 10734.7 10734.7 10401.9 10901.2 10734.7 1073..7 10734.7 10734.7 10734.7 10734.7 10734.7 I0734.7 30734.7 1073A7 MIA& I FOA Etat I OAM4W t(MN AM* 0.0 00 0.0 175S.0 2496. 1997.3 1997.3 197.3 1997.3 W97.3 1496.0 2139.0 204t.5 2119.0 212S.0 2125.0 212S.0 206S.0 3000 24966 3000 2400 2400 2400 2400 2400 3600 1490.0 * 1498.0 1498.0 3498.0 1498.0 1498.0 1498.0 1498.0 1496.0 3496.0 1J980 1498.0 I3800 160.0 . ~~~~ ~ ~ l15S.0 9444.1 0 t 9444.1 1 205S0 12401.21 20.5.0 2065.0 2065.0 20650 2065.0 2065.0 206S.0 20.5.0 206S.0 2065.0 9444.91 1445 9753.1 1 ~ a I 6 1 l560.0 10237.1I 3223.7 1 12232.76 62232.)1 12232.71 12232.? 1 12232.7 1 12232.7 2232.7 1 12232.) 1 32232.71 ~ 14297 12799. h 16373 12269A.I 1716.9 12705.7 I 3796.1 12732.0 36081.1 12732.01 1952.9 12399.11 2025.1 12399. 1 2097.3 2169.3 224 2322.3 2403.2 2467.3 2574.6 266S.7 2760.0 2858.1 2960.2 2065.0 12232.76 206S.0 12232.7 1 ~ # C"ACOY FIR I TOTAL Y sE I IIORtaS (EKCY ICAPAC6Y GCMI6a MwAo O l" * MWb" MM" WAO GW1" I 0.0 1800 1800 3600 180.0 1')0 1800 1800 3800 1600 1600 1885.0 107347 3885.0 10734 7 TOAL GV#93 30663 31767 ~ ~ t 10733.0I 11240.2 1 16758.0I 12285.7 6 NO 12768.36 13253.71 13740.9 15OE 14228.6AI 14735.7 15263.61 15812.61 16384.4A 16979.3 t 17598.5 3 %8242.93 3891393 19612.31 500 50D 5o0 600 S0 S W00 00 1100 100 3100 1100 1900 900 3900 WAA OAT) 20339.51 21096.8 1900 1900 ~ ~ ~ KAM s$08 CM EN CAi4OA 4A UW ~ ~ ^ATOOC GORG SIACE StIl BATOKA GORGE S1M;E SAT2 HM{Nt WAM U ?R4AZ~ UZ*$eB tWN4U STAGE rA trA3 GASMVOMS GI 4363 4X1 1 4161 1 5277 i 5277 t 5277 t 5277 108273 10827 1 102?1 108273 10827 1 ~ ~~A O f" t 1 I 4161 1 4161 1 4186 1 4161 I t 1tS.0 16 AV 4I 32SJ 22.0% 1755.0 270.5 16.2% 213V0 2041.5 2119.0 2625.0 2625.0 2625.0 2865.0 501.5 324.6 3209 7439 672 599.9 7/,7.7 2055.0 2863.0 2865.0 2665.0 3165.0 3365.0 3t65.0 3165.0 39650 3965.0 39650 3965.0 39130 4950 944.1 69S.5 620. 542.7 761.6 677.7 590.2 99.3 120S.0 3106.9 30048 32.1% 27.6% 23.4% 31.7% 27.2% 22.9% 38.7% 3.7% 36.7% 33.9% 898.7 29.3% 788.3 24.6% J 9844.1 31.7% 30.6% 18.9% 17.8% 39.5% 34.4% 29.6% 36.6% FRMftV TOTAL SMM GQWAI % .30. 1.73 12401.2 216 4A40 20.51 44.54 0.28 0.72 16 0.14 0.37 1.02 2.70 0.01 0.04 t.09 3.3 000 0.00 0.00 002 1277.6 12289.6 1270S.? 16893.0 166930 16560.1 16560.3 136937 16 393. 16397 17509) 375M0.7 MM5097 17509.7 23059.7 23059.7 2309S.7 23059.7 0.07 230597 206 l0dt 94 *60 A12 330 281 21ir 1eIt11 16 ll?.F^ S-' Aal 41A 344 27; 196 GRS C.AOAY FOMEf0E7t 300 500 600 4A0 100 300 420 138 0 4136 5105 ghs .e 1133 Fl 632 1116 2798 44Som 2900W 6..KAMA 1028 DO L 0O t~~ a . ~ ~~~~~~~~~~~~~~~~~ -AUWS &OGY SMWAGY SR cemw a S e I X*I s OLROO £ICISW 36.5000 * I * I1tS - MPOlltAfM11 CANW UMS I 1988/ I I 6989/9t * ; * *I 199"0lI 91/972 * 1920)1 I 1993/4. 6 1994/#$# S 99596 S I ,OGRW ,. w ' 6 I E~~~SU4BA 0905 U~~~~~ ZISCO tam (Mw 0 a 17550 9444.1 0.0 175S0 9441.1 00 3000 3000 20.0 240.0 240.0 240. 75S0 99044t 18)9.0 10300 I80S M02.) 1879O 1708.5 18SO 10734.? 1885.0 10734t "1996071 | IGSD 9 197/981 68650 10901.2 I 6998/19 188S.0 10734.7 1999006 I8SO 107347 62000/6f 688.O 10734.? * 200121 te68s.0 60734.? 1 2002/03i' 688O 10734. 2003V041 86MS.0 1073. I 2004W1S1 1885.0 10134.7 6 2005106I 1885.0 10734.7 I 20036/7' 1885.0 07.7 1 2007/861 1885.0 1073.7 i 2006j9t 6883S.0 10734.7 1 2009/401 1885.0 10734.7 180.0 160.0 l6800 6800 M8D.0 180.0 180.0 800 1800 80 16800 1800 1800 TOEM 0. 0.0 2496.6 24966 1997.3 1997. 1997.3 199I3 6o . G0"l. 55.0 94416 6~ FOVW (EIVGY D CAPAGT61PM I11 I ZiWMPO lOEb6 IW OJEaCS E0G4 6CAPACU JAWse GFAWb MV* Qw"a A 68) I IS750 2055.0 219.0 2W.3 2)19.0 21250 2125.0 9444.1 1 12401.20 129A I 122896 12703.S1 12732.06 11732.06 1484.5 1560.0 14375 1716.9 79. 1881.1 1952.9 2065.0 2065.0 2096.0 2065.0 2065.0 2096.0 2065.0 2065.0 2065.0 2065.0 2065.0 296S.0 2065.0 12399.1 12232. I 12232 1 12232.7 12232.7 1223222 1222.71 12232.7 122327 1 12232.70 62232.7 62232.7 6 12232.?6 2097.3 2169.5 2244.5 2222.3 2J03.2 2A87.3 2574.6 26653 2760.0 2058.6 29#0.2 30S6.3 2176.7 10409.973 7212S.1239.1 1 149.0 48.0 I6980 148VA.0 1498o 6490.0 1498.0 98n.0 1498.0 498.0 1498V 1498.0 1498.0 1429.7 70.1 9444.t9 I 9753.1 1 10237.l 107330t 112402l 1175a I 62285S7 IC 1276.3 9325X? 13740.90 Gtl 14228.61 14735.7 G12 1S263.66 658)2.86 WS 14384.4 t 169793 6sM 17598.SI 18242.91 18913.916S16 19612.3 6 203393t 21096.8f G13 | 1 %7S5s. 175.0 20551 0 1 2190 . 2041S 11994 41611 2675.0 £1611 2625.0 1 I 500 500 638 638 776 776 6t76 6576 IS6 1576 IS76 6576 1614 56691 51869 6216 I 62161 11766 61766 6115 61 667661 11766 1 117661 1l766 167666 12794 1 *.,3t 2703.0 203.0 2841.0 2846.0 3641.9 3641.0 3641.0 3646.0 3641.0 3641.0 3641.0 3641.0 379n.0 9as EOSAt .. 1.U Mt MU041" 101t* tAV Gob* GM 32S3 22%1 20.5 4950 501.5 324. 3X9 743.9 67.1 599.9 605.7 S33.S 596.5 518 1237.8 1153) 1066.2 975.3 866. 782.9 6808 18.2% 312% 306% IS09 17.% 39.5% 34% .7 440 20.51 4454 028 on 0 9444.1 1240.2 1279A 122"6 1205.7 168930 6"8o *30 216* 206 t60 94; 460; *12. 28.9% 24.6% 26.% 22.3% S-5% A6.4 41.4% 366% 31.9% 27.4% 23)01 18.7% 19.011 6.3 3.97 6.8S 470 O.00 0.00 000 002 0. 0.20 O0A 231 3.6 17587 17421.2 6se44e I6448 2399.68 2998b 23998.8 23998.8 23998.8 23998.8 23998.8 23998. 250263 38 319. 376: 3t68 866. 761. I 701' 64( 574.7 402.3 29.3Xk 944.4 4 57S. 508 4aa 36S i312 CAPAOIY FM046=f0 SA S(nH CMI KtSE C A"= &%A W no RAICK6A GOE STACE WAI GATOMA GO0GSTAGE 9412 tOdAU EEoA WE ZAA UII IMmaG SJAGEa ft3 rm UPMs a.e, GI . 3 SO 800 400 100 30D 420 1 00 0 4141 5105 fA tou 44"S5 1663p eo 290GYf 832 1154 2798 ho-tUA 1028 % '.5 0 _ BECRh stwswNj GACEtNUW4 J41 GRAMAE 39902030 CASED.I/GjAJ tP - MOM - OtVAN 20 DMSE fWAST - OCWAVE CAM I t I vWI I * * * I VKSIEGZgS0 SI I I * 1989/901 1 1992193 I S 5 ; t I (Wio 4Ova #Wm ZESCO mw. TOAt G9 AW S I taw"/I YHA 09901914 1991/92I 1755.0 0.0 9441.1 175S.0 944.1 1755.0 9904.6 1839.0 103030 0.0 3000 3000 2400 18015S 10292.3 1993J941 58790 1994)951 3850 1995/961 . 8865.0 1996/971 18650 *9"?98 I 1885.0 - 199 81 1850 53999 0I 16650 1 200001 1I8S50 I 2003/025 18850 I 20022 I 18080 I 2003/043 I 8850 I 200410SI 16880 S 7005/06l 68850 1 2006/071 l8sso 1 2007$),5 18S50 1 20o0i6t0 8asso I 3009/)GI 13850 10706.5 10734.7 10734.7 10401.9 2400 2100 2400 210.0 1600 1800 160.0 100.0 580.0 580.0 1600 1600 3800 1800 5600 1800 16OO 10901.2 10734.7 10734.7 1073..7 10734.7 10734.7 1073.. 507 7 10734.7 67U*.7 10734.. 107"4.7 10734.7 X I POWF I 0.0 17S5.0 9444.1I o0 1755.0 2496.6 9444.11 205S.0 12401.2 1 2139.0 12799.6, t 2496 1997.3 1997.3 1997.3 1997.3 1997.3 1498.0 1496.0 1490.0 1498.0 496.0 1498.0 14".0 14960 I190.0 3*98.0 149800 3490.0 14960- "Rvfmm 2041.5 . 2)19.0 2125.0 212S.0 212S.0 206S.0 20b5.0 206S.0 2065.0 2065.0 2065.0 206S.0 2065.0 2065.0 206S.0 206S.0 206S0 20550 CAPACW MM I DEMAND DEMANIDS PIEOS GMho Il NMWo Gv*bb I 12289.61 12705.7 t 12732.01 12732.01 12399.1 1 12399.1 1 12232.7 3 12232.7 12232.7 1 12232.7 1 12232.7 t 22W2.7 12232.7 1 12232.7 1 122)2.71 12232.7 1 12232.7 1 12232.7 1 AMhM 1YO MW ewe'mA *I0t TOTAL SAN" O; 9444.1 I 1429.7 9444.9 14845 1560.0 97S3.1 I 10237.11 16375 10733.01 1716.9 11240.21 1798.1 188).) 1952.9 2025.1 2097.3 2169.S 2244.5 2322.3 2403.2 2487.3 2574.8 266.7 2760.0 28561 2960.2 3066.3 31767 I TOAt ENEKY I CAPACY GVW*. i MA 11758.0 1223.71 HC8 12768.3) 132S3.7 I 13740.9 312286 1473S.7 I GTl 15263.6t GJ2 15812.6 5 16384.4 1 03 16979.3 I 17598.5I &A11 18242.91 18913.91 19612.3 * 20339.51 21096.8 1 Soo0 500 S00 S00 S00 638 776 77t 9V4 VIA *714 1714 1714 1714 1714 1714 A)65 1)11 Al6b A'61 4161 I 1?550 325.3 22.8% I 1SS.0 1 205S.0 1 2139.0 1 20411. 270.5 49S. 501.5 1&62% 31.2% 30.6% 15 9 1 1 0 5189 1 6216 t 6216 7744 t 7244 1279 1 12791 1 1279Jt 12794 t 32794 I 12794 1 2119.0 2625.0 2625.0 2625.0 2565.0 2S6S.0 27030 28.1.0 2843.0 2979.0 2979.0 37"90 3J79.0 3779.0 37790 379.0 379.0 324.6 320.9 713.9 672.1 599.9 467.7 395.5 458.5 518. 437.8 491.7 401.2 1113.3 1019.0 9209 i8e8' 712.7 603 18.9Yb 57.8% 9.5% 3*4.4% 29.6% 22.3% 18.2% 20,4% 2.2 18.2% 19.% '15%. 41.8% 36.9% 32.2% 27.% 23.2% 19.01 9444.) 12101. .30, 133 216 4.40 12799.6 206 20531 12269.6 46.56 0.28 Qn2 3.78 7.70 I7A. 9.42 4. 167 7. 19.96 0.00 0.01 003 0.12 0.46 1A7 12705.7 16893.0 168930 36S60.1 16560.) 3693.7 17421.2 38488 16448.6 19476.3 19174.3 25026.3 25026.3 250263 25026.3 25026.3 2S026.3 104- 94 160 4n2 330 261 216 26t 2)6 2635 309 24§ 7J4 671 611. 541 465 WI G8WA*Y OPI:8 CAGAJ KAA SOUItINWK4T CAHORABASSA WN SAtOIeAGOGE SUM BAIO 0GOGE StAG 8 ICS SATI IA12 ")lM E8M UPIE U tWAWGE STAGOE 8 WfANS mWc3 0 tY NUY 30 5W 60o 400 0 4A16 SIOS )0 5 1163 Oa. 300 420 11)0 2909 to0 $32 r10 i~ . l ~ ~~~ . 445GM* 290fA ~ . ~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~o ~ :MM . ~~~I h ; 0~~~~~~~~~~~~~~~~~~~~~ ~ t ~~~~. .. 2AAW UIEDrJYSmtsw sp. f9tfC1CtI 5)J-31C1Ots CsD*UWo4 I(* 6 FIOGIAMA4E19902010 PM 4.. ;' 3 I ; t * I I W"Af . POUCVNUh CAMI-l 3C8/IlMIGTISAI/AW43. IOP SHR/V - 8ASVNA #42002 CAMl I EQSiVJ ZENA M VAY t09r4 TOTAL * I WAR ~~~~~~ZESC I *wNa. GAH. MW%. GMa hWA . 1980/6/891 I1989/K; * I 990,f ts ;1 1991/92t *I .19M993I * 1993/943 1 19"4j951 ; 195/9o I 19961971 ; I997/961 11998/991 31999/20001 9 2000/011 : 2001/021 * 2002/03. * 20031041 * 2004/05' 1 2003/^ 1 2006/071 1 2007/0181 4 2008/091 I 2009/101 75.0 944.1 17S50 17550 139.0 1801.5 1879.0 16850 la8850 18850 1865.0 18850 t685.0 166S0 1885.0 9865.0 1885.0 98850 18850 tS50 885.0 l865.0 1685.0 94".1 9904.6 10303.0 10"2.3 107085 10734.7 10734.7 10401.9 10901.2 10734.7 1034 ? 10134.? 07J4.7 90734r7 107347 107347 107347 107347 907347 107347 10734.7 0.0 00 3000 3000 2400 2400 2400 2400 2400 9800 1800 1800 1600 1800 IOO 1800 9800 1800 1800 9800 9800 96O0 I POWER 1ElY tINW CAPAIY MM I 9OA tsAtCI 3DEMAND DEMAND I ROSCI ENERGY I CAPACiTY GWomla* hWA.o GOVAl. MW,o CW" I3 MNi. Af&o 00 1SS.0 00 24966 24966 999?.3 19973 19973 l99t7. 1997.3 1496.0 1498.0 1496.0 * A4980 14980 IJV90 498.0 A9480 1498.0 14980 1498.0 14980 1496.0 9SS.0 2055.0 2139.0 20415 21190 21250 21250 2125.0 2065.0 206S.0 206S.0 2065.0 206S.0 2065.0 2W6S.0 206S.0 206S.0 206S0 2065.0 206S.0 2065.0 9444.3 a I t 9444.9 1 142.7 9AU.I1 I14". 12401.21 15663 12799.6 1 I1650.6 12289.6t 1740.2 12705.79 1835.0 12732.01 1935.A 12732.01 2028.3 12399.11 2126.2 1239.1 1 2229.1 12232.79 2337.5 12232.?1 2451.5 02232.79 2571.3 12232.t 1 2697.5 12232.71 2830.2 92232.? I 2970.1 12232.?t 3117.3 12232.71 3272.2 12232.71 3435.3 12232.71 3607.1 92232.71 3788.1 12232.7 1 3978.6 9 9J66.6 10279.1 10822.31 9 196.5t . 120041 1 12647.21 #IO 1327181 SQ0 13929.81 14623.01 9E *5353.3a loi22.9 I Gr92 16934.01 17789.01 SAl) 18690.31 1964061 20642.6 i 21699.3 22813.81 23989.51 lkA12 2S229.89 26538.4 I WG3 GENEAII I S00 S00 600 8a 1076 1076 1676 1876 9676 1676 I876 9 1876 2276 2276 2696 t 1 4161 1 41611 4161 4161 1 4961 1 62169 626t 11766 i 117b66 117664 11766 9 11766 1 117661 13219 1 13219 1 16017 I 32S.3 22.8% 17S5.0 268.5 488.7 486.2 301.3 284.0 6896 5967 986a 635.9 S27.S 689.5 569.7 1243.5 Il10.6 970.9 823. 666.8 5057 7339 552.9 782.2 16.1% 31.2% 29.6% 173% 5.5% 356% 29.4% 23.5% 28.5% 22 6% 26.10A 22.2% 46.1% 39.2% 32.7% 26.4% 204% 14.7% 20.3% 14.6% 19.7% 2055.0 2139.0 2049.5 291'0.0 262 0 26250 2625.0 26650 2865.t1 3141.0 3141.0 3941.0 3941,0 3941.0 394.0 3941.0 3949.0 434190 a341.0 4761D ~ ~ ~ ~ ~ f WM EWY TOT4Al sWIa GOVh CW 9444.1 1.68 5.44 26.V1 70.t9 0.5? 1.86 4.67 1.14 3.26 0.50 2.24 0.00 0.00 0.01 0.06 0.58 3.5 0.31 2.23 0.53 9444.1 12101.2 12799.6 12209.A 12705.7 16893.0 1689J.0 965601 I6560. 16392.7 184&8.8 96446.8 23998.8 239984 239986 2399.8 239986 23998.8 2545.S 25aSI.8 282494.6 OP60.' KAMASOUI CXICIN CAFICABkSSA tWK we BAIOKA GGE2 SIACE WAl * AtOKAGORGESTAlA bA2 C9uI EN; (nfO ZAMSAZ UZA4J #WA*CE StAGES 91r3 GCA% itUlS C1 ~ 9w 17S.0 CAPAUtY t ~~~ ~ t ~ 303 500 60 400 100 9oo 300 420 136 . ~ PMM ~ ~ EtIGY 0 4161 SOS pbs eW* 4SGVM 1163 p&a *290WH 63t 9l16 279n 1028 ~ ~ ~ ~ 5 4 -3r. 2121 197; 69: 703 42:. 36? 26)! 1939 104 232. 15..^ 62V F 5301'i 43S4 335cl 22 116 146 22 171 a %Wi4 t-*WY SIttAKG StU (ICIK SW*ECTO CXNE&A" CI%ON&tL OGAAE ,* * 1"0-2010 CAM .- HS.GT/BAT/Gt . tCIP 5jR .TOrAN ; 22 DAMCAST * VVIKY NEU13 CASE ~~ 9 I It - t * I EOIItiG ZESA "MPO"fICm WAIR ZEKCO I I MWA GWlOb OWl. C 19J88~#,db 1755.0 9444 1 0.0 1989j906 17550 944AI I 19901911 755.0 9904.6 a M99919 1839.0 103030 1920931 1800.5 02M.3 a 1993)9a6 1879.0 107083 1 1994)031 185.0 10)347. a 19951961 1685o 10734.7 1 199697 se8so.0 10401.9 I 999)981 185.0 10901.2 I 9998/99l 18830 10734.7 11999/200ot 1885.0 10734.7 I 2000P011 1885.0 10734.7 1 2001/021 168S0 10734.7 1 2002P31 18850 10734.? I 2003048I8885.0 10734.7 I 2004/0SI 18650 10734.7 I 20St61 986SO 107.4.7 t 2006/ 0t 1685.0 10131.7 * 20071081 18850 107347 1 2008Pet8 16830 10734.7 1 2009J091 1885.0 10734.7 00 3000 3000 2400 2400 2400 2400 2400 160.0 1800 1800 180.0 1800 1800 ISOO 1800 1800 1600 1300 1800 1600 I 4 ~~ 0.0 0.0 2496.6 2496.6 197.3 1997.3 1997.3 1997.3 1997.3 1198.0 1490 I498 0 1A98.0 I496.0 1498.0 9198.0 1498.0 1498.0 1498.0 14980 1498.0 1490.0 0tA I POWEI EN.ERGY I NM CAPACITYFORM4 I T0OM IESCN I EWMND DEMAN DI P*OJECaS &4E2GY I CAPACITY MX iA .Wso Gv41o I AWOA OWl. I mw.o CWSII mw,. MW 1755.0 175S.0 2055.0 2139.0 209.$ 2119.0 2)25.0 2125.0 2125.0 206S,A 2065.0 206S50 20650 2065.0 2065.0 205.0 2065.0 2065.0 2065.0 2065.0 2065.0 206S.0 9444.1 a 142 , 9444.9 a 9444.1 1 146.5 976A6.1 12401.2 1 15"6.3 10279.61 12799.61 . 1650.8 10822.31 12289.6a 1740.2 11396.5 12705.71 1833.0 12004.1 I 12732.01 19334 12647.2 HCS 12732.09 20283 13271.6 12399. 1 2126.2 13929.81 12399. 1 2229.1 14623.0 1 Gr192 12232.71 2337.5 15353.3 5 2232.7 0 2451.5 16122.91 Gr3 12232.71 2571.3 16934.01 GT4 12232.?1 2697.S 17789.0 1 8AT1 12232.71 2830.2 18690.31 12232.7 1 2970.1 190.0 6 12232.71 31173 21',.2.6 1 12232.71 3272.2 21699.3 1 17232.79 3435.3 22013.8 BAT2 W 12232.71 3607.9 23989.5 I 12232.71 3788.1 25229.8 1 Gt5 12232.71 3978.6 265384 1 C6t 5o Sa00 500 776 776 914 1052 1852 1852 1852 1852 1852 2252 2252 2390 2528 toAp a 1755.0 325.3 22.86 1 17550 2685 468.7 ass2 301.3 2840 889.6 596.7 48a8 611.9 5035 527. 545.7 1219.5 10868 946.9 799.7 6448 88l.? 709 666.9 614.2 1.1% 39.2% 296% 11.3% 15.5% 35.6% 29.A% 23.5% 27.5% 21.5% 21.5% 21.2% 45.2% 38.4% 31.9% 257% 19.7% 257% 197% 17.6% 154% 1 a 1 1 41611 4161 1 4611 62164 6216 1 7244 I 8271 1 13821 1 13821 1 13821 1 13821 1 138211 15274 1 15274 t 16302 1 17329 I 20550 2139.0 2041.5 2119.0 2625.0 2615.0 26250 2841.0 28410 2979.0 3117.0 3917.0 3917.0 3917.0 391?.0 39170 4317.0 43170 4453.0 4593.0 FPA 0EIECY TOTD Smt G% o G% 9444.1 9U44.1 1.88 12410.2 5.44 1279.6 26.91 12289.6 70.19 12705. 0.57 166930 I. 16893.0 5.59 16560.l 946 18415.2 554 18448.8 S.13 19476.3 4.72 20103.9 0.00 26053.9 0.01 260539 0.03 26053.9 0.22 26053.9 1.32 2E05539 007 2750.9 05 27509 1.32 26534A 2.20 295620 .32 212 197 89 70 24 362 263 399 309 335 356 1 826, 736 649. 0 54) 43S 469 3S1 33. 302 GENERAIJEO6'OK6A: CAPACTV FIRMENEMY KARA SOUTH WI* KE CAP I SAM" 5A HCs IATOCAGOPGE 5tAA& AIl WOKA GOE StAl;E SAt2 EOMtINK (OM IIMUitZAWAZI (SZAMS HWAME StAGEU KJ3 GASIUMtfS GI 300 SOO 8oo 403 10 300 420 138 0 4161 SOS aOm twSoGIM 1163 Fin wen 290GW 832 M116 2798 1028 WASA *~~~~~~~~~~~~~~~~~~~~~~~~~~ I~~~~~~~ ,' O ' A 21 Page I of 11 ELECTRICITYSUPPLYOPTIONS, 1991-2010 -LEAST COST ANALYSIS: BASECASEJPOLICY-ACTIVE SCENARIO(1989 Z$ mn) NO ZAMBIAIMPORTSAFTER 1999 CASEVSCIIHCSWMIAT LOLPllye Doab b"(Yeo ?fjpV f Plow (1989ZS to) 1995 1997 1998 1999 20CO 2002 2003 5 2002 3.60 HCB (Jfl CaTI BATI (12 G13 BATI 2006 2007 2008 2009 B02 V~~~~~~~~~~~~~~ _ HCB KSE 2005 vu1~ 3,551 XKSE 2004 2010 5 200S PIZ 20 2002 -4Z 3.463 RQC M CASEVIMACD/Gl6AT 20 200S 5 2002 S 2005 20 2002 20 2005 3.50 362 3,33 3,516 3.m BCD I CB HCB RC cm KSE KS£ GtI BATI CASEDC-HCBM;T/WA" GTI lATI GhGT3 GTI GrIlR12 (il BATI NfIC HQC GTIJ12 C (14 GTt T2 gm3 GT6 BAT I 3.726 20 20D5 HlG3 MI3 Gil GT4 CT4 BATI ( 5 2005 -P-9z3X93 BATI 075 BATI BATI HWG3 CASEXNcIIXSEIl 3 GFiMT 5 2005 -P2Z- nPo- 3.961 3.143 BCD Bnc KSE Gil HWG3 an EMMW GT2 GC2 BATI CASEXlHcBrIGTAWG3J GTIT S 2005 G DATI Ms DATI Annex 21 Page 2 of 11 5131*6810 0165L81332 50UU6E E"tA MKM -1 MO 0*1f04ESt YEAR v 390/9 19/909 t,om 1991199 t12/93 19919 n/s 19/s6 19097 97/9 1s9s8s9 1I200 2000/S 2001/02 z202/03 2003/04 2e0/0s 200304 2006/0? 201001 209 290 199026 Emsmaus M -AI l 1m.e tam 111 s 2 2100lfiASI ge. 944.1 1865.0 1865.0 1865.0 86.0 1.0 1885.0 Tea5.0 1883.0 10714.7 1073.7 13734.7 10734.7 10734.? 1e3.7 10734.76.0 103.7 To734.7 AJT 0.0 0.0 3o0.0 30.0 240.0 240.0 240.0 240.0 240.0 100.0 1O.0 0.0 o 0.0 0.0 0.0 0.0 0.0 0.0 0.0 . 0.0 0.0 0.o 240.6 2496.* 19973 1997.3 97.3 199.3 1997.3 1498.0 1498.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 o 0.0 0.0 - Muac isno- 2 mm t WuO cow" FIR0 fl3t t (19 (RG? cWA3 a e. 3o 3 fyoOTAL,0t meo eWIOW PIClECTS om 0.0 - t0ow 2011 t *930 3999 10ML1. a _! 755.0 9444.1 1ns.o 990o.A 1839.0 1030S.0 10011.5 10292.3 1879.0 IBM8.$ 185.8 10734.? 188.0 18734.? 1885.0 10734.7 3815.0 10734.? 1865.0 10734.? Te16Ss.0 1073.7 t885.0 10734.7 IM U 25131* llt0 ............................ 3885.0 CASEW13 - wMaJ3/jvM? CM ICO ACUW 6*51 VWco" ........ Attll . U155.0 9444.31 ........... 429.7 ......................... ............................ 944.9 1755.0 t755.8 9444.1 148t 9153.1 205S.0 12401.2 1W.0 1037. 130.0 32799.4 W637.5 10M3.0 2041.5 12289.6 116.9 11240.2 211.0 Ul270m.7 3196. 1118.0 2125.0 123.0 It18.I V2M5S.7 2125.0 12A2.0 1952.9 11748.3 2125.0 1272.0 2025.1 13253. 206s.0 12232.7 2097.3 13740.9 206s.0 12232.7 21t69.s 1428.4 88.0 10734.? 224.5 14735.? 18830 0734.7 2322.3 35263.6 186.0 10734.7 2403.2 15812.8 188.0 1t03' 7 248.?3 1638A.4 1885.0 134.7 2574.8 16929.3 1185.0 10134. 266S5.7 7TM.S 185S.0 10734.7 270.0 1622.9 1685.0 10734.7 2858.1 16913.9 tS.35O.30734. 2960.2 10612.3 1885.0 074.7 30663. 20339.5 38et.0 0734.7 3176 7 21096.8 OCO ISE E1 G12 ati, S50 sce 5sW 501 Soo 6OM 938 1076 1016 1876 1876 4161 4161 4161 4161 416t 4161 ste9 Sl19 6216 6216 I176I 1166 1676 t676 11766 11766 938 495.0 5M1.5 324.6 320.9 743.9 e72.1 s5.9 467.7 39f.S 440.1 SO0.7 2961.0 2s6t.0 376.0 3761.0 361.10 3761.0 3761.0 3761.0 473.7 56.2 109S.3 1001.0 902.9 800.8 69.7? 384.3 2823.0 1876 11766 1876 1U766 K NMU E61 SW2 tt WAIl 063X GI 125.3 270.5 17S5.0 205S.0 2139.0 2041.5 21t9.0 2625.0 262S.0 2625.0 256.0 2565.0 2683.0 2623.0 CAMAIS" fll (It8R* WNU,l ti3 CAit Bush31.13 "IOU 00"G StAGE 9t8* COW LtAE EOit LINK RDPM* 21621 3JAN6EStOAE1I1 GAS133l31 101P P03t1 be 300 soo 600 400 100 300 420 130 419.8 22.62 8.2X SC.M 3.0x 16.92 17.8X 39.53 34.4 29.63 n2.3x 18.23 39.63 23.64 '7.3 19.0X liAM Efmy WIl s Clso 94.1 9441.1 12401.2 12799.6 12209.6 1275.7 14e93.0 te93.0 1683.0 16393.7 1593.7 14895.7 5.33 ss973.2 1t.A 4.40 20.S1 46.56 0.28 0.72 1.73 8.08 18.24 10.31 13.34 1s923.2 7.54 36950.8 15.03 19WA 16950.8 41.1 36.33 31.63 27.13 22. M 10.43 0.00) 0.01 0.03 0.12 0.4 1.72 Qibo I I -0.81 -3D9.0 2166.1 2068.6 U09.4 947.7 4691.3 '.24.7 3659.3 2US2.6 216S.1 160.0 659.6 110.4 W66.4 *26.5 22seo.8 4902 I 22MC0.6 4257.9 22300.6 3586.9 223oe.6 2.5 22500.8 22500.6 2161.3 1404.0 ; E38 o 4161 50$m ptu 1165 piu 82 1136 2796 1123 .t1 eat. 4450S 29U1itl tem A19 .91 Annex 21 "age 3 of 11 llPSASll SNEMC61817301 1T31 tttcitticttt 10-0Ct8 G680AT001W SAS ro0c18 r - 381 EIA ubte I9820#0 tMOT Oft lO ............. 9u 173.0 94.3 0.o 944.1 0.0 300.0 300.0 240.0 240.0 240.0 240.0 240.0 1.0 160.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.8 0.0 l7s5. 990.6 1911/92 139.0 10303.0 199293 t001.5 te292.3 19s93/4 1s89.0 10708. 1994"/ 18815.0 30734.7 1s96 188.0 t341.? 199s 10734.? 1997t9a 18.0 10734.? 19960 1615.0 t1134.?r 1999/2000 s1385.0 1734.I 2G009/l 3885.0 10734.? 2001/02 s.-0 10734.? 2w02/03 1885.0 30734. 7 203B/04 18850.0 171.7 20045 t1885.0 187U.7 200506 183.0 10134.7 2f0M070? 107.7 26l07os 1085.0 10134.7 2000 &S. to.0 0734.7 2009110 1885.0 18734.7 t885.0 I885.0 t ot at P90* 2ESco ......... t9/91 lJOAt - /t MDZMOIA UP0T1 8991 a* 19t89 * CASE VItI JCtIVE C*A 50ICt 1Xt58t3l "At 90W ....... ON" 0.e t735. e.0 1ns.0 MS..* 2496.6 2496.6 997.3 tes7.3 1997.3 6997.3 1197.3 1498.0 1496.0 0.0 0.0 0.0 0.o 0.0 0.0 205.0 2153.0 2046.5 2119.0 211.50 2125.0 2125.0 2065.0 20e.0 1885.0 w7s0. ¶.0 115.0, 151.0 10o34.7 WMn4.7 1o034.7 10734.7 16734. 1885.0 18a85.0 388.0 ¶88S.0 3074.7 134.7 10734.7 10734.? 1M5.0 1885.0 D.0186s.0 0.0 0.0 8.0 0.0 9444.1 12401.2 129.6 12289.6 32703.7 1172.0 1273?.O 12732.0 t?n2.7 122?2.7 3w7nf.7 149.7 t484.5 3560.0 36315 17)6.9 179m.1 163.1 S92.9 2025.1 2Wr.3 2169.5 227.4.5 2322.3 2493.2 2401.3 2S74.8 2W6S.7 2760.0 2960.2 4 29 0.2 3066.3 3176.7 813 IS 20 199. 70* t10830 (10m . .................. 94.1 - MliN CAPACt3lV13m PCoJEClS 41f30o bW* 0310 VoA wh" I..... S013 0 KmO r _83 1Wm 013 ................ 1 133o ..... K08R of* .......................... .0P 1wt 1755.0 325.3 22.81 97s3.1 IM237.S 10133.0 11240.2 1755.0 2055.0 zo.0 2041.S 270.S 495.0 18.2X 2625.0 2625.0 2425.0 286S.0 2615.0 2e23.0 743.9 6?72 5S9.9 76W.7 695.5 578.1 tZ2BS.7 S OD 500 se0 000 t1 seo all 938 936 1736 1n7 136 3738 BATS 10242.9 7m8 38913.9 18612.9 20339.5 21096.0 178 1710 738 2138 012 GEu1A103 406t 4161 4163 4163 4161 S899 Slav 10739 10739 1On79 0739 1079 10739 30739 10739 12192 2e23.0 3623.0 3621.0 36.0 3623.0 3623.0 3S23.0 362o.0 3623.0 402S.0 CANU OASSA SATO" oo0 W4OKA O0" StAGE StIAE t13* UPPER ZA7AlI ^m 3A*8ElWt 6O3 13399ES to" I. 324.4 t 300.7 129.8 1135.? 1048.2 957.3 063.0 42.0 642.a 556.7 646.S 39.52 4.41 29.64 36.62 32.1$ 25.81 21.61 50.8 45.7s 40.73 35.95 31.31 22.41 22.01 18.21 26.61 *0.0 944, 9.4." 1.73 12401.2 4.40 12199.6 20.51 122e9.6 44.56 12M7.? 0.28 16093.8 0.72 36893.0 1. 1es3.0 t6 0.14 36393.? 0.45 16391.? 2.38 15923.2 5.33 15923.2 0.00e2173.2 0.00 2473.? 0.OD 2n473.2 0.o0 21473.2 0.05 21413.2 0.63 2ti73.2 0.6S 21473.2 2.20 21413.2 0.06 22926.2 ... ^ *1¢9.0 2164.1 b086.6 1049.4 947.7 *607.3 '124.7 363.3 2652.9 2165.1 1187.5 659.6 54.4 5038.8 4'93.9 3874.7 3230.3 1506.3 2530.9 fil3,7 3029. t o 3- . ontoom. cotpActl lSSA SOUIT XliN 3o. 18.91 2M19.0S?0,917.8S $178.0 12766.3 33253.7 13740.9 14228.6 1433.7 15263.6 13812.8 1638.4 16979.1 173s.s St.7% I o f$-* ......................... 94449 sot.sA film 1*6 IoIAL 083 KISE K9S SAl 5412 to"3 tl3 6so CI tf 300 510 800 400 300 30O 420 138 IRMt MOOe 0 4141 5105ptu ftr 445"MO 3163 ptus entre 2904 632 frm IARIIA 3336 2798 1020 Vl Annex 21 Page 4 of 11 11Ct91C1 T SU-sEECTOR 613E8160 K14U? GM31 VWR im 198"19 "fM 1997O810 "T CAMlVIll tmt -ONCUW 9Ud AtCTWECASE 1102100 mm1 s TE5 18186 ?55.e 199/90 17S5.0 M9D.9" 1755.0 1991J92 16139.0 1992/93 t 81.5 199394 1879e.0 1994/95 1885.0 1995/96 r8s.e t199497 1NS.& 1ts7/s 1885.0 998/99 1885.0 1885.0 20eoe 18S.0 2001e/2 188s.5 2002/03 1s. 200304 188t.e 2004t05 188S.0 2005/06 1885. 2006/07 11s.0 2007/08 11s8.0 20809 1885.0 K2 IC 18S.0 ~99i72O00 tt1*iW fRO MA18L 7tSCO SUiO i61~. 3868.1to 88tlUo b5o63N" 944.1 9996.6 l63s.0 10292.3 t10.S, 10734.7 10734.? W0734.7 N0734.7 TO73M.? MR73.7 t0n4.7 t07s.?7 10734.7 10?34.7 T10M.? 10734.7 1073.7 TOM.7 T0734.7 10134.7 e.a o.e 0.0 0.o 300.0 2496.6 30D.0 2496.6 240.0 1997.3 240.0 197.3 240.0 1997.3 240.0 1997.3 240.8 1997.3 180.0 1498.0 180.0 14W96 0.0 D 0.0 0.0 o0.6 0.0 0.8 0.0 0.0 e.0 0.0 0.0 0.0 0.0 8.0 0.8 0.0 0.6 .0 o88a5.0 0.0 0.0 0.e 0.0 k w 5am EIIER111M IN cctn Ii 8186 8 0 PR32CtS 80t lIWmo os6 ...... .... ............... 255.0 944.1 1429.? 75.0 2855.80 2539.0 2041.5 2119.0 2125.0 2125.0 212S.0 2065.0 2065.0 6I85.0 885.0 1185.0 1S5.0 185.0 eNS.0 185.0 .35.0 1t8s.0 9644.1 1484.5 9753.1 1560.0 10237.1 1637.5 10753.0 1716.9 112?0.2 179.1 117-.0 1881.t 12285.7 1"2.9 12768.3 2025,t 13253.7 2097.3 13740.9 2169.5 14226.6 2244.5 14735.7 2372.3 15263.6 2403.2 15812.8 24a7.3 16384.4 2574.8 56979.3 2S6.7 t7ss8.5 2?60.0 t6242.9 2858.1 19MS.9 2ffC.2 19612.3 3066.3 20339.5 317.7 21096.8 2401.2 12799.6 12289.6 127S5 7 12732.0 12732.0 12u32.0 12232.7 12232.7 10734.7 10734.7 10734J7 107.?7 t0734.? t0734.7 10734.7 10734.7 10734.7 10734.? 1885.0 1734. 7 C tUTKA to a2n0 tER 1999 m PaIm oftWin lI m..................... ".I ItUT 4 9444.9 ttes seD s5o 500 638 638 914 1052 IS2 1852 18S2 1852 6Tt 62/63 6T4 Mtil tss2 ts52 1852 1852 1852 4161 4161 4181 5189 5189 7244 8271 13s21 321 1is82 13821 13821 13821 13s2 13821 1321 TOT. 1T1mE CAPCTI o tMI1o t ............ on" LU0 SItteIA 0W STA1GE 81ft01 @033 EONL SW C*A3 tit 575S.0 325.3 175S.0 270.5 2e5s.0 0s.e 2139.0 S01.S 204.5 S324.6 2119.0 320.9 262S.0 743.9 2625.0 672.1 2625o. 5%99.9 2703.0 60S.7 2703.0 533.5 2799.0 554.5 293s.0 614.7 3737.6 1335.8 3737.0 1249.7 373.o 1162.2 373. To0.S 3737.0 977.0 3757.0 878.9 373.0 76.s 3737.0 670.r 3737.0 S60.3 * nu 6cC 2ttl ST*AG tit GA: 61t0lnEs 30 4161 e0 s5os Ur Ise wta WO 3so 420 ................... 22.61 E1.2S 31.7n 3e.x 16.98 17.81 39.51 34.4S 29.61 28.91 24.61 24.75 26.51 55.5S 50.21 4S.11 40.22 35.41 30.61 26.21 21.9X 17.64 944.1 1.3 4.40 20.51 46.56 .8 0.72 1.70 1.63 3.97 4.38 2.62 0.00 0.00 0.00 0.01 0.0 0.0o 0.28 0.99 3.4) 94".1 I2M1.2 12739.6 1226.6 62785.7 t6891.0 1693 a 16893.0 17421.2 17421.2 1797a.3 10s0.9 24S55.9 245S5.9 e 24S55.9 2415559 24555s.9 24555.9 24555.9 24555.9 2455S.9 ,,.,. 40.8 .309.0 2164.1 20M6.6 1049.6 94?. 4607.3 4r24.7 3639.3 38.3 3192.6 3242.6 3742.3 e745.1 171.5 7576.6 6957.4 6313.0 5642.0 4943-6 4216.4 3659.1 ; j 0 SW 400 10O lhor #I" EE80 foul lItmUS atlO G)f 8860 mm f11I 612 EON SIAM6 l ................. CAPACIIW ftm 8*1tte £6156 Mo L06 PU eattra 4456)4 1163 plus extra 2906 832 1516 27 fromK38869 1028 ~14 04 a Annex 21 Page 5 of 11 23NSARIlt 118506 1 MATit OfLusOPr P*00MS BASErOucav * P0135W AItIl E3s6N1 218 3130 ........ ......... 190.20 CASEVIII No 10614 "Wm ctal 10 CaSIi FM tWil ,. ..................... t175.8 94441 0.0 8.0 199/90 1M.0 9444.1 904.6 0.0 e.0 2496.6 7496.6 1997.3 1997.3 1991.S 1997.3 197.3 1498.8 1 9 1999/208 2D0001 2001/02 200o20 2003/05 2004/5s 2005/06 200C07 2010708 208/t 209/10 m.0 02.3 1078.S 1014.? 10734.7 1074.Y 17354.7 300.0 30o. 240.0 240.0 40.0 240.0 240.0 18.0 10734.7 10734.7 10734.7 1035.7 10734.7 S02.7 1o034.? 0.0 0.0 0.0 0.0 0.0 0.0 0.0 t869.0 10383. 18*1.1 1079.0 15.0 .0 1885.0 1685.0 1885.0 10134.7 1885.0 185.0 1885.0 18.0 18a.0 885.0 18S.0 185.0 1M.0 To0m.7 3073.7 18s85.0 073.? 188.0 10734.? 16:.0 e0.0 0.0 0.0 0.0 1496.6 0.0 0.0 0.0 0.0 o. 9.0 0.0 0.0 0.0 0.8 0.0 0D. AO OEM CA" 00 15.0 9444. 1M.0 9.1 2055.0 7M9.0 2043.5 '19.0 22s.0 212S.0 i125.0 206S.0 206S.0 1885.0 18ts.8 1805.0 6A.0 1885.0 1M.0 9e85.0 18t.0 188t.0 1885.0 %8.0 12101.2 t21W.6 o 1229.6 12M.7 12z32.e0 123.0 12M2.0 12232.7 12/52.? 107.7 10'.r 10734.7 10714.? 10134.7 TOM73.7 90734.7 te04.? 10734.7 1074.7 10734.7 <,*1W *1-2* IN 200 W' AMI "of9 TOTAL GAIN0 19st8/9 1990/91 19t91z 192/93 99394 1994n95 19S/96 199619? 1997/98" OCAMPIAT 1019 2 Is 6410 ............ mIi St .. cApkCltWr11 ,.._.......... 70t1* amo * .. ,._...... usaw3 Ws6 L IC ................ 944.9 115.0 325.3 2.6s 44.s 9M.1 1m.0 270.5 18.2X 2169 224. 23.3 2403.2 247.3 soo 500 S0 KHa S50 14220.4 1475.7 G11/92 15263.6 7 15612.8 614 13*I052 257,.8 16979.3 GIs 2665.? 198.5 lUt 2740.0 18242.9 2856.1 18913.9 2960.2 39612.3 36.3 20339.5 3176.7 2190.6 o9o Stt 7 914 1052 1190 399 1990 1990 1990 1990 4161 461 4161 4961 4461 6216 7244 8271 827 9299 14049 1489 94849 16449 I4849 149 2055.0 2119.0 2041S5 2119.0 2625.0 26s.8 262S.0 2565.0 2565.0 2601.0 2799.0 2937.0 29P7.0 3075.0 3.0 3073.0 3875.0 3817.0 38.0 38u5.0 495.0 5s0.5 324.6 320.9 743.9 612.1 599.9 461.7 395.5 4*. 476.7 533.8 449,? see52 109.3 111S.0 1016.9 914.1 008.7 693.1 wl" ............... 14 9. 156.0 10237 63T.5 0123.0 1t16. 9240.2 179.1 11758.0 1881. 9228.7 1952.9 12766.3 20M5.* 132S3.7 09?.3 13740.9 f1R 39.12 1.12 30.62 40 18.95 20.51 17.80 6.56 S9.51 0.26 34.41 o.72 29.6 1.78 22.31 7.78 18.21 17.61 1.1 W 6.92 20.51 90.6 22.21 4.62 18.1 16.44 19.4 0.-23 4S.4a .00 40.4 0.e0 35.6 0.0 30.91 0.88 28.41 0.22 22.0 0.82 6 M* ___....... ..... 94.t 944.1 124.2 12799.6 12289.6 127es.r 16893.0 16693.0 1689S.0 16393.7 393.7 15 .8 17.'3 19005.9 9ss00.9 2003.4 2583.4 258.4 2s3. 25583.4 25583.5 265s5.4 ___.,._ -1. .30.0 2164.1 2.6 3049.4 947.7 407.3 4124.1 3639.3 2652.8 2165t.1 2M1.1 27J4.t 319.1i 2 s21.5 34.1 ?eM.9 7340.e 6669.5 597t. :, ! ., 5255.9 44e..6 UAPACIT? 1134419t. eat"it mm cm l CAIKA 1*SS 1C1 1SE 31 8*3400030 CE STAGE Utt1 0*1044Gdam 6"l "lt t 011413 EOM UPPE62I34ZI WAt/ t;t0 ST1AGIII 123 GASt39tilES Cl 3e0 SOO 800 400 too 10 4*7. 136 0 4161 190 pIus efite 445r 1163 plus extr 290513 032 1tt 2198 C 1 tA :116 102. .0 Annex 21 Page 6 of 11 ZOS1K (ac 57RtE0 0131 tes E4RM4 lowsEvEL0u.4 P0215 "go-me CASEsi - uCS/M3061 0B111CAS1O aotcv AclIW CAE IIS no ......... 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ML - 11240.2 1755.0 325.3 22.81 0755.0 2055.0 MA 270.S 495.0 18.21 30.72 324.6 18.9s 2041.1 I"CO w Gl cr1 eTt SW soa xe 500 S0D 92 tess 1ess 1196 1996 *996 1996 996 0996 1996 2109.0 262.0 43 2625.0 W 26no.0 4161 2s65.0 4181 2565.0 69S9 2805.0 7 a943.0 2a 7987 2943.0 90U 38at.0 Mt 300.0 0196 14US4 380.0 14564 3881.0 14564 3081.0 US64 3801o. 14564 383.0 04564 388.0 SOt. 320.9 743.9 677.1 59.9 467.7 395.5 560.5 620.7 539.8 593.? 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The methodologyapplied compares the total systemcosts(investment,maintenance,operation)of differentcombinationsof new and inheritedcapacity to meet the load forecast(central)at least discountedcost. This providesa series of backgroundplan scenarios which are then tested for sensitivityto forecast variations in such elements as selecting an optimumplan. Applicationof this methodologyrequiresthat demandand energyforecasts, alorg with 2. any changeto the load durationcurve, be preparedfor each year of the planningperiod. New capacity must be constructedif the forecastscannotbe met withoutinfringingon reserve capacitymargin. Ihis will determinethe amountand timing of new capacity,together with the maximumunit size of a given addition,but not the type or optimumunit size. Since differenttypesof capacityhave different cost characteristics,the total systemoperatingcosts in each future year will vary with the type of capacity which is constructed. Using a total system cost approach,a "background"plan techniqueis appliedto convergeon least-costscenariosfor the choiceof combinationand type of newand inheritedplant. The optimumchoice of unit size is finallya matter for detaileddesign. Powersystemplanningposesproblemsof projectappraisaland evaluation,determination 3. of reservecapacitymargins,and the choiceof price levels and tariff structures. The economicanoroachinvolvesthe solutionof three independentproblems:the choice 4. of a new generatingplant in integratedsupply systems;the choice of reliabilitystandards and hence qualityof supply; and the choiceof pricing(tarift) policies. The objectivesand constraintsof planningin the power sector must be stated in such a S. way that they can be translatedinto "decisionrules", as follows: LI (a) The plant mix (hydro/thermal)and type is closeto optimum'or given fuel costs nosuit the predictedchangeof the load durationcurve, the minimizesystem prou-uctioncosts; (1) The generationequals in total the systemmaximumdemandincludinginstalledcapacity reserve, accordingto required reliabilitystandards. Installedcapacityreserve is taken to include immediatespinning reserve, frequency regulationspare, and contingency reserves; (c) The plantcharacteristicsutilizedwillpermitexpectedloadvariationsto be met and cover predictedsystemand plant abnormalitieswith acceptableoutage rates. International,Inc. by GilbertCommnonwealti This descriptionwas preparedby ZESA, based on recotmnendations - 211 - Annex22 Page 2 of 6 6. Systemdevelopmentprojects, as in this case, are frequentlyappraised by establishing which investmentsmeet estimateddemandat leastdiscountedcost. In applyingthis criteriondefinitions must be clear as to what is meantby "cost" and also the qualityof serviceto be producedas a measure of the associatedbenefit. The qualityof supply is a determinantof the requiredreservecapacitymargin, and this influencesthe strategyfor systemdevelopmentto meet an increasein system demand. 7. Cost is interpretedas "economiccost" whichvaluesresourcesin terms of their next best alternative. In practical terms, and in the nationalcontext, this is taken as reviewingthe allocationof available economic resources, measured according to consumptionopportunities foregone by the applicationof a discountrate to establishthe net presentvalue (NPV)of a project, and takingintoaccount market or 'shadow' prices. Inflation is not normally taken into account, subject to .elative. prices remainingunchanged,as the samevalue of NPV will be calculatedwhether the calculationis made in "constantprices' or inflationaryterms. In the studies, constantprices are used and expressed in 1990 ZimbabweDollars. 8. Efficientplanningrequiresthat both financialand economiccosts are produced. Each is requiredfor a differentpurpose. Financialcosts are requiredin connectionwith the abilityto finance the developmentthroughvarioussourcesof funds,both local and foreign, and Licludingrevenuesfrom the sale of electricity. 9. Economiccosts,as discussedabove,determinewhetheror not the developmentis in the national interest. Both types of costs were determinedin ZESA's System DevelopmentPlan issued January, 1990. ExpansionPlannin2Issues 10. The objectiveof long-termexpansionplanningis to establishwhen, where and whattype and sizeof plant to build,in order to ensureeconomicand reliablesupplyof forecastedload. Economic costs includeboth capitaland operating,and the latter are minimizedby productioncost analysis. The timing, type, and size of plant are determinedaccordingto the standardof service required, definedin termsof a probabilisticmeasureof reliability. Newcapacitymust be constructedif the forecastscannot be met without infringingon the desired reliability level. The problem of expansionplanning is, therefore,resolvedby integratingproductioncost and reliabilityanalysis. II. In consideringthe plant additionoptions, an estimationof optimumplant size and costs for candidateprojectshas been madetogether with first possiblein-servicedates. The projects include Old Thermals rehabilitation,Kariba South upgradeand extension, Hwange7 & 8, Grass Roots, and BatokaGorge. Furthermore,importopportunitiesfrom Zambiaand Mozambique(CahoraBassa)have been addressedas appropriatein all expansionscenariosdevelopedto convergeon an optimumsystem plan. These include 'contract"energypurchasesand emergency(capacity)support. 12. Differenttypes of plant capacityhavedifferent cost characteristics,and the total system operatingcostsin eachfutureyear willvary with the typeof capacitywhich is constructed. Usinga total systemcost approachandan assignedlevelof reliability,alternativeplans are developedaccordingto the choiceof combinationand type of new and inheritedplant. - 212 - Annex 22 Page 3 of 6 13. In developingplanningscenarios,the modeof systemoperationwas carefullyaddressed both in temrs of econoMicdispatchand spinningreserve requirements. Strategieswere developedto achievesupply/demandbalancewith appropriatereserve capacitymargins; and the reliabilityand cost implications. Comparisonof Alternatives 14. Efficientplanningrequiresthat both financialand economiccosts be produced. Each is requiredfor a differentpurpose. Financialcosts are required in connectionwith the abilityto finance the developmentthroughvarioussourcesof funds, both local and foreign, and includingrevenuesfrom the sale of electricity. Both types of costsare determinedand presented. 15. At the end, all scenariosare ranked with their economiccosts as cumulativeNPV in Z$000's. 16. In ZESA System Developmentsequencean LOLP index of 5 hrs/yr was utilized as recommendedby GCII. In studiesdevelopedto reviewthe EShfAP report, sequencesreflectingthose in the first draft were studied with the same assumptionas the ESMAP report and also different assumptionsin regard to Zambia's imports. EvaluationTeam Methodology Introduction 17. The objectiveof this noteis to describebrieflythe methodologyadoptedfor the electricity supplyplanning as appliedfor the ZimbabweEnergy Strategy Evaluation. The principal aim of the studieswasto determinethe leastcost developmentsequencefor the Zimbabweelectricitysupplysystem over the period to 2010, taking into accountexistingand candidateplant, and various import options. The studies were carried out in consultationwith ZESA, althoughthe ZESA planning model was not availablefor use at the time of the Evaluation. Followingthe submissionof the Green Cover report, ZESA undertookstudiesusing their own planningmodel, which led to somewhatdifferent resultsfrom thoseof the Evaluationteam. One of the key areasof differencewas in the forecLstusageof gas turbine plant. The ZESA modelindicatedsignificantlyhigh gas turbine utilizationthan was predictedby the modelused by the Evaluationteam.. CandidatePlain 18. The Evaluationteam initiallyconsideredthe followingcandidateplant, installedcapacity, and commissioningdates(whichwere subsequentlyrevisedin line with demandrequirementsand leastcost criteria): Hydro: KaribaSouthExtension,2xlSOMW,1997 BatokaGorge, 4x200MWplus 2x200MW,2001 Upper Zambezi,3xlOOMW,1998 - 213 - Annex22 Page 4 of 6 Thermal: Rehabilitationof Old Thermals, 1995 HwangeStageIII, 2x22OMW,1996 Sengwa,2x220MW,1997 Gas turbines,150MWnominal, 138MWsite rating, 1994 Imports: Zambia,300MWdecliningto 180MWby 1998 'EvaluationTeam estimate) 300MWdecliningto zero by 1999(ZE5.Aestimate) CahoraBassa(HCB),500MW(400MW'take Jr pay'), 1995 Cost and PerformanceData 19. Cost andperformancedata for the candidateplantwas establishedusing informatioafrom the ZESA planning database,updatedand convertedto reflect economiccosts. A standardconversion factor of 1.5 was used on the foreign cost elementsto reflect the real cost-of foreign excnange. By comparison,ZESA useda standardconversionfactorof 2.15. Since the ZESA databasedid not contain gas turbineplant, cost andperformancedata werederivedby the Evaluationteam. Fuel costs for the gas turbineswerebased on the Evaluatiorteam's gas oil price forecastsderivedfor the liquidfuelssubsector. ExpansionPrograms 20. A wide rangeof alternativeexpansionprogramswere derived. Each programsatisfied the followingplanningcriteria: - LOLPcriterion:Five hrs/year and 20 hrs/year limitingvalueswere used, exceptfor the periodto 1995,the earliestdate by which the next major energyproject can be brought into service; - firm energy criterion:the total firm energy available from hydro and thermal plant locatedwithinZimbabweshouldbe sufficientto meet forecastsystemenergydemandin each year; new generatingcapacity: is deemedto be brought into service at the beginningof the year indicated; earliestfeasiblecomn;issionin-dates for new .capacity:is as shown in para. 2 above. LOLP Anaish 21. The LOLPanalysiswas carried out using a power system reliabilitymodel, KDLOLP. The modelemploysstandardprobabilityalgorithmsto determineall possibleoutagepermutations. The probability outage matrix is then convolvedwith the system load duration curve to determine the contributionof each to the LOLP. The load durationcurve is representedby polynomialsderivedfrom actual system load durationcurves usinga curve fitting program, KDPOLY. The load durationcurve may be dividedinto segmentseach representedby a discretepolynomial. - 214 - Annex 22 Page 5 of 6 22. The LOLP analysiswas performedon a monthlybasis; plannedmaintenancewas predeternined to levelizethe plant marginsubjectto the followingconstraints: - hydro plant maintenanceperformedoutsidethe wet season; - no morethan one unit in a stationto be on plannedmaintenanceat a time. 23. Plannedmaintenanceperiods and forced outage rates were based on annual averages. The periods and outagerates adoptedwere generallysimilar to ZESA planningstandards, as indicated below: Plant Old thermals Hwange,units 14 units 5-9 Gas turbines Hydro all imports Forced Outage Rate (Percent) Planned Outage (VWeeks) 12 7 9 5 1 2 4 4 6 4 2 nil The proposedinterconnectionwith CahoraBassais plannedto comprisetwo singlecircuit 24. EHV transmissionlines. For the LOLPanalysis,the HCB interconnectionwas modelledas two discrete blocks of 250MWeach with a forcedoutagerate of 2%. EnergyBalances 25. After formulationof feasible generationdevelopmentprograms based on the system (LOLP),theprogramswere checkedto ensure the adequacyof firm energyto supply criterion reliability forecastrequirementsin each year. The firm energyoutputsof the hydro plant are taken from ZESA's database,which in turn is basedon the hydrologicaland reservoiroperationstudiesperformedby Gilbert CommonwealthInternational.Firm energyfiguresfor the thermalplant are based on maximumaverage annualavailabilitiesof 75% for Hwangeand other coal-firedsteamplant and 85% for gas turbineplant. Energy importsart-a sumedto havea maximumannualavailabilityof 95%. Firm energydefic;iswere coveredby bringingforwardthe next generationproject in the developmentsequence. Wherethis is not feasible, as for examplemaybe the case with Batoka,an interimproject is added,e.g. a gas turbine. SystemSimulation Estimationof generationsystemoperationon a year-by-yearbasis is performedusing a 26. probabilisticsimulationcomputerprogram,KDSIMBAT. The system is simulatedon an annualbasis, - 215 - Annex22 Page 6 of 6 using averageplant availabilitiesand averageenergyfigures for the hydro plant. The algorithmfor the simulationis based on Joy and Jenkins2/ and uses an equivalentload curve. 27. Given a loaddurationcurveof the systemfor a year, th1 e curveis modifiedusing the first unit in the merit loadingtable, i.e. the unit with the lowest short-termmarginal cost. The resulting equivalentload curve (ELDC)is then modifiedby the next most economicunit, and so on for all units. In general, the (K)th ELDC is modifiedby the (K+ l)th unit in the merit order list, which resu:is in the (K+ l)th ELDC. The expectedenergygenerationof athe (K+ l)th unit is the difference bet- een the expectedenergy not served by the (K+')th ELDC and by the (K)th ELDC. The expected unserved energy of the system with 'N' generatingunits is the expectednot served by the (N+ 1)th ELDC. On a mixed hydro/thermalsystem, the procedure is similar, except that the hydro units are aggregated (followingthe techniquedevelopedby Booth 1t) and the hydro unit is used to displace Lhe energy generationof the (n)th, (n-l)th, (n-2)th, etc. units. 28. The programoperateswithin a 'MW' grid; the step size is determinedby the operator. The choiceof step size is a tradeoffbetweencomputationaccuracyand processingtime. There is also a limitationset by the availablecomputerlivestorage(RAM). A refinementhas beenintroducedrecently wherebycompositegenerationoutageprobabilitiesare determinedat discrete generationlevels, thereby improvingsimulationaccuracyand reducingthe sensitivityof the results to the step size selected. The programoutputgives the expectedgenerationof each stationon the system, the unserved energy, and the total hydro generation,year by year. Program Costing 29. System capital, production, and other operating costs for the various development programssimulatedare determinedusingthe computerprogramKDRUNOUT.The programis designed to operate using outputfiles from KDSIMBATand also uses commoninput files. The output of the programcomprises: - annualenergygenerated,fuel and other availableoper2tingcosts. by station; - capitaland fixedoperatingcostsby station, on an annualbasis; - discountedcapitalcosts (less residualvalues); - discountedfixed operatingcosts; discountedfuel and other variableoperatingcosts; total discountedcosts. 2/ / Joy, D.S. and Jenkis, R.T., -A ProbabilisticModelfor Estiinatingtie OperatingCost of an Electric Power GeneratingSystem",ORNL4M-3549, October1971. R.R. Booth, Optimal GenerationPlanningConsideringUncertainly"1971P.l.C.A. Conference,Boston,May 1971. - ?16 - Annex3 CHARACTERISTICSOF ZIMBABWE COALS TYPICALSEAM CHARACTERISTICS WANKIE ProximateAnalysis Moisture Ash Volatile Matter Fixed Carbon 2.0% 16.0% 23.8% 58.2% 4,2% 17.2% 22.4% 56.0% 87.1% 4.9% 1.9% 2.5% 3.6% 82.2% 4.5% 1.9% 0.5% 10.9% 27.5 MJ/kg 25.6 MJ/kg 38.2% 48.5% Ultimate Analysis (Dry. ash-free basis) Carbon Hydrogen Nitrogen Sulphur Oxygen Gross Calorific Value SANGWA Ash Comoosition Si02 A12 03 33.2% 10.8% Fe203 CaO Mgo 33.1% 13.0% 11.4% 0.4% 1.9% 0.8% 0.3% K2 0 0.2% Ash FusionTemoeratures(DegreesC) Initial Deformation 1,250-1,280 Hemisphere 1,32;. Flow 1,330 1,320 1,400 1,450-1,500 Swilina Number 2 1 HardaroveIndex 59-65 79 TYPICALCOAL PRODUCTSPECIFICATION Coal Type TyRicalAnalysis Mositure % Ash% Vol. Matter % Fixed Carbon% CV MJ/Kg Sulphur% Ash FusionoC HardgroveIndex Hwange Dry Steam Coal 1.0-1.5 12.5-15.5 22.0-25.0 61.0-62.0 28.0-29.0 2.5-2.8 1,250 56-65 gurce: WCC;SENCOL. Hwange Washed Steam Coal 1.0-1.5 11.0-14.0 23.0-26.0 61.0-62.0 29.0-31.0 2.0-2.5 1,270 56-65 Hwange Coking Coal 1.0-2.0 9.0-11.0 25.5-27.5 62.0-63.0 30.0-32.0 1.25-1.55 1,250 56-65 SENGWA Power Sation Coal (Annual Average) - 25.0 >24.75 - 24.75 1,320 67-70 SENGWA Run-ofmine Run-of-mine Upper Seam Lower Seam 5.0-6.0 16.0-19.0 19.0-21.0 60.0-54.0 +/-25 0.4 1,350 79 4.0-5.0 14.0-16.0 23.0-21.0 59.0-58.0 +/-28 0.4 1,350 79 - 217 - Annex 24 Page 1 of 3 THE GASIFICATIONOF COAL BLUE WATERGAS OPTION' Nature 1. Blue water gas is obtained by passing steam over red-hot coke, in a cyclic process comprisingtwo main stages. ie., (a) (b) Gasmakdng,which reduces the temperature of the coke. Blowingwith air, which raises the temperature of the coke. The calorificvalue of blue water gas varies between 11.4-11.9MJ m-3 at s.t.p. sat. . Iheoretically, gas should consist of equal proportions of carbon monoxideand bydrogen accordingto the equation C + H2 0 = CO + H2 -12.06GJ Increase in temperature favours this reaction. This equilibriumconstant is 1.06 at 1,1000C and 2.27 at 1,400°C. At lower temperatures the followingreaction also takes place: C + 2H2 0 = CO, + 2H2 -8.24GJ The gas is also diluted with nitrogen so that the theoretical calorific value of 12.6MJm3 for a mixture of CO and H2 is reduced to the range of values shown above. A typical composition Vol. Percent CO2 4.7 CO 41.0 H2 49.0 CH4 N2 0.8 4.5 t The gas is called 'blue' water gas because of its blue flame, a characteristic of the combustion of CO. 4 - 218 - Caloric value 11.6MJmi3 at s.tp. saa Specific gravity 0.55 Annex 24 Page 2 of 3 3. It is necessaiy to distinguishthis gas from 'Carburetted water gas", which contains oil 3 ). vapots to bring the compositionup to that of town gas (19.75MJ.m 4. Manufacture. The gas is manufactured in a brick-linedor water-cooled chamber, similar to a dry-bottom gas producer except for the blast, steam and gas change-overconnections. The cycle consists of blow, purge, and make periods. The duration of each cycle is up to 4 min. usually arranged as follows: (a) Blow - 1 min. with the stack valve open. The temperature of the coke rises to about 1,450°C. The blast rate is up to 0.95m3 s'-/m2 cross-sectionof the generator. (b) Purge - 10 to 20 sec. Steam is admitted from the base, with the stack valve open. (c) Make of run 2 to 3 min.The stack valve is closed. Steam is admitted at the base at first for an up-run. Steam is then reversed to equalize the down-run (1 min.). The temperature falls to about 1,000°C. The process again is reversed for 10-20 sec. to clear the ash pit of inflammablegas before the next blow period. S. With hand operation, fuel is charged through the top of the generator about every 10 cycles and clinker is dischargedfrom the base once per shift. With fully mechanized plants. fuel is charged, and clinker is extracted continuously. Valves are operated automaticallyby timing devices. Quantity Balance 6. Blow Period. If combination is to C02 , 0.4 kg carbon is consumed per kg gasified by steam during the make period. If combustionis to CO, 1.25 kg carbon is required. In practice, carbon is burned to a mixture of CO2 and CO, and nearly 1.0 kg is bumed per kg gasified. The ratio of C0 2 :CO in the exit blast is ca. 1.4:1. The calorfic value of the exit blast gas is 1.8 to 2.0 J/m . 7. Make Period. 'Me total requirementsof coke and steam per m3 gas of CV. 11.7 MJ m 3 are 1.16 kg of coke and 1.16 kg of steam. This gives a yield of about 1.87 m3 kg of dry coke = 21.8 MJ & Heat Balance. A typical heat balance for a modern plant, fitted with a waste-heat boiler to absorb heat from the blast is as follows: - 219 - Annex 24 Page 3 of 3 Heat balance per 100 heat units in coke: Heat in Coke Steam Heat out 100 3 Total Potential heat in gas Steam produced Sensible heat in water gas and stack gases Total heat, undecomposedsteam Total heat in clinker Radiation and unaccounted 113 Total 62 14 7 8 13 9 113 Thermal efficiency - 62% (gas) or 63% (gas plus 1% surplus steam) 9. Use of OxeWe. The water-gasprocessis intermittent because of the stronglyendothermic character of the reaction and the use of air to maintain the temperature of the fuel bed. The blow gases cannot be used as high-qualityfuel because of the high nitrogen (and C02 ) content. ITe process is also wasteful thermally because of the necessity for heating this nitrogen to the hot coke temperature. The use of oxygenin place of air makes possible a continuous water-gas process. Four basic types of continuous process have been developed using oygen , viz (a) (b) (c) (d) Non-slagginggenerators, operating at near atmospheric pressure Slagginggenerators, operating at near atmosphericpressure Pressure gasification(Lurgi process) Gasificationof fluidizedcoal - 220 - Annex25 Page 1 of 3 COALBEDMETHANEPTETIAL IN ZIMBABWE ResourceAspects 1. Zimbabwe'scoal resourcesare exceptionallylarge. A reassessmentof all availablecoal explorationdata undertakenby the MontanConsultinggroup in i982 gavea reserveestimateof 10.6bn M.T. in-situ. This makesthe presenceof economicresources of coalbedmethaneprobable. 1/ 2. Methaneis presumedto arise from thermalactivity in the regionof the s;!amwhile the latter is underhigh pressure. In these circumstances,methanerather than hyd-3genwlii i-e . irmad, and if this gas is trapped, it will be adsorbedon to the cleat (bedding)planesof th.- coal. 3. An overview of the developmentof coalbed methane production suggests that its resurgenceduring the 1980s is in part due to fiscal incentivesfor non-conventionalfuels and to the sequenceof boom and bust affectingthe oil and gas industryin the wake of the oil price rises of 1973 and 1980. The later resulted in a considerableexpansionin the numberof drilling rigs and availability of stimulationequipment,and the operatorswere eager for any work when natural gas deregulationin the U.S. causeda price collapsein 1982onwards. Anothermore lastingfactor has been the growth of environmentalconcerns. In contrastwith aturalgas, coalbedmethanecontainsalmostno sulphuras the latter stays in situ. Indeed, there are almost no impuritiesin such gas apart from a small amount of carbondi-oxide. 4. Coalbedmethanetechnologyis in relativeinfancy,althoughit has benefittedfrom crude oil and natural gas production. The developmentof coalbedmethanediffers from natural gas in that it is cheaperand less risky but a!so less rewarding. Naturalgas wells are usuallyover 5,000 ft deep, are frequentlydry, and when they have gas the initialvolumesproducedare often of the order of several millionsCFtD, tailing off over the years. Coalbedmethanewells are seldomdry (the consistentnature of coal seamsmakes non-interceptionhighlyunlikely),are normallydrilled to a depthof about2 500 ft, seldomgive muchmorethan about 1 mn CF/D and take someyears to attaintheir maximumoutput.The key aspect of successfulcoalbed methaneextractionis the stimulationof the well, embracingcasing perforationand seam fracturing. Muchof the technologyused is unavailablein Zimbabwe,and would have to be imported. Ho t ever, the drillingrigs used are mobile, hydraulic,top-headdrive units. 5. Reservoirengineeri.agis an importantrequirementfor coalbedmethaneextraction. Good geologial knowledgeof the area is essential,as is a good knowledgeof the coal characteristics. Coal LI ntneretin coabed methaneawakenedin the 1970sin the UnitedStates when the U.S. Bureauof Mineslauncheda major investigationinto methanecontrol infiery mines. From this work a techniquewas evolved thwoenabledthe methanecontentof mine air to be loweredthroughdrainingmethanefromboriholesaheadof the workingfaces. lhis wrJkalsofousd that methanecouldbe extractedfromcoal seams (beds)using 'stimulation'techniquesdevelopedby the naturalgas indstry. In theten years since this developmentwas commercialAy expfoited,k is now estinated that coalbedmethanereserves,S trillionCF, representabout3 percentof the U.S. proven naturalgas reserves. By end1990, about6,000 weftsweredriled (some2,6000operating) which,atfultproduction,provide 625mn CFIDor 0.20% of U.S. naturalgas output (Oiland Gas Journal, May 20, 1991.p.32). - 221 - Annex25 Page 2 of 3 suitable for commercial methane production will generally exhibit some or all of the following characteristics: * * * * seams lying at depthsgreater than 250 m; seams lying under water; coal with a high vitrinitereflectance(0.7-2.0); and areasof structurallyenhancedpermeability. Some six or seven times more methanecan be extractedby drilling coalbedmethanewells in advance of mining than will be removed from the coal through the developmentof a mine and extensive ventilationof the working faces. Also, coalbed methaneextractiondramaticallyctLs;t,e amountof methanereleaseto atmospherethrougha mineventilationsystem, therebyreduqinga coptribupr to global warming. Usually, coalbedmethanewells require artificialstimulationto achievecommercialgas 6. flow rates, except in areas of high natural permeability. This is a challengingtask-andhigh treatment pressures, limited proping agent (sand) penetration,and complex fractures are common. For actual production,it is necessaryto thoroughlyinvestiagethe dewateringand pump selection,liberatedwater disposal, well and surface equipmentworkover, and gas treatment and compression,for a smoothly operatingmethanewell field. 7. The coals in SouthernAfricawere formedin freshwaterenvironmentsfrom tundra-type shrubbyvegetationin a cool-to-temperateclimate. This means that the coal componentsare different from thosebeing used for coalbedmethaneextractionin the U.S.A. and their gas holdingabilitiesmight be lower. However,the presence of methanein associationwith such coals is undoubted:all three of the undergroundminesthathavebeendevelopedin theregion(Hwangeand Bubyein Zimbabwe,Moatize in Mozambique)have suffered major methanegas explosions. 8. The abundanceof coal in Zimbabwehas meant that only shallow coals (i.e. less than about200 m depth)havebeenexaminedin detailin the past. Suchcoalswouldhaveoutgassedlongago. particularlyas there is someevidencethat the coalsof the Hwangearea were at shallowerdepths in the past than at present, with their current coveringof aeolian sands. In addition. coal cores outgas very rapidly(theadsorbedmethanedoes not reportin thevolatileanalysis)so that the existingcores on surface will no longer give any indicationof such gas. However, two major areas are likely to have good coalbedmethanepotentialwhich presentlyare subjectof exploration: a) Sabi Valley: The depositswere examinedin detail by the ShellDevelopmentCompany in the 1970swith a view towardsdelineatingpotentialexportcoals.The coalsfoundwere heat altered, steepdipping and of high vitrinitereflectance. For this reason, the coals were dismissedas bcingof no commercialinterest. b) North of Wankie Colliery: A major feature - the Deka fault - marks the edge of a massivedownthrow. A basaltsill overliesthe whole area and the Wankie mainseam is presumedto be deeplyburiedand under water there (the Deka fault is a major aquifer). - 222 - Annex25 Page 3 of 3 Economic Aspects 9. U.S. productioncosts (1989) were typicallyless that US$2.-/CF'000 whereas current natural gas prices to the consumerare aboutUS4.-/CFOOO.(Ilis latter price is roughly equivalentin energyterms to a diesel/gasolinecost of aboutZ$0.40/1). The implicationsof finding a major natural gas resourcein Zimbabwewould be far-reaching,and only a few of the more obviousdevelopmentscan be guessedat. 10. A naturalmarketwouldexistfor electricitypeak-loppingvia gas turbinegeneration. This could have the effect of delayingmajor capitalexpenditureson higher-costpower generationprojects. The thermalefficiencyof a two-stagegas turbinewitha heat exchangeris about30%. On this basis, two 25 MW units wouldconsumeabout 14 mn CF/D of coalbedmethane. % 11. Ammoniaproductionwouldbe anotherpossibledevelopment,especiallyas this couldset free nearly 100MW of power with the closureof the SableChemicalselectrolyticplant. The maximum market for ammoniain Zimbabwe is about 400 tpd, which representsabout 12 mn CF/IDof coalbed methane. Further downstream, the production of methanol might be possible. For transmission, compressingthe gas for distributionby rail (railwaysare convenientto both potentialsourceareas)might be a better initial optionthan a pipeline. The gas couldbe transportedto the major industrialcenters. - 223 - Annex2i Page I of 7 OPIIONS FOR EXPANSIONOF LIQUID FUELS STORAGE 1nlmdUGjn 1. Themainissuesrelatedto decisionson liquidfuelsstoralaare the following: (a) (b) (c) Justification for additionalstorage; Choiceof thetype of storage:and Comparative economics. Jusilati2cn forAk4didonal Storage 2. The mainreasonsfor havingamplestoragecapacityareto (a) (b) (c) (d) accommodate surgesin inventoriesdueto intermittenttankerarrivalsandvariationsin salesshipments; allowfor unplanneddelaysin shipments; makeprovisionfor longsupplyinterruptions; and allowfor errorsin forecastingdemand. 3. WithtankershipmentsdestinedforZimbabwenormallyarrivingseveraltimesper month, one-monthstockswouldusuallysufficeto satisfythe firstthreelogisticalreasonslistedabove. Stocks of liquidfuelsare presentlyat thislevel. However,it is prudentto allowa somewhatgreatermarginof error, whichmightjustify a target level in the order of two-threemonthsstocks. This couldbe accommodated in existingstorageavailablein Zimbabwe.Anythingabovetwo monthsof stockswould be consideredas 'strategicstorage'whichcouldonlybejustifiedif thereisa strongprobabilityof severe supplydisruptionsfor extendedperiods(for intemational,regional,andnationalreasons). 4. Beyondthe probabilityof extendeddisruptions,thereis the questionof the economic justificationfor the storage. This dependson the estimatedc to the countryof severesupply disruptions.For Zimbabwe,therewill alwaysbe alternative(buthighercost)sourcesof supplyother than the normalBeiraroute,andthe possibilityof significantly reducingdiscretionary demandwithout majoreffectson the economy. Alternativesourcescouldbe overlandfrom either Zambiaor South Africa,dependingonthe natureofthe disruption.Althoughthesesourcesmightnotbe ableto filly meet normaldemand,whencombinedwithenforceddemandreductionstheywouldgreatlyextendthe period untilstockswererun downto crisislevels. Ontheotherhand,thecostof notonlythe storagetanksbut also the reserveof petroleumcontainedin them will be high in relationto Zimbabwe'seconomic resources. - 224 - Annex 26 Page 2 of 7 Type of StreM 5. The principal alternatives consideredby the Governmentand NOCZIM have been undergroundrock-minedcaverns,andconventionalabove-groundsteeltanks. The Governmenthas opted in favor of undergroundstorage. This decisionwas largely influencedby weighingvarious factors, of which "strategicvalue"was givena weightof 10.0, comparedto 5.0, 2.5 and 1.0 for commirercial value, reliability value and environmental value, respectively. These essentially amount to empirical judgements. 6. If aboveground-steeltanks werebuilt at a numberof locationsin the countr;..especially at or near the existingpetroleumdepots, several advantageswould accrue: (a) Lower cost; (b) Comparablesecurity,due to the lesser concentrationof the inventory;and (c) Improvementsof the marketingoperations,protectingagainstbreakdownsin the internal transportsystem. 7. storage: On the other hand, there are a number of less tangibledisadvantagesto underground (d) It is more difficult to forecast cavern construction costs or to anticipate potential geologicalproblems;1/ (e) Evaporationlosses, especiallythrough filling of gasolinetanks, will be higherthan for floating roof steel tanks, which adds to costs; (f) let fuel will have to be dried and filteredafter undergroundstorage; and (g) Infiltratingwater must be pumped out semi-continuously,which requires larger oil separatorand waterdisposalsystemsthan for above-groundtanks. Submergeddeep-well type pumps used in most underground storage are more difficult t( access for maintenance. Costsof Storage 8. CapitalCosts. The undergroundstorageoption is statedto have a total capital cost of US$86.9 mn, equivalentto US$38.3/B. By comparison,well-establishedcosts for above ground steel I/ For undergroundstorage, a constructionperiod of 36 monthsis assumedwhereassteel tankscould be built in about 12months. If thereis a real securitythreat,suretyit is inportantto installthe storagesoonerthanthree yearshence. - 225 - Annex26 Page 3 of 7 tanks are typicallyUS$15-20/Bincludingall land and ancillaryfacilitiessuch as roads, dike walls, fire fightingfacilities,controlsystems,transferpumps,securityfencing,etc.. Thus, the cost of above-ground tanks of equal capacitywouldbe expectedto be in the range of US$3445 mn, or roughly one-halfthat of undergroundstorage. In additionto the cost of installingthe storage vessels,the cost of the product to fill them must be consideredin an assessmentof the economicimpactof strategicstorage. If it is assumedthat two months supply is sufficientfor normal operatingcontingencies,then the co-t of the additionalfour months supply must be consideredan outlay that produces no return, un. as . severe disruptionoccurs. Assumingnationalconsumptionof 1.08 mn m3/yearof the three major products,this At averagedeliveredcosts or LS$32/B(as would correspondto the proposedcapacityof 360,000 under pre-Gulf war conditions),this will result in an investmentof US$72 mn. Thus. the total capital cost associatedwith the strategicstorageoptions willbe as follows(in 1990USS cj: m3. Underground Cost of StorageFacilities Costof Product Stored Ahev'- m'"J 86.9 72.0 45.0 7'1.0 158.9 111.7 9. OperatingCosts. While laborcostsfor undergroundand above-groundstorageare fairly similar, the energycosts are expectedto be significantlyhigher for undergroundstorage, due to higher pumpingcosts (i.e. power for fans, heating and cooling, seepagepumps, and pumpingproduct from below-ground).Above-groundenergyrequiredwouldbe 40-50%thatrequiredfor undergroundstorage. Maintenancecost for undergroundstorageas indicatedby NOCZIM,i.e. about 43,500 Z$iyear, seems to be unrealisticallylow.2/ Maintenancecosts would generallybe higher for abouve-ground szo.age, since steel tanks require painting and occasionalrepair due to corrosion. However, this will be a relativelylow item in Zimbabwe, consideringthe dry, non-c'rrosive atmosphere. Thus. maintenance costs are assumedto be 3% of replacementcost of the actualsteel equipment(which in turn wouldbe about UJS$10/Bor an estimatedUS$22 mn), i.e. about US$0.66 mn/year, or ZS2mniyear. Tbis is conservativelyhigh consideringZimbabwewage rates and the non-corrosiveatmosphlere.Other costs such as communications,vehicles, insurance,and overheadsshouldbe identifiedfor each type, except that some difference in insurancecost mightbe expected. 10. A comparisonof the operating costs of the two types of storage, based on the above, wouldbe (in Z$'000 p.a.): A/ is not clear what is includedin It is based on .2% of 'capitalequipmentcost, whichis said to be Z$21.7 in this itemsince it is only a small part of the total investmentquoted For mostpetrolewn handling equipment, mainteneance cost are nonnall at least3% of replacementcost, - 226 - Annex26 Page 4 of 7 UnderruUnd OUgl2n Site Personnel Communications Site Vehicles Energy Maintenance/ Insurance Aove-izroun-d Option 358 4 27 24 651 774 358 4 27 12 2,000 333 Total OperatingCosts 1,839 2,747 USS '000 Equivalent 613 915 a! Assuming3% of equipmentcost. Conclusionand Recommendations 11. The economicbenefitsof the undergroundstorageproposaldependon the probabilityof a severedisruptionin supplylastingmorethan abouttwo monthsand on an assessmentof the cost of this disruptionto the Zimbabweeconomy,after takinginto considerationalternativesupplyand conservation measuresthat could be adopted. This to a large extent must remain a judgementdecision. However, alternativesto undergroundstorageshould be studied in more detail. If Zimbabweproceedswith the undergroundstorageproposal it will be out of step with most other countriesin the region that are now reducingthe level of their strategicoil stocks, includingSouth Africa. What is beyond question is the high cost of this proposal. These costsare summarizedas follows (in USS mn): CapitalCosts Annual Costs: OperatingCost Tank Amortization0 10% Intereston strategicstocks Total AnnualCost Underground Storagye Above-ground $tcrage 158.9 111.7 0.6 9.3 7.2 0.9 4.8 7.3 17.0 12.7 - 2?7 - Annex26 Page 5 of 7 12. The aboveestimatesassumethe tanksare amortizedover 30 yearswith 10% interestrate. Sincethe productwillbe turnedover so that it shouldnot deteriorate,it shouldhave an equivalentvalue in the futureif withdrawnfor use, so only the interest on the capitaltied up is to be considered.1I 13. Costsof the undergroundstorageproposalincludinginventorywouldtotal nearly US$50 mn more than those of above-groundoptions, which cannotbe justified on the groundsof operational need or of securityof supply. Storageis presentlyadequateand shouldbe expandedonly by additions to the steel tankage at existingterminals, in step with product demandgrowth. The Evaluationteam thereforerecommendsa more moderateexpansionof storagecapacity,alongthe followinglines: 3/ (h) Proceed with the ongoing program to construct conventionalsteel tankage at existing storage sites in the main industrialcenters, i.e. Harare, Gweru.Bulawayoand .sutare, to ensure that a minimumof two months capacityis available. Since present capacity already exceedstwo monthsof nationalconsumption(0.26 mn nim'.there is no srgency to build more tankage until demandgrows. Nevertheless,such a program should be designednow sincesome additionalstoragemay be required withinthe next two years. Additionaloperatingcosts will be minimalsince existingterminalstaff will operate the new tanks; (i) Graduallyincreasestocksto aboutthree monthsinventorydistributedin proportionto the regionaldemand. Present inventoryis reportedto be aboutone monthsupply. This will require an expenditureestimatedto total US$24 mn spread over three years or so; (j) Preparecontingencyplans for securingsuppliesby alternativeroutes, and/or temporary products rationing,for the eventualityof a major supply disruption;and (k) Emphasizeprogramsto improvethe efficiencyof using liquid fuels. Onefactor not allowedfor are the costsof storagelsses. Theseare likelyto be lower in the case of above-growud storage,asswningfloatng roof tanksare usedforgasoline. Themajorloss, however,iSdue tofilling and emptying; this is afuncwon of market offiake rather than the volue in storage. It will not thereforebe a majorfactor in the analysis. - 228 - Annex26 Page 6 of 7 COMPARATIVECOSTSAND NET PRESENTVALUE OF STORAGEOPIIONS (1989 ZS milious) A Undeound Option Above-ground Option SixMonths Stocks _________________ Yeor ToWa Danmad Tanks Prodc (m'0o0)w/ 1991 Il.OI 1992 1993 1994 1995 1996 1997 1998 1999 2W0 2001 2002 2003 2004 2005 2006 2007 2008 209 2010 1.,59 1.221 1,286 1.54 1.425 1,501 1,580 1,664 1,752 1,845 1.943 2,046 2,154 2,268 2.388 2.515 2,648 2,788 2,936 Toud Opewadig Cost Tani COA Opeating Totw PFroduct Cost Cost p.s. Tanku Fbotuct :. - 60.9 60.9 60.9 189.5 . 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 NPV 60.9 60.9 60.9 190.7 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 237.9 Basic Asumption: 89.2 360,000 ' oap buik, frt wo case Thirdcase,built a requiredto maint to monthsof socks Undegound coas (as per Snk& eati_mae) Tanksamortizdover 20 years bn chargd on productovertwo monthsrequirnt kI Policy.activodemandsenaio Sgur: DOERD;NOCZIM;Evaluationtm e_imates. OperUang Totc Cost Coot P. va. at 10% I Above-ground Optio mree Months Stocks 174.7 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 89.2 . 3.6;176.5 3.8 1.8 .4.0 1.8 4.2 1.8 4.6 1.8 4.7 1.8 4.9 1.8 5.1 1.8 5.5 1.8 S. 1.8 6.a 1.8 6.3 1.8 6.7 1.8 7.1 1.8 7.5 1.8 7.9 1.8 8.3 1.8 8.7 1.8 9.3 197.3 - ~ .22.7 .2 *:.2. 23.2 ..Q.2 12.50.2 14.2 0.4 19.8 0.4 20.7 0.4 29.8 0.6 11.9 0.6 12.9 0.8 13.4 1.0 14.4 1.0 14.2 1.2 15.9 1.2 16.3 1.4 16.7 1.6 17.7 1.8 18.0 1.8 19.0 2.0 19.8 2.2 3.8 26.5 27.2 16.7 18.8 24.8 25.8 35.3 17.6 19.2 20.1 21.5 21.7 23.8 24.8 25.8 27.4 28.1 29.7 31.3 168.4 - 229 - Annex 26 Page 7 of 7 UNDERGROUNDMINEDSTORAGEVS. ABOVE-GROUNDSTEEL TANKS 1. CapitalCosts AST are significantlylower cost, roughly one-half the cost under Zimbabweconditions. 2. OperatingCosts ASToperatingcosts are about50% higher in the case of the Zimbabwe storage. 3. Security UMS is more secure from militaryattack. However, if AST xAks are dispersedat a numberof locations,their securitywill be enhanc;Žd. 4. Flexibility AST are more flexible, in that it is easier to changeproductservices. 5. Loss Control AST are superior, provided floating roof tanks are used for volatile product service. It would be more difficultto maintainaccurate stock records in the case of UMS, should measurementdifficultiesarise. 6. Contamination AST are superior;undergroundcavernshold the productin contactwith water and possiblyother contaminants. 7. Use of Local Materials UMS will likely use less importedmaterialsof construction. 8. Availability UMS has the disadvantageof a muchlonger constructionperiod, three years vs. one year for AST. 9. Environmental Impact UMS is less obtrusiveand uses less landarea. There may, however, be a greater dangerof groundwatercontaminationwith UMS. 10. Technology Required ABStechnologyis much more widelyknown, and there is now good knowledgeof ABS operationsin the country. - 230 - Annex 27 Page 1 of 2 EMt8810N CONTROLAT COAL-FIRED POWERPLANTS 1. Overall emission rates for the four main atomospheric pollutants -dust, sulphur dioxide, nitrogen oxides, and carbon dioxide -- have been calculated for the existing coal-fired power plants in Zimbabwe tasaa on plant design characteristics and the nature of the fuel, boiler plant, and cleaning systems at each plant. A 25% ash content and 2% sulphur content in the ccal have been assumed. Daily emission rates for the four pollutants are calculated as follows: Emission Rates (M.T./Day) Bwange Harare ;unyati Bulawayo Dust Uncontrolled Dust Controlled St l,SOO 96 15 1S 17 2 1 1 280 38 34 34 NO, 42 5 5 S co, 15,400 2,156 1,914 1,914 Although the above represent only rough estimates of emission rates at each plant, they do provide a basis for assessing the potential significance of control measures. 2. At Ewange, fly ash emissions are controlled on all boilers by electrostatic precipitators. The design standard for this equipment, hcwever, is fairly lenient at 450 mg/Nm3 (dry), although Units S and 6 are reported to achieve even lower emissions. The near invisibility of the stack plume at Hwange suggests that fly-ash emissions are not a major problem, and that the only measure needed to be taken is to ensure that electrostatic precipitators fitted to Units 1-4 can achieve a performace of below 100 mg/Nm3 (dryj. 3. Uncontrolled dust emissions, however, are high enough to justify additional particulate control measures at all of the power staticn3. Although additional res'arch must first be carried out to determine the loca. health and onvironmental impacts of these emissions before definitive reco¢z¢ndatlona can be made, an allowance of SUS 0.8 mn is probably required for replacement of dust arrestment equipment at the three stoker-fired boiler plants at Harare, Munyari., and Bulawayo, along with an additional SUS 1.6 mn for renewal of the Harare electrostatic precipitator. 4. With respect to S02 emissions, the moderately high level of sulphur in HPS coal would favor considering some flue-gas desulphurization (FGD). Although it would not be cost effective to retrofit existing stations (with the exception of possibly Hwange Units S and 6), a strong case could be made for equipping any new units at Hwange with POD even though there are no other major sources of S02 emissions in the surrounding area. Before committing any resources to FGD, however, the nature of the sulphur in the coal also needs to be examined in order to assess the possibilities for reducing pyritic sulphur in the coal preparation process prior to combustion. - ?.31 - A.nex 27 Page 2 of 2 S. At present,there Ls no equipment lnetalledat any of the stations for reduclngemissionsof N0L Still, Lt is not likely to be cost-effectiveto reduce emissionsby up to 50% by retrofittinglow NCx producing burners to existingplantssincethis wouldpossiblyrequiremodifications to the combustion chamber. it wouldbe expected,however,that low NOxburnersbe inetalledat any new boiler plantsat Hwangeto containthe rise in NOx emissionsto no more than an addltlonal25 M.T. per day. 6. There la no equipmentlastalledat any of the stationsfor removal of acid gases. However,there is likely to be no justificationfor acid gas treatmentat any of the stations,so long as there is aufficientstack height to guaranteethat high groundlevelconcentration of toxicmetals in the surrounding localitiesdoes not arise. - 232 - Annex 28 Page 1 of 10 NAPHTHAREFORMINGOPTIONSl/ Backglord The Governmentof Zimbabwehas been inttrested in the possibilityof reactivatingthe 1. Mutarepetroleumrefinery, whichhas beenshut downsince 1965. It would liketo establisha petroleum processingindustryto providehighertechnologyemployment,and to developmanagersand professionals all relevant in a sophisticatedindustry, as part of a general industrialdevelopmentstrategy. HuwiUver, reasons: several for evaluationshave so far indicatedthat this would be uneconomic demandimbalancebetweengasolineand middledistillateson the domesticmarkiat: unsuitabilityof the refineryconfigurationto meet current middle distillatedemand; productionof heavy fuel oil and petroleumcoke for which markets can be found only with difficulty;and high cost of refinery rehabilitation. Also, if the Beira-Ferukaoil pipelinewere to revert to crude oil rather than product 2. service, it wouldbe difficultif not impossibleto accountfor the disproportionatelyhigh middledistillates demandby batchingdistillatesup the samepipeline. (Cleanand dirty productsare not normallybatched in the samepipeline.) For technicalreasons,therefore,the prospectsfor reactivatingthe existingrefinery of crude oil at Mutareare not promising. There is even lessjustificationfor investingin a new refinery to supplya relativelysmall,unbalancedmarketin competitionwithvery muchlarger, establishedefficient export refineriesas exist in the Middleand Far East. At the same time, the Governmentis anxious to find the optimum dispositionof the 3. physicalassetsof the refinery. Usually,selling sole refineriesand refinery equipmentis difficult. with a very limitedmarket, and high costs of dismantlingand relocation. The sale of the coker would be a possibility,and certain specificequipmentitems could be sold or reused on other Zimbabweindustrial projects. However, very littleof the capital in. ested will be recoverablefrom such sales. The NaphthaReformingProposal Consideringthe abovebackgroundand objectives,the IntegratedStrategyEvaluationhas 4. recommendedto analyzein more detailthe feasibilityof a limitedprocessingoperation for the existing refinery that would both provide economicbenefitsand permit some utilizationof the idle equipment. L/ naphihaand (b) wholenophtha,whoseprce Thereare two typesof naphtha,i.e. (a) reforming(vetrochenmdi-grade) on internationalnarketsis lower. The we of whok naphthaIs assuned in ths anatysis. - 233Annex2 Page2 of 10 The operationwouldessentiallyproducemotorgasoline,LPG, and, possibly,aviationgasolineand/or industialsolventsfromimportedraw petroleumnaphtha. S. The Mutarerefinerycontainsthe followingunitsfor possibleuse in therefiningprocess: Atmosphericand vacuumdistillationcolumns,for separationof crudeoil into gas, naphtha,kerosene,gasoils, and residues; Catytic reformer,for upgradinga heavynaphthafractioninto higher-octane gasolinecomponents; Catalyticcracker,for decomposition of vacuumgas oil intolightercomponents; Delayedcoker,for decomposition of residuesintocokeandlightercomponents; Polymerization unit, for the productionof a gasolinecomponentfrom light olefinsfromthe crackingprocess; Gas plant,for fractionating lightcomponents; and Desulfurizationunits. 6. TheEvaluationteamrecommends to analyzein moredetailthe utilizationof thenaphtha reformer,withits associatedfeedhydrotreater andsomeof the fractionatingequipment.The feedstock wouldbe an importedwholenaphtha,in the orderof 0.4 mn m3 p.a., boilingin the C5 - 430@F range andcontainingabout5% butaneto supplement the LPG supply. Suitablenaphthacouldbe purchased fromany exportrefineryin the MiddleEast or IndianOceanregion,in conjunctionwiththe purchase of otherpetroleumproductsfor Zimbabweandshippedin the sameproducttankersto Beira. It would thenbe batchedup the pipelineto Ferukaandregregatedfor processing.Ampletankageexistsfor the requiredfeed-to-product storage,but specifictanks wouldhave to be set aside also for intennediate produus. 7. The naphthawouldinitiallybe fractionatedintolightandheavyfractions,witha heavy faction of about 0.16 inn m3p.a. routedto reformerfeed tankage. This fractionwouldthen be pretreatedwith hydrogenfrom the catalyticreformerbeforebeing processedin the reformeritself. Reformerproductswouldincludehydrogen,fuel gas, propane,butane,and highoctanereformaterich in aromaticcompounds.The reformatewouldbe recombinedwiththe lightnaphthafraction,andthen fractionatedin the gas plantto producestabilizedgasolineand an LPG product. Finally,stabilized - 234 - Annex28 Page 3 of 10 gasolinewouldbe blendedwith tetraethyllead and/or ethaaolobtainedfrom Triangle,to producea final productto an octane and volatilityspecificationmost appropriateto the Zimbabweanmarket.al 8. Reformateis rich in benzene, toluene, and xylene. At some stage, it might be justified to producethese productsalso for the Zimbabweanmarket. It mayalso be possibleto producearomatic and aliphatic solvents, e.g. dry cleaning and paint solvents. A small batch still would require little investmentto produce small quantitiet of these high-value products for the local market from the intermediatestreams, yet importand transportationcost savingsmay be significant. 9. Fuel requirementsfor the processingoperationwould likely be equivalentto about5% of the feed naphtha. Hydrogenproducedin the reformer would be used primarily to treat te incoming naphtha. Any surplus would be used as processingfuel along with methane and ethane products and some propane. InvestmentReirements 10. Investmentassociatedwith the naphthareformingoptionincludesthe following: (a) Rehabilitationof catalyticreformer, gas fractionationplant, reformer feed pretreater, gasolineblendingequipment,intermediateproduct tankage, boiler plant, coolingtower and coolingsystem,power supplyfacilities,flare/blowdownfacilities,and, possibly,the atmosphericcrudeunit; 0b) Modificationsto the distillationunits to be adoptedto this operation; (c) New facilitiesto blend ethanolinto the gasolineproducts;J/ and (d) New piping interconnectionsand disconnections. 11. In addition,workingcapitalfor the purchaseof feedstockinventory,catalysts,chemicals and other operatingsupplies, and for start-upexpenseswill be required. A definitiveinvestmentcost estimate requires a more detailed inspection of the state of the refinery equipment, as well as a preliminaryengineeing study of th. modificationsrequired. The Evaluationteam's brief inspectionin February 1990 and discussionwith CAPREFstaff indicatedthat the equipmentwas in unusuallygood conditionconsideringits age, and had been well maintainedduring the entire shutdownperiod. lhis condiion was also helped t.y the relativelydry, non-corrosiveatmosphereat Mutare. For example,all pumps had been maintainedin operating condition; vessels were filled with oil to prevent internal I/ #I An aternadve configuratonwouldbe to ydronreat the *olk npkhafraction beforespUng. this wuld resultin a *wermukandsweter produ. XAlernaty, Me edsn8g aangements to bknd ethanolat the depotsmightbe retained,dependingon voba sand where na,ketei - 235 - Annex-28 Page 4 of 10 corrosion;and externalpainting was generallyin good condition. It might be assumed, therefore, that the process units will require little rehabilitationother than detailed inspectionand minor repairs. An exceptionmay be the control systems (these are now obsolete pneumaticsystems). New electronic systemsmay have to be installed. Furnacesmay require refractoryrepairs. 12. On the basis of the requirementsindicatedabove, the Evaluationteam's preliminary estimatesof capitalcost requirementsare as follows: 12991US$mn Rehabilitationof processequipment Modificationsto equipment New piping and tie-ins Catalystsand chemicals Operatingsupplies Start-upexpenses Total 5.5 3.0 2.0 0.8 0.3 1.0 12.6 Raw naphthainventory 7.0 Total includingfeedstock 19.6 Economicsof Nap4pa Reforming 13. For naphtharefinery to be a viable project, it must be assumedthat the past investment in the refinery equipmentis a sunkcost and that the equipmentnowhas essentiallyzero value. The total capital to be amortized would therefore be the incrementalinvestmentfor this project as discussed above.41 14. I/ Viable economicresults for this proposal dependon the followingfactors: (a) Mostimportantly,the differentialbetweenthe CIF price of naphthaand motorgasoline. The transport costs of each to the refinery is essentiallythe same except that higher volumesof naphthaare requiredbecauseof processinglossee. Tbis differentialis usually USc3-6/U.S. gallon. (b) The differential betweenthe cost CIF refinery of naphthavs. LPG: This differential usuallyis large, due mainlyto the muchhighercost of transportingLPGin cylinders(vs. Is maycausesmedifcules since Mepresentownersshowno interestanrectivating te plant,yetmayclaim re rsbmmnfoman otherpary erestedin developingthisproposaL - 236 - Annex2 Page 5 of 10 naphtha by pipeline). The evaluationteam estimates the LPG costs CIF Mutare or Harare to be almosttwice as high as naphtha; and (c) on the debit side, the roughly 5% processing loss, includingfuel required, and other operatingexpenses,as follows: * * * * * * * Maintenance- labor and materials Operatingwages, salaries, and materials Chemicals,catalysts,and tetraethyllead Processroyalties Electricity Overheads Technicalassistancecosts. 15. There maybe additionaleconomicbenefitsif the proposalwere extendedto includeother productssuch as aromaticor aliphaticsolvents, and aviationgasoline. Nevertheless,such an extension might best be considered in a later phase based on a proper economicjustification for the capital investmentsspecificallyrequired for this extendedproduction. 16. The economicsof naphthareforminghave only been consideredin the present supply situation, e.g. importationof petroleumproducts via Beira. However, should these imports become feasiblevia or from SouthAfrica, the proposal wouldbe in competitionwith suppliesof gasoline, LPG and other productsfrom that potentialsource. This couldradicallyaffectthe economicsof the proposal. SouthAfricahas three majorrefiningcenters,i.e. Durban,CapeTown, and Sasolburg,with a total crude processingcapacityof over 0.4 mn B/D. Also, fuel products are availablefrom the coal liquefaction plants in the Transvaal. Exportablesurplusescould be readily available. Offsettingthis advantage, ptoducts from the Transvaal refineries would have to be transported to Zimbabweby rail or road, Involvinga transportcost disadvantagerelativeto the Beirapipeline. Productsfrom the Durbanand Cape Town refineriescould be movedbe sea to Beira, and thence by pipeline. 17. As a particularadvantageto Zimbabwe,naphtha reformingwould bring about a v.-Are reliable, lower-costsupply of LPG. Suppliesof at producthave been a problem in the past, due to a shortageof rolling stocAfor rail transport. LPG can be of a valuable energysource in the rural areas prior to electrification,e.g. for food processing. 18. A preliminaryeconomicassessmentindicatesa net marginof U$3.8 mn, for a reformer yield of 85% and an annual operatingcosts of U$5 mn. (Thesecosts, which are relativelyhigh, take account of the fact that in additionto the reformer, other sectionsof the refinery need to be put into operation for naphthareforming.) Assuminga project life of ten years, an indicativeeconomicrate of return is estimatedas follows: - 237 - Annex28 Page 6 of 10 Central Case InvestmentCost 50%higherthan Central Case OperatingCost 20% higher than Central Case 27% 14% 20% 19. Beforethe proposal is taken any further, the economicsshould be firmed up by an indepth study based on a detailed inspectionof the refinery, more definitivecost estimates,and a review of likely future trends in internationalpetroleummarkets affectingthe basic cost relationshl- between 'straight run" naphthaand finishedgasolineto a specificationsuitable for the Zimbabweanmarket. 20. A potentiallyimportantfactor impactingon the hanhtha refbrmingoptionis the current trend towardsformulategasolinesthat are environmentadly less harmful, particularlyby elim.natinglead and reducing vapor pressure. This puts pressure on non-lead octane boostir.g facilities and should Improvethe incentiveto operatea catalyticreformer. A contraryfactor relatedto the environmnents the limitationof aromaticcompoundsin gasoline,as is required now in the United States. Since reformate is highly aromatic,reformingis less of an option in the U.S. for octane improvement. As yet, however, his is not a major factor in the eastern hemisphere. 21. The naphtha/gasolineprice relationshipmay also be affectedby the use of naphtha as a raw material for ethylene production, a major petrochemicalintermediate. Ethylene may also be producedfrom propane, butane, and other light hydrocarbons:the choice of feedstockwill depend on relative costs of these various hydrocarbons,modifiedby the obtainableethyleneyield from each. 22. The interaction of these various factors is complex, and the prediction of future relationshipalmostimpossible. But there is no reason to expect the historicalprice relationshipbetween naphthaand gasolineto changemarkedly,consideringthat gasolineis the majormarketoutlet for naphtha (after upgrading). Ideally, the purchaseof whole virgin naphthaas feedstockfor this project shouldbe based on a long term contract, at a price with a fixed relationto sufficientdiscountbelow the price of 87 RON gasoline in the region as definedby posted prices. This would lock in the revenue flow from the project. LPG producedwill always likely be profitablein view of the high transportcost involved in procuring it. InstitutionalConsiderations 23. The Mutarerefineryis ownedby the CentralAfricanPetroleumRefineryCo. (CAPREF), whi h in turn is ownedby a numberof internationaloil companies. The petroleumindustryin Zimbabwe is essentiallycontrolled by the Goverment, tough its National Oil Co. of Zimbabwe (NOCZIM). CAPREFshows no interest currendy in recommissioningthe refinery, which probablyis relatedto the poor economicsof refinery crude oil discussedabove (paras 1; 2); the need for considerableinjections of foreignexchangefor capital investment;and evenif it were marginallyprofitable,uncertaintiesabout the repatriation of profits. Tbe possibilityof just reactivating'he reformer apparendyhas not been consideredby CAPREF. In many cases, this is likely to be ur.ttractive to them as a small, marginal project for the internationaloil companies. - 238 - AnMex2 Page 7 of 10 24. Sincethe refineryhas not operated for many years, the Governmentmay argue that as a strategicasset the CAPREF refinery shouldbe recommissionedwithin a certain time limit and in the opposite case, it should be handed over to NOCZIM.J/ NOCZIM would then be free to make whatsoeverarrangementsit wishedto reactivateall or part of the refinery. However, very few stateoil companies have been successful in the petroleum downstreamsector. The optimal approachmight thereforebe to lease the facilitiesto a privateZimbabweancompany,the terms of the lease beingto some measure determinedby the net revenuegenerated. Equity and loan capital could be raised locallyand abroad. Mostof the capitalinvestmentwill requireforeignexchangee.g. for specializedequipmentand processingchemicals. Also, some expatriatetechnicalassistancewouldbe required. Conclusionsand Recommendations 25. A possible recommissioningof the refinery's catalytic reformer to produce motor gasoline, LPG, and, possibly, other products from importednaphthamay providesignificanteconomic benefits, requiringrelativelylow investnent and entailingfew economicrisks. It couldbest be carried out as a private sector project, purchasingor leasingthe equipmentfrom CAPREF. Reactivatingpart of the refinerycouldprovidea nucleusfor future expansionintoother petrochemicalventures, following the transferof technicaland managerialexperienceto Zimbabwein this field. 26. The Evaluationteam reconunendsthat the Governmentconsider: (a) (b) I/ A prefeasibilitystudy of the proposalshould be commissionedincludinigthe following: (i) more detailedinspectionof the refinery; (ii) preliminaryengineeringto produce a more definitiveprocessingflow plan and to determinewhich itemsof equipmentwill be used and what modificationswill be required; (iii) firmer capitaland operatingcost estimates; (iv) updated market outlook, under due consideration of the price elasticity of demand; and (v) economic sensitivity assessmet based on various feed and product price scenarios; NOCZIMshouldexplorethe naphthasupplyopportunitieson a long-termcontractbasis, at suitableprices relatedto motor gasoline;and HaWng reasyfor petroklumpurchasingfor Znbabw, NOCZMinanyeventwouldhaveto be involved inthe purchasg of fphG - 239 - Annci2l Page 8 of 10 (c) NOCZIM shouldassess the interestand suitabilityof various companiesnow operating in Zimbabwe,as investorsand/or operatorsof this project. - 240 - Anex 28 Page 9 of 10 PotentialBenefitsand Risksof the NaphthaReformingOption (1) Foreign exchangesavingsfor petroleumproductspurchases (2) Contributionto developingtechnicaland managerialcapability (3) Minor creationof employment(mainlyskilled) (4) Productionof petroleumproducts specificallytailoredto the needs of the Zimbabwean market, including specialized petrochemicalproducts such as soiwm'. This could provide a nucleusfor future petrochemicaldevelopmentprojects. (1) Under-estimationof capitaland/or operatingcosts couldresult in non-viableproject (2) Plant operating problems would adversely affect the availability of vital products. (Remedy: maintainadequatereserve stocks; be preparedto import products in the case of an extendedplant problem) (3) Environmentaldamagecloseto the refinery. (This is a very low risk since any reformer operation is essenially non-pollutingexcept for some SO2 emission. Modern refinery systems allowgood controls.) - 241 - Ax 21 Page 10 of 10 MATERIALBALANCE Foed Wm« '000) ReformingNaphtha400.0 Demand1m3'000) LPG 12.3 (1992, BaseCase) Gasoline 308.9 Kerosene 161.3 Diesel 696.2 Capacity(fr 3 '000) 768.0 Distillation Vol% m 3'000 100.0 400.0 Atmospheric: Total Naphtha Gas, FOE Propane Butane Refomate Ught Naphtha Heavy Naphtha FCCUGsline Kerosene Light GasOil Residue Vacuum: Atm. Residue Vac. Gas Oil Vac. Residue 5.0 0.0 0.0 20.0 55.0 40.0 220.0 160.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 158.0 Reformrn GasolineBlending %m7'o00 m3'OOO RON RON RON RPVI Diesel +1.6a *+3.2 16 2.4 1.0 1.6 6.0 9.6 I0.0 93.0 100.0 103.0 .138.0 .: 85.0 136.0 136.0 95.0 101.0 101.8 3.6 220.0 65.0 76.0 80.0 20.3 -100.0 160.0 0.0 94.0 96.0 97.0 6.5 366.0 76.9 85.9 88.7 17.3 (SRPV) 0.0 Total Fuel RefineryFuel Net FuelOil ECONOMICBALANCE - Naphtha FeedCost -Product Value1992 m3 '000 US$ mn US$ mn m3 US$/m3 US$ mn DemandBalance 400.0 261.0 104.4 LPG 14.8 304.7 4.5 12.3 2.5 Gesoline 366.0 297.0 108.7 308.9 57.1 Kerosene 0.0 0.0 0.0 161.3 -181.3 Diesel 0.0 0.0 0.0 696.2 -857.5 Bitumen 0.0 0.0 0.0 20.0 -20.0 Fuel Oi 0.0 0.0 0.0 13.0 *13.0 TotaW 104.4 113.2 GrossMargin OperatingCost Net Margin EstimatedIstestment Cash Flow Base nv-Q Caso 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 IRR(% Note: -12.6 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 27 -18.9 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 14 Assuneeawale"linrfaoon Smal surplusto 1994 Imported Imported Imported CIF OP Cos + 50% Q50S6 -12.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 17 8.8 5.0 3.8 12.6 Gasoline/NaphthaPriceMarnin 10% les 20% ess 10 *10 In the Base Case/Policy-ectiveScenario,the surplusIs redued, but no significant effect on the economicsof the project occur. The mot critical fator is the difference betweenthe naphthaand gasolineprices. - 2.42 - Annex 29 HEALTHEFFECTSOF POLLUTANTSFROM MOTOR VEHICLES Pollutat Health Effects Carbon Monoxide Interfereswith absorptionof oxygenby hemoglobin(red blood cells); impairs perceptionand thinking, slows reflexes, causes drowsiness, brings on angina, and can cause unconsciousnessand death; it affects fetal growth in pregnant women and tissue developmentof young children, It has a synergisticactionwith other pollutants to promote morbidity in people with respiratory or circulatory problems; it is associatedwith less worker productivityand general discomfort. NitrogenOxides Can increasesusceptibilityto viral infectionssuch as influenza:irritate the lungsand cause oedema, bronchitisand pneumonia;and result in increased sensitivityto dust and pollen in asthmatics. Most serious health effects are in combinationwith other air polluut.su. Hydrocarbons and other Volatile OrganicCompounds Low-molecularweightcompoundscause unpleasanteffectssuChas eye irritation, coughingand sneezing. drowsinessand symptomsakin to dnrnkenness; heavy-molecular weight compounds may have carcinogenicor mutageniceffects. Some hydrocarbonshave a close affinity for diesel particulatesand maycontribute to lung disease. Ozone (Precursors:HC and NOx) Irritates mucousrmembranesof respiratory system causing coughing, choking, and impaired lung function; causesheadachesand physical discomfort;reduces resistanceto colds and pneumonia;can aggravate chronicheart disease, asthma, bronchitis,and emphysema. Lead Affects circulatory, reproductive, nervous, and kidney systems; suspected of causing hyperactivityand lowered learning abilitv in children;hazardouseven after exposureends. Leadis ingestedthrough the lungs and the gastrointestinaltract. SulfurDioxide A harshirritant,exacerbatesasthma,bronchitisandemphysema;causes coughingand impairedlung functions. ParticulateMatter Irritates mucousmembranesand may initiate a variety of respiratory diseases;fine particlesmaycause cancerand exacerbatemorbidityand mortality from respiratory dysfunctions. A strong correlation exists between suspendedpar'.culates and infant mortality in urban areas. Suspendedparticulateshave me abilityto adhere to carcinogensemitted by motor vehicles. Toxic Substances Suspectedof causingcancer, reproductiveproblems,and birth defects. Benzeneand asbestos are known carcinogens;aldehydesand ketones irritate the eyes, cause short-term respiratoryand skdnirritation and may be carcinogenic. SQ£: There is growing evidencethat the synergisticeffectsof these pollutantsin coombination maybe far more seriousthan the adverse effectsof individualpollutats. This is particularlythe casewhere NOx and SOx coexistor occur in associationwith particulatematter. Sju: OECI) 11988];French [19901;ECMT119901;Walsh 11989cl. 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O'O"**e** am ~~~U ~ ~80 ~ ~~~"ai ~ 60 ..... 40,1 d -***'*- O's tI ~SI to IS Oe *'0 *es e.g01 i0 I'll @- S: :l°t .i' I't 'l *'$ e.g O ~ .*O's 51 el# 5 's *-0 i ~ e's~ me Us am, 0 tO PS e's *'0 i-I 0-*t5 1,s We *'so i-O i4 S'S l, *'o O S p,* LC 55O Oe ie' s *'l 0-0 *'i 11t1 s"at Mte ................-.. e 55 tIl O's * iS 5.2 e11 ei *lg S'S- 0's- c.s* 41'* 6'0- ouct -....01610cs 16 ct .......... 05 O' 5 t-0 -i i-i 5"so a5.5 i'# i.e 50 Sw'ee 0c's- C's P. me: let _ af*4 -0t t0#e0 _ Z q 1 *" tm4 af5&age too le £'@ GPes aaee -N5 # ge,*t *il iminr^, 11O t-'S 't Ane5 Axomlw a o mS0.e Annex 34 EtriW Sector Sumary - Pelle1 Activo Coe (%11lions of Zimbabwedollers _ _ _ _ __ _ _ _ _ __._._ _~~~~~~~~~~~~~~~~~~~~~ 1990 ,_._._.__. 1991 _ 1992 ---------_---------- 1993 ^ --- ~ 1994 _ - 1996 -_____._____-_----------- _ - _ _ 1996 - _ _ 1997 _ _ _ _ _ 199M I99 _ Page _ _ . 2600 _ _ _ _-__ _ -_- -------- 2091 _ 5 of 6 ______-____________- 2964 2092 2009 e86 1878 1290 2762 1300 1468 2378 485 483 1999 2346 1667 1083 2977 280C 966 1248 1734 1840 2645 2320 296 26"6 2965 - - ------ _---------------------------------------------------- ----------. ___ A INVES1MEIN NET SAYVNGS Not energy sector esvings Cros savings Interestpsyment Energy soctor investment Local currency Foreigncurrency E ergy sectorde icit Orove Borrosolgs froms for.lgn Centrel Government Montery sector Privet. sector Not Betrowtgs from: Forelgn CentralGovrnment Monetarysector Privet. eector 847 819 264 224 918 1024 1202 1431 760 892 1084 689 959 1414 1986 2031 823 1138 464 427 903 1162 960 635 738 1149 1676 1691 -126 9 136 248 9s 15 U74 -90 188 198 867 112 °76 417 98 866 272 614 132 382 421 99 432 834 OS7 8t1 476 568 119 631 412 792 249 653 664 1U8 638 606 890 226 465 557 161 707 646 486 192 293 324 1W 774 686 1088 66 6e2 6" 101 125 49 108 184 136 77 l1o 26 189 1t1 9 819 137 18s 90 857 159 1s6 146 511 14i 181 . 103 # 196 I18 208 -40 )7 190 237 357 214 270 177 683 242 8S7 292 779 278 849 680 eo5 98 1OS 81 14S 172 112 56 77 235 286 164 164 63 810 120 120 114 249 121 116 167 -72 265 133 177 834 268 160 206 123 529 109 22S 226 645 191 264 505 489 215 215 1b3*1 1778 2199 2157 81u42 $598 401 944 1254 1602 1624 667 423 261 885 1966 786 665 561 46 8a8 877 1034 740 020 516 427 871 710' 636 642 528 465 479 402 6280 1879 1138 1211 972 5985 2142 1288 1410 1095 7664 2671 146? 1638 1320 1I1 89 -14 198 l88 68 a82 976 1162 935 214 l8t 1153 9S9 3S9 206 846 ON8 s8 2990 819 2301 251 1496 146 S1 481 94 1016 78 688 96e 66 69 8 083 6e 81 28 uN0 26 603 849 233 633 3ta 894 131 44 1238 1125 444 8No 848 89 43 a89 80 820 w 908 1294 1403 1137 788 248 243 022 1102 544 2679 2136 26S2 898 1679 2016 O1 861 26 44 14 -6 OUTSTANGINOMEsT Energy sectoe dbt Eater.sl From btudgt Fro monetarysoctor Froe private*etor 8759 16469 12826 16371 17601 19709 20659 2188 8316 1648 1690 1905 7240 3069 2976 6401 7668 3483 3101 6565 781 38? 826 643 1168 1247 182 a8t 228 3160 8694 825 s8 28 262 34389 37 4016 438 704 676 822 274 4886 400 95 086 8? 362 5268 671 8766 4643 6478 6487 1883 2166 2380 2889 2106 2346 2631 2737 2727 8829 4982 5828 DeBTSERVICE 267 816 8 412 496 697 474 800 960 48 6 19t 151 290 264 I"mort ofe*lectricity Importsof coal A coke Imports of potrolom product. Total *nergyImports 12 20 80 624 le 38 984 916 22 42 904 Ga7 28 51 Sol 676 27 .69 918 99 198 68 941 1202 229 206 90 78 1115 1310 1400 1620 299 286 274 268 262 242 234 162 203 164 147 132 117 104 1643 1786 2014 2264 2414 2031 2684 1882 2123 2398 2614 2652 8196 8316 Itetreatpald for. by energy Prlncipol rcped to fToregn l porto * Pb t * erico 86 0 eo7 54 18 982 le 82 88 21 1070 1027 165 47 1204 202 SS 1466 288 212 01 75 1867 1938 214 94 2260 08 l9 172 164 286 819 a 867 249 a8l 25M 81? 268 865 Energy debt service EFFECTS BALANCEOF PAYMENTS 486 618 431 862 u4 186 227 166 184 1S0 263c 2894 8210 8626 899 COPITALACCOUHT Not foreignborrawing arossforeianborrowlnh 285 266 121 196 529 638 645 779 489 8se 768 970 983 112 i69 1233 6S 1126 818 688 26 a8 . - ------ ------ - - ---------NETSAVINGS-A IWESTMFXT not =r9yveoctor covings ore, as lose Ist.r.st poponts Energy soctor lnvostasat Loesi turroacy Forelp currency Eftergy sector deficit Gross sorroolop front Foreign Central Government mosetery sector Private sector Not Borrowings treat Forelon cosktrat Government Monetary sector Privet. G*ctor E"rgy Stetor Sumeary- Osea,Cases,Policy Activs (poreent of OP) ------ - - --------- - --------------1990 1991 IM 10931 1994 IM IM 1997 IM IM MO 2001 2M -- --- - ----- - --------------- - ----------------- --------------- - ---------------------------- Annex.-3 A Page 6 of 6 - - ------------ - M3 2M 2M 2M no - --------------- - -- ---- -6.0 0.1 0.9 1.6 0.8 1.0 2.4 -0.2 0.9 1.1 2.1 0.6 1.6 2.2 0.4 1.8 1.2 2.3 0.8 1.7 1.9 0.4 1.7 1.8 2.6 0.7 1.0 2.1 0.4 1.9 1.4 2.6 O.S 1.9 2.2 0.4 1.9 1.5 2.0 0.7 1.4 1.6 4.4 1,0 1.4 1.2 0.6 0.7 0.0 0.4 1.9 1.3 2.6 1.8 1.1 2.0 0.4 1.0 1.4 1.9 0.9 1.1 1.6 0.5 1.9 1.3 2.6 0.9 1.7 2.S 6.6 1.9 1.4 $.I 1.11 1.0 2.6 0.5 2.0 1.6 2.9 1.4 1.3 2.4 0.6 2.1 1.6 3.4 1.8 1.8 2.9 0.6 2.2 1.7 3.3 1.4 1.9 2.6 0.6 2.3 1.0 2.7 0-9 1.0 2.2 0.6 2.0 1.0 2.2 0.0 1.4 1.7 0.6 2.3 1.8 1.1 4.4 O.S 0.1 S. 2. 1. 1. 0. ir. 0. 0.7 0.0 6.3 1.1 1.0 6.7 6.4 0.6 1.2 0.4 0.6 6.0 1.2 0.6 0.6 0.8 2.2 0.6 0.6 8.6 0.9 0.4 9.6 0.3 0.6 0.4 9.6 -0.1 .S 0.4 0.6 0.9 0.7 0.4 8.6 0.4 1.1 0.4 0.6 0.5 1.2 0.4 0.6 1.1 0.9 0.4 0.4 1.3 1.2 0.4 0.4 1.0 1.2 0.4 0.3 1.6 1.2 0.4 SJ 1.1 1.0 0.4 0.3 0.0 0.5 0.4 0.2 013 S. S. 'S. 0. 6.6 0.7 0.2 0.9 0.9 0.4 0.1 0.4 1.1 1.1 0.4 ::,4 1 0.4 -8. 1 0.2 1.0 4.4 0.4 0.4 0.7 0.8 0.4 6.2 0.2 0.1 0.4 -0.2 0.6 S.11 SA 0.9 6.5 0.3 0.4 0.2 6.9 0.11 0.4 0.4 1.0 0.3 0.4 9.3 0.6 0.3 0.11 1.1 1.0 0.3 0.3 1.4 1.0 0.3 0.2 1.3 0.9 0.8 0.2 0.0 0.1 0.3 0.2 0.6 0.2 J 0.1 0.0 0. S. S. 0. 9.0 1.6 2.2 2.4 2.6 9.6 2.8 2.4 2.3 2.6 9.9 8.0 2.6 2.3 2.1 14.4 3.8 2.8 2.4 2.0 11.4 4.2 2.8 2.5 2.1 11-4 4.4 2.6 2.6 2.1 11-0 4.1 2.0 2.6 1.0 11-0 4.2 2.0 2.7 2.2 It-9 4.3 2.0 2.9 2.2 12.6 4.7 2.8 2.9 2.2 13.0 6.2 2.8 3.0 8.0 14.4 6.2 2.0 2.9 8.9 16.6 6.8 2.6 2.9 4.7 IS-$ 6.0 2.S 2.0 6.9 11.2 8.2 2.0 2.7 6.1 16.9 6.2 2.0 2.8 6.0' 16.1 14. p 6 & S.I 2:6 g. 2.4 2. 6.0 4. Energy dobt sorvice/W Energy debt s.rvIco/Exports 0.8 8.9 0.4 1.0 0.6 1.3 0.6 1.5 0.7 1.7 0.0 1.0 0.7 1.6 0.7 1.7 0.7 1.2 0.7 1.7 0.0 1.0 0.0 1.0 0.0 1.9 0.9 2.4 0.9 2.1 1.6 2.1 0.9 2.1 2 BALAWE OFPAVVDITS EFFECTS van laporto of oloctrielky Isporto-of coal A Coke, Imports at pettolem products Totel aftairgy lo"rte Enorgy Imports/Total lo"rt. 4.1 0.2 3.0 4.1 12.9 ;.I 0.2 4.6 4.9 13.9 0.1 0.2 4.1 4.8 11.7 0.1 6.2 8.1 9.4 9.9 0.1 0.2 3.0 A.11 8.6 0.8 0.2 2.7 3.6 8.9 9.6 0.2 2.0 3.6 0.9 0.6 0.2 3.0 3.7 9.1 0.6 0.2 8.1 3.9 9.2 0.4 0.2 9.1 2.0 9.3 0.'4 0.2 9.2 2.8 9.11 6.4 6.2 3.1 3.4 9.0 0.8 0.2 8.0 8.5 0.1 4.8 0.2 2.9 8.4 9.4 6.8 0.2 2.0 3.8 0.1 84 0.2 2.7 3.2 7.9 ' .I 9.2 2.6 4.1 7.6 S. S. 2. S. 7. 0.2 8.1 4.8 0.3 0.1 6.3 0.4 0.1 4.9 0.6 0.1 3.9 0.6 8.2 4.8 9.6 0.2 4.1 0.6 9.2 4.3 0.6 0.2 4.4 0.5 0.2 4.6 6.6 9.2 4.6 0.0 9.2 4,4 6.8 9.2 4.6 8.6 0.2 4.4 0.6 4.2 4.2 8.7 0.3 4.2 O.? 0.3 4.1 8.7 0.3 4.0 0. 0. A. 0.6 0.7 0.9 1.0 1.1 1.2 1.1 1.2 1.0 1.2 0.1 0.9 0.3 0.6 0.6 0.8 4.6 0.7 0.9 1.1 1.0 1.2 0.6 4.0 1.0 1.2 1.9 1.3 8.9 1.2 0.7 1.0 0.2 0.5 S. 4. OUTSTANDM DEBT ----------Energy sector debt Extornal From budgot From oo"tery socter From private sector OUT SOWICE lot. pold forelp by energy PrIxOpol repaid to foreign toperts # Debt "rvico CAPITAL ACCOIW IMM200MUSS"Ou Not for.190 bort"in Gr"o foroip borrow -261.- Annex 35 Page 1 of 10 ENERGYSECTOR SUMMARY:PROJECTED ENERGY-SECTORINVESTMENTAND FINANCING REQUIREMENTS,ENERGYSECTOR DEBT, AND EFFECTS ON THE BALANCEOF PAYMENTS, 1990-2010 - RESTRAINEDELECTRICITY IMPORTS TALI 1. ErergyInvestmentScerario- BaseCase, Policy ktive (millions of Zimbabwe dollars) 11 199219931994195 196 199715581999200020Ot2002 03 20042005 06 2007200820092010 Local Cumwey1998$ KaribaSouthUpgrading 0.5 1.0 0.0 0.0 0.0 0.0 n.0 0.0 0.0 0.0 3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 KaribaSouthExtention 0.0 0.0 0.0 0.0 8.5 12.616.423.1 19.5 5.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.Q Satoka Stage I 0.0 .5 3.7 4.6 15273.1 53.6 123 249 25 236 14893.3 L.0 .0. 0.0 .0.0 0.0 0.0 0.0 CoboraBassa 0.0 0.0 18.3 46.0 27.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0:0 0.0 0.0 0.0 0.0 0.0 Old Themals Rehb 3.0 9.7 21.3 17.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.u 0.0 0.0 0.0 0.0 0.0 0.0 Gas Turbine t1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 8.3 18.C 1.4 0.0 0.0 t.0 0-0.0 09. 0.0 0.0 0.0 Poer Tranmission 12.0 15.0 15.0 15.0 18.0 18.0 18.0 18.0 18.0 18.0 48.018.0 18.0 lr&fS.Z 18.&. O 18.0 18.0 18.0 PowerDistribution 28.0 30.0 30.0 30.0 30.0 35.0 35.0 3'.0 35.0 35.0 35.0 35.0 3'.0 35.0 35.0 3'.0 35.0 35.0 35.0 35.0 coal 0.5 3.0 0.6 0.5 12.3 0.6 0.5 0.5 -3.1 42.3 0.5 3.1 0.5 33. 6.6.h 0. : 0 6.3 Fuel storage (3 eths) 0.0 7.5 0.0 0.0 0.0 0.0 7.' 0.0 0.0 0.0 0.0 7.5 0.0 '-0 7.5 0.0 0.0 7.5 0.0 0.0 Pipeline 14.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 D.090.0 0.0 0.0 0.0 0.0 0.0 Ethanol 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 0.0 0.0 0.0 0.0 0.O 0.0 0.0 0.0 0.0 Fuel distribution 5.0 5.0 5.0 5.0 5.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 S.0 6.0 6.0 TOTAL 64 74 94 119 253 145 137 205 339 388 297 217 153 60 79 62 60 67 62 65 3. -oreignExch (89 ZSequ.) KaribaSouthUpgrading44.4 36.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 KaribaSouthExtention 0.0 0.0 0.0 0.0 2.2 15.8 85.0 13476.2 2.2 15.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Satoka Stage I 0.0 3.4 7.2 41.9 19.5 15.6 31.9 55.7 72.6 206 205 118 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 CoborsSassa 0.0 0.0 36.2 89.0 _.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 .0.0 0.0 0.0 0.0 0.0 0.0 Old ThermalsRehab 27.1 62.3 11556.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Gas Turbine#1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 32.4 70.2 5.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 PowerTransaissior. 20.0 20.0 25.0 25.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 a8.0 28.0 28.0 28.0 PowerDistribution 50.0 50.0 50.0 52.0 55.0 60.0 60.0 60.0 60.0 60.0 65.0 65.0 65.0 65.0 65.0 65.0 65.0 65.0 65.0 65.0 Coal 0.5 23.0 1.4 0.5 41.7 1.4 0.5 0.5 23.9 49.9 0.5 23.9 0.5 0.5 24.5 23.0 0.5 1.4 23.0 13.9 Fuel storage (3 aths) 0.0 17.5 0.0 0.0 0.0 0.0 17.5 0.0 0.0 0.0 0.0 17.5 0.0 0.0 17.5 0.0 0.0 17.5 0.0 0.0 Pipeline 41.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Ethanol 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Fuel distribution 5.0 5.0 5.0 5.0 5.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 TOTRL 189 218 239 270 205 127 233 284 295 465 326 258 100 100 ',1122 100 118 12S 113 Total Investment Kariba SouthUpgrading.44.9 37.4 0.0 0.0 0.0 0.0 0.0 0.0 0-0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 KaribaSouth Extention 0.0 0.0 0.0 0.0 10.7 28.4 105. 157.95.7 7.4 15.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 BatokaStag I 0.0"5.910.9 46.5 12,8L7 85.5 178. 321 459 441 266 93.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 v Cobora Bassa 0.0 0.0 54.5 135j80.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Old ThermalsRehab .30.1 72.0 136k 74. 4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 GasTurbines #1 0.0 0.0 0.0 0.0 0.Q 0.0 0.0 0.0 40.7 88.2 6.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 PowerTransission 32.0 35.0 40.0 40.0 46.0 46.0 46.0 46.0 46.0 46.0146.046.0 46.0 46.0 46. 46.0 46.0 46.0 46.0 46.0 PowerDistribution 78.0 80.0 80.0 82.0 85.0 95.0 95.0 95.095.0 95.0 100 100 100 100 100 100 100 100 100 100 Coal 1.0 26.0 2.0 1.0 54.0 2.0 1.0 1.0 27.0 92.2 1.0 27.0 1.0 1.0 36.6 26.0 1.0 2.0 26.0 20.2 Fuel storage (3 eths) 0.0 25.0 0.0 0.0 0.0 0.0 25.0 0.0 0.0 0.0 0.0 25.0 0.0 0.0 25.0 0.0 0.0 25.0 0.0 0.0 Pipeline 56.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Ethanol 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 50.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Fuel distribution 10.0 10.0 10.0 10.0 10.0 12.0 12.0 12.0 t2.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.O T0TRI 22 291 333 389 45 272 370 490 638 53 623 476 252 159 220 184 159 1d 184 178 -_ _ _ _. An2 .Anex TABLE 2a EnergySector Sumary -Polic q ctys (millions of Ziababwedollarel 5 3n Of 1O 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2005 2010 I INVESTMBiT NETSAVINGS savings 133 201 Net energy sector 6ross savings 271 364 Interest payments 138 164 Energy sector investment 2M0 368 Localcurrency 69 86 currenLy 150 283 Foreign Energysectordeficit 87 168 6ross Borrowingsfrom: 101 189 Foreign Central Government :22 131 Nonetarysector 50 77 Private sector -164 -229 Net Borrowinasfrom: 120 226 Foreign CentralGovernrent 103 109 30 55 sector Monetary -169 -2M2 Privatesector 170 368 198 510 113 397 340 184 431 248 675 161 5L3 491 12 466 314 681 225 6.6 729 92 504 411 1080 527 S33 988 266 344 136 134 1S4 133 -182 -128 440 370 15 144 154 1'9 -22 367 313 396 108 101 87 101 -167 -107 497 117 117 -1 67 573 506 713 329 384 647 67 10 -66 S7 646 778 878 1033 590 711 668 1119 1126 1625 2204 3310 33S 543 967 1196 791 1063 1237 2114 1070 158 2194 3376 257 530 164 185 205 233 164 228 384 222 537 101 115 129 134 153 172 369 isa 211 -700 1928 2628 1303 356 347 -465 3530 3995 1538 435 1123 2004 2022 8 W2 1416 635 7jZ 23j 266 489 895 265 301 342 373 396 480 1026 1526 1495 1425 777 869 1571 397 146 165 186 340 194 219 24i 227 441 940 1372 1040 455 623 208 736 OJTSTANDIN6 DEBT =. Energysector t102 External Frombudget Frommonetary sector sector Fromprivate 1 278 335 398 90 1269 504 445 453 -132 1610 2101 817 1212 553 654 539 641 -299 -407 2830 1703 771 757 -408 43 70 '16 177 251 12 26 487 525 18 33 782 833 3817 4464 2094 2316 872 986 892 1044 -40 118 5534 2872 1113 1217 330 7092 3649 1261 1411 771 426 522 928512662 23561 33418 4516 6089 8361 10438 1426 1612 2967 5448 1630 1873 2930 3757 171' 3083 9104 137,76 DEOTSERVIC Energy debtservice 339 378 637 773 1429 1924 BLNCEOFPAY)WSEFFrTS Imports of electricity laports of coal& coke Imports ofpetroleumproducts Total energy imports Interest paid for. by energy Principal repaid to foreign Imports+ Debtsersice 22 42 899 962 25 27 193 206 220 234 242 214 71, S1 59 68 78 90 104 117 132 226 796 907 965 1109 1303 1'34 1755 2002 3892 872 994 1227 1393 1613 1873 2113 2348 4382 326 38M r334 8048 35 57 91 137 190 254 273 310 378 455 547 1021 1425 14 25 41 61 85 103 116 144 182 226 408 499 568 904 1078 1049 1244 1566 1771 2039 2395 2730 3121 5811 9972 8 WITAL ACOcNT Net foreign borrowing borriming Gross foreign 120 226 125 240 313 396 338 436 497 384 222 558 470 326 557 672 777 869 1571 920 1052 1797 179 259 347 396 504 366 397 805 455 954 FINACIAL Tax revenuefromLGDfuels GDP 218 303 448 638 718 1315 2408 1504918207216692536223153335123817143080486203487361930113396207634 * - 263 .nwaL - 35 Page 3 Of 10 3. EnergySector Susary - EaseCase, Policy Active. TABLE 4Percentof 6DP) 'SW 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 0.9 1.6 0.9 .5 0.5 1.0 0.6 1.1 2.0 0.9 2.0 0.5 1.6 0.9 '.7 0.8 0.3 -1.1 1.0 0.7 0.4 -1.3 00 2010 NETSAYINS & INESTT Net energysector savings 6rosssavings Interest paysents Energysector investment Localcurrency Foreigncurrency Energysector deficit GrossBorrodingsfrow: Foreign Central Government sector Nonetary Private sector Not Borroings from: Foreign CentralGovernment Monetarysector Private sector 0.8 1.7 0.9 2.4 0.5 1. 1.6 1.2 1.4 0.6 0.5 0.5 0.5 -0.8 -0.5 -0.2 1.7 1.9 0.8 0.2 0.5 '.0 2.5 0.1 1.E 1.5 3.3 1.1 2.3 3.2 0.0 -0.1 -0.6 1.7 1.6 1.7 1.6 1.8 2.3 4.0 5.3 1.' 1.8 1.9 0.3 2.3 3.4 0.8 i.8 4.0 5.5 0.7 0.4 (.5 0.4 1.2 0.4 0.5 0.5 1.5 0.4 0.5 1.0 1.5 0.4 0.5 1. 2!3 0.4 0.6 2.E 0.6 0.4 0.3 1.3 0.4 0.4 0.2 0.7 0.6 0.3 0.4 0.4 1.3 0.3 0.4 0.5 1.6 0.3 0.4 0.9 1.6 0.3 0.4 1.7 2.5 0.3 0.4 E.2 0.4 0.3 0.P C.9 ('.2 0.3 0.1 0.4 0.3 1.5 1.2 3.2 1.6 1.6 2.9 0.2 1.5 1.3 1.9 C.9 1.0 0.1 1.5 1.4 2L6 0.8 1.8 1.7 1.5 0.5 0.5 -0.1 1.1 0.4 0.5 1.1 1.1 0.3 0.4 1.1 0.5 0.7 1.7 1.6 1.0 1.1 E.? 3.0 0.6 0.8 2.0 2.3 1.9 2.5 O.8 1.2 0.7 0.6 0.2 0.3 -1.1 -1.2 1.4 0.5 0.4 -0.8 1.6 0.4 0.4 -0.4 1.7 0.4 0.4 0.0 7.3 7.0 1.8 2.8 2.2 ?-4 2.6 2.5 0.6 -0.7 7.4 8.3 3.8 4.8 2.6 2.6 2.5 c.5 -1.4 -1.6 9.7 5.9 2.6 2.6 -1.4 11.4 11.7 6.2 6.1 2.6 2.6 2.7 2.7 0.3 -0.1 12.8 14.6 16.' 6.7 7.5 8.2 2.6 2f6 2.6 3.0 8 2.9 0.8 1.6 3.1 20.4 20.8 9.8 7.5 2.6 6 3.0 2.6 5.0 8.0 16.1 5.0 2.6 1.8 6.6 0.3 0.9 0.4 1.1 0.5 L.4 0.7 1.7 0.9 2.0 1.0 2.3 1.0 2.2 1.0 2.2 1.1 2.3 1.2 2.5 2.7 1.3 2.6 0.9 1.9 0.1 0.1 0.2 4.3 4.6 0.1 0.2 4.1 4.4 0.1 0.2 3.1 3.4 0.1 0.2 3.1 3.4 0.6 0.2 2.9 3.7 0.3 0.2 3.2 3.8 0.2 0.2 3.4 3.9 12.8 11.4 8.7 8.4 89 0.5 0.2 3.0 3.7 8.8 0.4 0.2 3.2 3.9 11.3 0.5 0.2 2.9 3.7 8.8 0.5 0.2 3.2 3.5 89 8.8 8. 0.2 0.2 3.5 3.9 8.5 0.2 0.1 3.8 0.3 0.1 5.0 0.4 0.1 5.0 0.5 0.2 4.1 0.7 0.2 4.3 0.8 0.3 4.7 Q.7 0.3 4.6 0.7 0.3 4.7 0.8 0.3 4.9 0.8 0.3 5.0 0.9 0.4 5.0 0.9 0.4 5.1 0.7 0.2 4.8 0.8 0.8 1.2 1.3 1.4 1.6 1.6 1.7 1.7 1.9 1.1 1.4 0.6 0.9 1.3 1.6 1.6 1.9 1.6 1.9 2.5 2.9 0.4 0.7 0.2 0.5 OUTSTANDJI DEBT Energysector debt External fro budget sector Fro monetary Fromprivate sector DOTSERVICE Erergydebt service/GDP Energydebt service/Expots 1.2 BALANCE OFPAYENTS EFFECTS Importsof electricity Importsof coal &coke Importsof petroleumproducts Total energy imports Egy imports/Total imports Int. paid foreip by enery Prircipal repaid to foreign Imports+ Debtservice 0.? 3.2 3.9 L8 CAPITALAcouw4 Not foreign borroing 6ross foreign borrowing FISICIAL -264- , 35 Page 4 of 10 Case, PoliCYktive TABLE 4 : Sumaryof KeyIndicators - Base 4percentageof GDPur.less otherwisespecified) 1990 1991 1992 1993 1994 RedalP groth {%) Noenal GDPgrowthlO Real GP/capitagth (J 4.2 4.3 20.9 21.0 1.4 1.7 Realexportgrowth (X) Real iwportgrowthlX) Noinal export gth (S) Nominalimportgth (M) Exports lopots trade balance 4.0 4.9 24.6 26.9 33.0 31.0 2.0 4.0 6.6 31.9 39.5 36.0 35.7 0.3 5.9 4.1 1.8 3.9 6.3 4.4 1.9 6.0 Netfactor payents Interest paidabroad Profit d abroa Crnt Account Deficit 4.4 19.0 :.8 4.5 17.0 1.9 4.5 4.5 15.0 15.0 1.9 1.9 4.5 13.9 2.4 4.5 4.5 1223 12.9 2.4 2.4 6.2 4.4 1.7 2.7 5.1 3.5 1.6 1.9 4.0 2.5 1.4 1.1 3.2 1.8 0.6 0.3 0.0 0.5 1.5 0.5 0.8 3.7 1.7 1.6 0.2 0.0 0.2 1.3 0.5 0.8 4.2 1.4 2.5 0.2 0.0 0.1 1.1 0.5 0.8 1.7 0.9 0.4 0.1 0.0 0.3 0.8 0.5 0.9 1.0 0.6 0.2 0.1 0.0 0.1 0.5 0.5 0.9 6.8 4.9 1.9 4.1 7.5 1.7 1.4 0.2 0.0 4.1 1.5 0.4 1.5 6.4 1.8 1.6 0.3 00 2.7 1.6 0.4 1.3 6.3 1.8 1.7 0.3 0.0 2.5 1.6 0.5 1.5 6.2 1.8 1.1 0.3 0.0 3.0 1.6 0.4 2.3 764 52.6 52.1 23.8 23.6 75.7 52.0 50.3 23.4 234 Centralgovtrevenue Direct tax Domestic indirect tax Importtax huporttax/llports -C recurrentexpenditure Centralgovtsavings C capital expenditure COdeficit withoutgrants 6rants COdeficit withgrants M foreip borrowing 37.5 16.2 9.4 7.0 22.5 39.0 -1.5 9.1 10.6 1.3 9.3 1.1 38.5 16.2 9.3 7.9 22.0 39.2 -0.8 8.4 9.2 1.5 7.7 1.6 4.5 4.5 12.9 12.9 2.4 -2.4 6.6 4.8 1.9 3.4 7.5 5.6 2.0 5.2 Grossconsumption 2010 5.5 5.4 13.3 13.5 48.6 45.7 2.9 7.5 5.5 2.0 5.5 24.0 5.0 2.0 4.0 6.0 13.0 24.3 16.7 I80 200S 5.5 5.3 13.2 13.4 47.6 44.4 3.2 7.2 5.3 2.0 6.0 21.6 5.2 1.5 4.4 5.9 10.5 23.6 17.4 17.7 2000 5.5 4.8 13.4 13.1 46.6 43.2 3.4 6.8 4.8 1.9 7.0 Grossinmestent C6investment Enr investent NonnergyPEinvestent -Potal PEinvestent Private investent Domesticsavings Private savings Nationalsavings Private consurot50n overument consumption 1998 5.5 4.9 17.6 16.5 43.6 41.2 2.3 -to S -to MS - to private Grantsto budget Direct foreign investent Change in re' for. assets -toeergy 1996 4.5 5.0 5.5 6.3 3.8 3.3 27.7 23.7 19.9 29.3 19.4 18.0 38.6 40.8 42.6 38.8 39.6 40.7 1.2 1.9 -0.2 6.6 4.8 1.1 1.6 0.8 1.2 0.2 0.3 -0.4 -0.1 3.1 3.6 1.3 1.5 0.1 0.3 1.9 1.6 Notforeign lending to budget 19?5 5.5 5.5 4.4 4.6 15.8 15.8 14.9 15.4 44.3 46.7 41.6 43.4 2.7 3.2 24.8 4.8 2.4 3.6 6.0 14.0 24.6 16.3 17.8 25.1 4.6 2.7 3.3 6.0 14.5 26.3 l8.0 19.1 25.1 4.5 3.0 3.1 6.1 14.5 27.0 189 19.6 25.6 4.5 3.2 3.1 6.3 14.8 28.0 20.0 20.4 24.4 4.5 1.9 3.0 4.9 15.0 27.1 19.3 20.2 26.3 4.' 3.3 3.0 6.3 15.5 29.6 21.0 22.9 28.3 4.5 5.3 3.0 83 15.5 31.8 23.2 25.6 24.7 4.5 1.1 3.0 4.1 16.1 27.9 19.8 22.8 26.3 4.5 0.8 3.0 3.8 18.0 29.2 20.8 25.2 75.4 73.7 73.0 72.0 72.9 70.4 68.2 72.1 70.8 38.5 161 9.2 IL2 21.0 38.6 -0.1 7.9 8.0 1.5 6.5 1.7 37.8 37.2 16.0 15.9 9.1 9.0 7.7 7.3 19.5 18.0 37.6 37.0 0.1 0.2 7.5 7.1 7.4 6.9 1.6 1.6 5.8 5.3 1.8 1.8 36.5 15.8 9.0 6L8 16.5 36.3 0.2 6.9 6.7 1.6 5.1 1.8 36.3 36.2 15.8 15.8 9.0 9.0 L6 6.8 16.0 1S.6 35.5 34.6 0.7 1.6 6.8 6.7 6.1 5.1 1.5 1.3 4.6 3.7 1.8 1.7 35.9 36.0 15.8 15.8 9.0 9.0 6.6 6.7 15.2 15.0 33.6 32.5 2.3 3.4 6.6 6.6 4.3 3.2 1.1 0.8 3.1 2.4 1.4 0.9 36 1 15.8 9.0 6.9 15.0 31.6 4.6 6.6 2.0 0.5 1.5 0.6 49.8 23.2 49.0 50.0 23.0 22.9 47.7 22.7 45.7 22.5 49.6 48.3 22.5 22.5 4 * .. bar. f mneax ec. C6bor. frmprivate seu neruy sdor ^avings 2wy actor investment Energy sectordeficit EnW sector for. bar. E'w sector bor. froC ESbar. frce moretary sc. ESbar. frw private sc. . -265139 1991 192 1993 1994 193 -1.6 -0.7 -0.2 -0.1 -0.6 -1.4 9.7 6.9 5.0 4.1 4.1 4.7 19% 0.0 2.7 C.9 1.1 1.r 2.0 BPSsings PS imetuu.t IPSdeficit WSforeignbmoming CPSOoairg from C6 sec. OPS bor. fro monetary CPSbo-. fro private sec. 1.0 4.4 1.0 4.0 3.0 0.3 1.2 0.7 0.8 Oerall govtsavings 06deficitwithoutgrants 06deficitwith grants CSforeignborrowirgs 0.3 125 11.2 1.7 r6 daIUtic borrowing Total publicdebt Etral publicdebt Of uhidc:-central govt - publicent. -enrgy - other tExternalprivatedebt] CTotal externaldebt] Doestic publicdebt Of hichd:-central gopt - public ent. -energy - other _Annex35 Page oflO 0.6 0.9 0.8 1.2 0.7 0.6 0.2 0.3 -1.S -1.2 3.4 0.2 1.4 0.6 1.3 9.1 91.7 327 26.7 6.0 1.8 2.6 15.4 49.2 59.0 33.8 28L3 2.2 23.1 0.8 0.7 4 P.7 1.6 1.9 1.4 1.6 0.5 0.4 0.4 0.4 -0.8 -0.4 0.3 3.2 2.9 1.1 0.3 0.4 1.1 0.2 1.9 1.7 0.6 0.3 0.4 0.4 0.1 -0.1 -0.6 3.3 5.3 1.1 3.2 5.5 1.8 1.6 2.5 0.4 0.3 0.3 0.3 0.4 0.4 0.2 0.9 2.2 0.9 -0.2 0.8 1.0 0.2 0.3 0.1 0.4 0.0 3.1 3.1 0.3 0.8 0.8 1.2 0.0 3.1 3.1 0.3 0.7 0.8 1.3 0.0 3.0 3.0 0.3 0. 0.8 1.2 0.2 3.0 28 0.2 0.7 0.8 1.1 0.2 3.0 L.a 0.1 0.7 0.8 1.2 0.1 3.0 LS 0.1 0.7 0.6 1.3 2.4 11.5 10.4 1.9 3.0 6.8 6.0 1.3 4.4 4.9 4.4 0.8 %6.4 46.7 29.5 17.2 9.8 3.6 21.1 62.5 49.7 12.3 31.4 2D6 28.8 86.8 39.3 E-.2 14.8 7.5 3.1 15.6 S 4 47.5 12.4 35.1 2.6 32.5 72.4 31.1 19.7 11.4 5.0 2.6 11.4 4L.8 41.3 7.2 34.1 L6 31.5 20.8 7.5 Lf6 2.6 20 16. 5.0 0.2 3.3 3.1 0.3 1.0 0.8 1.0 1.3 1.5 11.3 10.8 9.P 9.3 1.1 11.0 9.4 2.5 0.7 11.3 9.7 2.5 2.5 6.8 5.8 91.8 364 28.7 7.6 2.8 2.9 19.3 56.7 55.5 32L1 931 39.7 30.4 9.3 3.8 3.2 23M3 64.0 52.4 30.1 22.3 2.6 19.6 93.0 42.4 31.5 11.0 4.8 3.4 25i5 69.0 50.5 28.3 94.4 44.6 3.0 12.5 5.9 3.6 26.9 72.5 49.8 27.0 2.6 19.. 23.3 2.4 20.9 5.7 5.9 0.5 11.8 10.1 0.9 9.8 8.2 2.4 2.0 10.1 2.7 22 6.9 5.6 5.2 2.4 L.6 20.2 95.4 45.1 31.9 13.2 6.2 3.7 28.4 74.5 50.3 28L8 24.5 2.6 21.9 94.6 95.6 44.9 46.6 31.6 31.5 13.2 15.1 6.1 7.5 3.7 3.8 27.1 24.7 72.8 72L1 49.8 48.9 24.4 21.' 25.4 27.4 2.6 2.6 28.8 24.8 22L2 229 Energysector debt iternal Frortwdget Froeeetary sctor Froeprivate sector 7.3 1.8 2.2 L6 7.4 3.8 2.6 2.5 -1.4 2.3 4.8 26 2.5 -1.6 9.7 5.9 6 2.6 -1.4 11.4 6.2 2.6 7 -0.1 11.7 6.1 2.6 2.7 0.3 Debtuurvicu/6P Setk serwvicuExports 7.3 21.9 7.8 t.7 9.7 21.5 28.6 23.6 10.3 24.3 10.7 24.5 10.2 9.9 23M0 21.3 EnergSectors Qevm=AI6D Interu1lsDP Aortisation/8DP Total debtservioe/6DP External debtserv./Exports Def./GDP 1.B 0.9 0.3 1.3 0.9 0.6 2LO 0.9 0.3 1.2 1.1 0.9 I." 0.9 0.3 1.2 1.4 1.6 1.6 1.1 0.4 1.4 2.0 2.5 1.S 1.2 0.4 1.6 2.3 2.9 7.0 2. 2.4 2.5 0.6 -0.7 1.7 1.0 0.3 1.3 1.7 1.9 5 2010 0.0 0.1 1.4- 0.7 0.5 3.0 2.5 1.7 0.4 0.4 0.0 0.8 3.6 2.8 0.2 1.1 0.8 0.7 2.3 198 00 -0.1 -0.1 2.2 1.9 l.S 1.3 0.5 1.8 2.2. 1.7 0.2 3.0 2.8 0.2 0.7 0.o 1.' 6.2 14.6 20.4 7.5 9.8 L6 2.6 2.9 3.0 1.6 5.0 1.6 1.5 0.6 P2.0 2.3 3.2 9.3 20.0 1.7 1.8 0.7 2.6 2.7 5.5 4.6 3.5 26 1.8 6.6 7.6 5.7 1.L9 11.8 1.7 2.3 1.0 3.3 2.S 1.8 1.7 1.9 0.8 2.7 1.9 lO0 * -266- /I AMnex 3_5 ~~~~~~~~~~~~~Page 6 of 10 TAU. 1. Enegy bflftuient Sci>rario- BaseCase, Policy Nrutral (millions of Zimbabwe dollars) 19911992199319941995191997 19981999200 200120022003200420052006207 200 200 2010 Local Cwrrecy 19898s KaribaSouth Upgrading 0.5 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 KaribaSouth EKctention 0.0 0.0 8.5 12.616.4 23.1 19.5 5.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Satoka Stage1 2.5 3.7 4.6 15273.1 53.6 123 249 253 236 14693.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 CoboraSassa 0.0 0.0 18.3 46.0 27.6 0.0 0.0 C.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Old ThermalsRehab 3.0 9.7 21.3 17.9 0.0 0.0 0.0 0.0 C.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 BatokaStage 11 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 27.0 27.4 28.5 11.8 0.0 0.0 Nwarnge Stage III 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 31.4 P2.5 85.2 108 41.5 17.1I 0.0 Uipper Zambezi 0.0 0.0 0.0 0.8 0.7 6.8 27.8 48.7 81.5 37.5 C.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Powe Tramsmission 12.0 15.015.0 15.0 18.0 18.0 18.0 18.0 18.0 18.0 18.0 18.0 18.0 18,0 18.0 18.0 18.0 18.0 18.0 18.0 Powe~Distribution 28.0 30.0 30.0 30.0 30.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 coal 0.5 3.0 0.6 0.5 12.3 0.E. -.5 0.5 3.1 42.3 0.5 3.1 0.5 0.5 12.1 3.0 0.5 0.6 3.0 8.3 Fue! storage (3 aths) 0.0 7.5 0.0 0.0 0.0 0.0 7.5 0.0 0.0 0.0 0.0 7.5 0.0 0.0 7.5 0.0 OjO 7.5 .0.0 0.0 Pipuline 14.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Ethanol 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Fuel distribution 5.0 5.0 5.0 5. 0 5.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.06.0 6.0 6.0 8.0 6.0 6.0 TCTAL 66 75 103280 183 143 237 3L2396386 207 163 6091 158175 196120 79 65 Foreign Excb (89 1$ equ.) Kariba SouthUpgrading44.4 36.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Kariba SouthExtention 0.0 0.0 P.2 15.8 89.0 13476.2 2.2 15. 8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 DatokaStage1 3.4 7.241.919.515.631.955.772.6 206 205 118 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 CoboraBassa 0.0 0.0 382 89.0 53.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0. 03.0 0.0 0.0 0.0 0.0 0.0 Old Themals Rehab 27.1 62.3 11556.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 BatokaStags 1I 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 34.5 45.7 78.9 48.8 0.0 0.0 I'kangeStage III 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 35.2 132 145 14252.4 32.9 0.0 UpperZambuzi 0.0 0.0 0.0 2. 2.1 23.2 93.7 165 222 114 5.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Powr Transmission 20.0 20.10 25.0 25.0 28.0 28.0 28.0 28.0 28.0 28.028.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 Powe Distribution 50.0 50.0 50.0 ~2.055.0 60.0 60.0 60.0 60.0 60.0 65.0 65.0 65.0 65.0 65.0 65.0 65.0 65.0 65.0 65.0 Coil1 0.5 23.0 1.4 0.5 41.7 1.4 0.5 0.5 23.9 49.9 0.5 23.9 0.5 0.5 24.5 23.0 0.5 1.4 23.0 13.9 Fuel storage (3 uths) 0.0 17.5 0.0 0.0 0.0 0.0 17.5 0.0 0.0 0.0 0.0 17.5 0.0 0.0 17.5 0.0 0.0 17.5 0.0 0.0 Pipeliwe 41.5 0.0 0.0 0.0 0.0 0.0 O;0 0.0 0.0 3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Ethanol 0,0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Fuel distributtion 5.0 5.0 5.0 5.0 5.0 LO 8.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 8.0 6.0 8.0 6.0 8.0 TOTAL 192 221 276 266 290 285 338 334 562 505 '223 140 100 135 307 312 321 219 155 113 Total Investment Kariba SouthUpgrading;44.937.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0;.0 0.0 0.0 0.0 0.0 0.0 Kariba Sout:iExtention 0.0 0.0 10.7 28.4 105 157 95.7 7.4 15.80.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 BatokaStage 1 5.9 10.9 48.5 17288.7 85.5 178 321 459 441 26693.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 CoboraBDau 0.0 0.0 54.5 13580.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Old ThermalsRelab '-.MI0. 72.0 13674.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 RatokaStape11 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 61.5 73.1 10760.6 0.0 0.0 HoWagStageIII 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 66.6 184 23 250 93.9 50.0 0.0 UpperZambezi 0.0 0.0 0.0 3.4 2.8 30.0 122 213 304 151 5.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Powe Trammission 35.0 40.0 40.0 48.0 4.0 46.0 46.0 46.0 46.0 46.0 46.0 48.0 46.0 48.0 46.0 46.0 48.0 48.0 46.0 PowerDistribution 78.0 80.0 80.0 22.0 85.0 95.0 95.0 95.0 95.0 95.0 100 100 100 100 100 100 100 100 100 100 .coal 1.0 26.0 2.0 1.0 54.0 2.0 1.0 1.0 27.0 92.2 1.0 27.0 1.0 1.0 36.6 28.0 1.0 2.0 28.0 20.2 Fuel storage (3 aths) 0.0 25. 0.0 0.0 0.0 0.0 25.0 0.0 0.0 0.0 0.0 25.0 0.0 0.0 25.0 0.0 0.0 25.0 0.0 0.0 Pipeline 56.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Ethanol 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 50..0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Fuel distribution 10.0 10.0 10.0 10.0 10.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 2. 12.0 12.0 TOTAL M5 2 9 6 3 B0 5 4 47 3 4 28 5 756 9 .6 958V8 9 1 430 303 159226 465 4I?516 340234178 .- *32.0 *; - * ~1. - *.. Annex 35 Page 7-of 10 -267 T*BE2 Energy SectorSuary - Policy utal C .uillions of Zimbabu dollars) MM 00 1990 1991 1992 1993 194 1995 1996 1997 198 1999 8000 NE1T SAVISt M010 Ih t energy setor savings ro siavings interestpayments Energysectorinvestrent Localcurrevry Foreigncurrency Energysector deficit GrossBorings fr: Foreign Certral 9overruent sector Nometary Private sector frcs0 1f: Borrowings Forein CentralGoverment Nonetary sector Private sector 133 271 138 220 69 150 87 164 77 37 164 377 89 288 213 204 519 115 404 442 268 770 177 593 733 328 282 3 -5 -197 321 335 36 532 1'75 1163 529 381 646 782 1220 1360 -22 -402 -58 -819 -122 -3039 -6470 382 431 486 549 619 1134 2076 664 833 1186 1727 324 580 862 1147 1468 2.29 1073 1368 2228 3455 957 1131 12n 2325 2815 4275 1842 3486 1190 2295 4706 4173 2779 716 2C'5817 84 1558 435 1123 8027 1382 489 373 5145 752 895 396 9665 101 193 271 397 433 122 131 136 134 155 50 77 114 133 154 -164 -18 -79 63 52 5_4 144 179 597 578 768 82 158 1'38 164 185 M29 236 26£ 205 233 265 301 342 663 1128 1790 2462 3091 485 117 117 502 576 101 13 549 615 115 153 586 3710 1774 771 757 407 5070 2350 872 892 957 6S38 2966 9B6 1044 1543 120 231 318 462 105 109 108 101 30 55 87 101 -169 -182 -71 68 886 129 172 1001 891 146 194 1584 1742 1630 129 216 165 186 340 623 208 219 248 227 2149 2645 3S2 6981 DEBT UUWSTNDIN6 Ener sectordebt External Frombudget sector Fra monetary Fraoprivate sector 1102 1314 278 509 335 445 398 453 90 -92 1756 827 5S 539 -163 2490 1289 654 641 -95 8667 11482 1575720465 4014377867 3792 4683 6425 8055 10L. 14991 1115 1261 1426 1612 2967 5448 1217 1411 1630 1878 8930 3757 2544 4127 6276 89202384S53672 SEWlC DEBT Energydebtservice 43 70 117 179 262 350 414 517 653 786 1043 1601 2677 tFECTS BLqLEOFPAYENTS 12 18 22 of electricity Imports 26 33 42 of coal&COk Imports products 487 782 89 portsof petroleum 525 833 962 Totalewgy imports 25 27 193 206 220 234 90 104 68 78 51 59 796 907 965 1109 1303 1534 872 994 1227 1393 1613. 1873 242 117 1755 2113 214 264 326 132 226 389 2002 3892 7334 2348 4382 8048 Intest paid for. by erg Pricpal repai to foreign lports Debtservics 92 138 198 261 297 369 43 552 722 1146 1938 35 57 89 118 148 190 234 321 455 739 41 64 8 14 25 568 904 1079 1051 1256 1576 1808 2130 2528 2899 3391 5983 10725 Notforei bowing Bss foreignborwing 120 231 128 245 fuels Taxrevenuefro LOD 179 218 259 GOP 318 462 465 576 615 8GM 891 1742 1630 1298 216 344 504 549 665 733 975 1081 1976 1951 1753 954 303 347 396 448 504 566 638 718 1315 2406 207634 109 1120 816692536229153 335183817143080 480 573 61930113396 * * - 268- 3. Iw TUILE Sector Sliay (p'mnt of GDP) 8nex 35 Page a ot 10 meCase, Policy Nwtral. 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2005 2010 1 NE JtSw WIINS IM ET SAYINIE; Nt ergy swtor savins IIossevings Interest paments Enrg sector imestmnt Local eurrecy Foreign cumeny Ergy sector deficit Gross Borrwings from: Foreign Central Soverunt Monetarysector Private sector NotPorromingsfrom Foreipn CentradGovernmet Monetarysector Private sector 0.9 1.8 0.9 1.5 0.5 1.0 0.6 0.9 0.9 2.1 0.5 1.6 1.2 0.4 1.3 0.9 2.4 0.5 1.9 2.0 0.7 0.6 0.3 -1.1 1.1 0.7 0.4 -1.0 1.3 0.6 0.5 -0.4 1.6 0.5 0.5 0.3 0.0 0.7 0.2 -1.1 1.3 0.6 0.3 -1.0 1.5 0.5 0.4 -0.3 7.3 7.2 1.8 2.8 2.2 2.4 2.6 2.5 0.6 -0.5 1.8 -. 9 -1.2 -1.5 1.0 1.0 1.0 2.5 1.5 L2 4.0 4.6 6.3 1.3 2.0 2.1 2.7 2.6 4.2 7.8 4.9 L8 -2.0 1.0 3.0 5.6 1.S 3.7 7.6 -27 1.0 3.7 2.5 0.6 1.8 5.1 -3.1 1.0 4.1 0.8 0.2 0.5 3.9 1.8 0.4 0.5 2.6 1.8 0.4 0.5 3.7 2.8 0.4 0.5 4.5 2.5 .0.4 0.6 5.0 1.2 0.4 -0.3 4.5 0.4 .0.4 '0.2 4.7 1.9 0.3 0.4 2.3 1.8 0.3 0.4 3.3 3.2 0.3 0.4 3.9 2.6 0.3 0.4 4.3 1.1 0.3 0.2 3.5 0.1 0.3 0.1 3.4 0.1 -0.2 -0.6 1.2 1.1 1.0 1.1 1.3 1.6 3.5 3.0 4.0 1.8 1.1 0.7 2.3 L2. 2.3 2.9 4.2 4.1 -0.7 1.0 1.7 3.1 0.8 2.3 3.8 1.5 0.5 0.5 1.8 1.6 0.4 0.5 1.8 1.5 0.4 0.5 1.7 1.8 0.4 0.4 0.3 1.7 0.4 0.4 1.7 1.7 0.3 0.4 1.6 1.6 0.3 0.4 1.5 8.1 3.8 2.6 2.5 -0.8 9.8 5.1 2.6 2.5 -0.4 12.7 6.1 2.6 2.6 1.4 15.1 17.1 20.1 7.0 7.8 8.8 2.6 2.6 2.6 2.7 2.7 2.8 4.0 5.9 2.9 0.5 1.4 0.71.7 0.9 2.1 1.0 2.4 1.1 2.4 1.2 2.6 1.3 2.9 1.A 3.1 1.7 3.6 1.4 3.0 1.3 2.7 OUTSTNAJING D0T Eergy sector debt Externl Frombudget Frou mnetary sector Fromprivate sector 23.6 28.7 33.0 35.4 37.5 9.6 11.7 13.0 9.2 7.2 2.6 2.6 2.6 2.6 2.6 2.6 1.8 2.9 3.0 3.0 85 11.4 14.4 21.0 2.8 =T SEtRVIC 0.3 0.9 Eny debt service/6DP E- y debt seceeExports 0.4 1.1 PBLRNC OFPAYENSEFFECi Imports of electricity IMportsof coal &coke Iuperts of petrolemprodwts Total eey ivrts Eery iportslTotal imports 0.1 0.1 0.1 0.2 0.2 0.2 3.2 4.3 4.1 3.5 4.6 4.4 11.3 12.8 11.4 0.1 0.2 3.1 3.4 87 0.1 0.2 3.1 3.4 8.4 0.6 0.2 2.9 3.7 8.9 0.5 0.2 2.9 3.7 8.7 0.5 0.2 3.0 3.7 8.8 0.5 0.2 3.2 3.9 L8 0.4 0.2 3.2 3.9 8.9 0.3 0.2 3.2 3.8 8.7 0.2 0.2 3.4 3.9 L6 0.2 0.Z 3.5 3.9 8.3 IJt. paid foreign by energy Priecipal repaid to foreign bports + Mbt sevice 0.2 0.1 3.8 0.3 0.1 5.0 0.4 0.1 5.0 0.5 0.2 4.1 0.7 0.2 4.3 0.8 0.3 4.7 0.8 0.3 4.7 0.9 0.3 4.9 1.0 0.4 5.2 1.0 0.4 .3 1.2 0.5 5.5 LO Q4 5.3 0.9 0.4 5.2 0.8 0.8 1.3 1.3 1.5 1.6 1.6 2.0 1.7 1.9 1.7 2.0 1.6 1.9 1.9 2.3 1.8 2.2 3.2 3.6 2.6 3.2 1.1 15 0.1 0.5 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 L2 1.2 CAPITRL nccsNg et foreign borrowing Bross foreign borrowing Taxnrevee - _ a_. fro PP .C .. -_. . . -. -. - - TALE4 x A 269. - Page 9 of 10 Sanry of KeyIndicators- BaseCa, Policywtral (pentage of BDPunlessotherwisespecified) 1990 1991 1992 1993 1994 1995 1996 1998 2000 2005 2010 4.5 12.9 2.4 4.5 12.9 2.4 4.5 12.9 2.4 4.2 20.9 1.4 4.3 21.0 1.7 4.5 4.4 19.0 17.0 1.8 1.9 4.5 15.0 1.9 4.5 15.0 1.9 Realexportgrowth(5) Realimportgroith '1) Noinal exportgth I5) importgth IO Nominal Expot: lmot; Tradebalamce 4.0 4.9 24.8 26.9 33.0 31.0 2.0 4.0 6.6 31.9 39.5 36.0 35.7 0.3 4.5 6.3 27.7 29.3 38.6 38. -0.2 5.0 3.8 23.7 19.4 40.8 39.6 1.2 5.5 3.6 19.9 18.3 42.6 40.8 1.8 5.5 5.5 5.5 5.5 S.5 5.5 5.5 5.4 S.1 4.6 4.4 4.9 17.6 15.8 15.8 13.4 13.2 1.3.3 13.4 13.5 13.5 16.5 14.9 1.6 43.6 44.3 46.7 46.6 47.6 48.6 41.3 41.7 43.7 43.7 45.0 46.5 2.6 2.1 3.0 2.9 2.6 2.2 Netfactor payments Interest paid abroad Profit paid abroad Deficit CurrentAccount 5.9 4.1 1.8 3.9 6.3 4.4 1.9 6.0 6.8 4.8 1.9 7.0 7.2 5.3 2.0 6.0 7.5 5.5 2.0 5.7 7.6 5.6 2.0 5.3 6.9 5.0 1.9 3.9 6.6 4.9 1.7 3.6 5.6 4.1 1.6 3.0 5.0 3.5 1.4 Notforeignlending - to budget - to energy - to CPS - to Ns - to private to budget Grarnts Direct foreigninvestmer.t in net for. assets Change 4.8 1.1 0.8 0.2 -0.4 3.1 1.3 0.1 1.9 6.6 1.6 1.3 0.3 -0.1 3.6 1.5 0.3 1.6 7.5 1.7 1.5 0.2 0.0 4.1 1.5 0.4 1.5 6.7 1.8 1.8 0.3 0.0 2.7 1.6 0.4 1.3 6.4 4.5 4.4 7.0 1.B L.B 1.7 1.8 1.6 1.7 0.3 0.3 0.2 0.0 0.0 0.0 ").8 0.7 3.2 1.3 1.5 1.6 0.5 0.5 0.4 0.8 0.8 2.3 5.3 1.4 2.6 0.2 0.0 1.0 1.1 0.5 0.9 3.7 0.9 1.1 0.1 0.0 1.4 0.8 0.5 0.9 2.7 0.6 0.1 0.1 0.0 1.9 0.5 0.5 1.0 Grossinvestment MSinvestment Energyinvestment PEinvestment Non-energy Total PEir...;:tent Private investment savings Domestic Private savings Nationalsavings 21.6 5.2 1.5 4.4 5.9 10.5 23.6 17.4 17.7 24.1 5.0 2.1 4.0 6L1 13.0 24.4 16.9 18.l Grossconsumption 75.6 75.4 73.3 72.1 71.9 , 71.8 69.5 68.4 71.4 71.6 52.6 52.0 52.0 49.9 46.9 48.9 48.9 46.8 45.9 48.9 49.1 23.8 23.6 23.4 23.4 23.2 23.0 2L.9 22E7 225 22.5 2255 Central .. rvenue Directtax indirecttax Dmes5tic 37.5 38.5 38.5 37.8 37.2 365 16.2 16.2 16.1 160 15.9 15.8 S.3 9.2 9.1 9.0 9.0 94 7.3 6L8 7.7 B.2 7.9 7.0 225 22.0 21.0 19.5 1.0 16.5 39.0 39.2 38.6 37.6 37.0 36.3 0.1 0.2 0.2 -1.5 -0.a8 -. 1 69 7.5 7.1 9.1 8.4 7.9 Privateconsumption cor.wuption Goverment Importtax Importtax/Imports CSrecrent expenditure govtsavings Central CMcapitalexpenditure CMdeficit withoutrants Grants MSdeficit withgrants M: fore* brring 24.8 25.4 4.8 4.6 2.4 3.0 3.6 3.3 6.0 .6.3 i4.0 14.5 24.o 26.7 16.8 18.9 17.8 19.4 1.8 1.7 0.3 0.0 2.6 1.6 0.5 1.5 4.5 13.9 2.4 4.5 12.9 2.4 Real6DPgroth (5) growth(Y) Noinal MDP gth () Real6MP/capita 6.9 5.0 1.9 4.3 2.9 26M1 25.9 25.6 27.6 28.6 26.1 26.3 4.5 4.0 3.1 7.1 14.5 27.9 20.4 20.4 4.5 3.5 3.1 6.6 14.6 28.1 20.9 20.5 4.5 4.6 3.0 7.6 15.5 2e82 30.5 21.3 23.0 21.3 23.6 4.5 3.1 3.0 6.1 15.0 4.5 5.6 3.0 8.6 15.5 31.6 24.3 25.0 4.5 4.5 2L5 0.6 3.0 3.0 5.5 3.8 IL61 18.0 28.6 28.4 22.0 21.7 23.0 23.4 76.4 10.6 1.3 9.3 1.1 9.2 1.5 7.7 1.6 8o 7.4 6.5 5.6 1.5 1.7 1.6 1.8 6.9 1.6 5.3 1.8 6.7 1.6 5.1 1.8 36.3 15.8 9.0 6.7 16.0 35.5 0.7 6L8 36.3 36.0 361 15.8 15.8 15.8 9.0 9.0 9.0 6.6 6.7 6.8 1.6 15.2 15.0 34.6 33.6 3W.5 1.7 2.4 3.6 6.1 6.7 5.0 6.6 4.2 4.5 3.7 3.1 1.5 1.8 1.3 1.7. 1.1 1.4 66 3.0 0.8 2-2 0.9 36.2 15.8 9.0 7.0 15.0 31.5 4.0 6.6 1.8 0.5 1.3 0.6 - .-:? CBboi. frm mty sec. Cobor. fm privatestor 1990 -1.6 9.7 1991 07 6.9 -0.2 5.0 :: -0.1 4.1 -0.6 4.1 1995 -1.4 4.7 1996 0.0 2.7 1998 -0.1 2.1 2000 -0.2 1.8 2005 0.0 1.3 .2010 0.1 0.5 192 1994 Enrgy etor savings Eerg sector invtment Energysector duficit Enery sector for. bor. Energysectorbor. frm CS ESbor. fro monetary sec. ESbor. fre private sec. 0.9 1.5 0.9 2.1 0.4 2.4 0.1 3.0 -0.2 4.0 -0.6 3.5 -0.7 3.1 -1.2 4.6 -. 0 5.6 -7 2.5 -3.1 0.8 0.8 0.7 0.2 -1.1 1.3 0.6 0.3 -1.0 1.5 0.5 0.4 1.7 0.4 0.4 1.7 1.7 0.3 0.4 1.6 1.6 0.3 -0.3 1.8 0.4 0.4 0.3 1.5 1.8 0,3 0.4 3.3 2.6 0.3 0.4 4.3 1.1 0.3 0.2 3.5 0.1 0.3 0.1 3.4 PS avigs WPS investent OPSdeficit OPSforeignborrowing OPSboowing fromC OPSbor. fr mwnetary sec. OPSbar. fromprivatesec. 1.0 4.4 3.4 0.2 1.4 0.6 1.3 1.0 4.0 3.0 0.3 1.2 0.7 0.8 0.8 3.6 2.8 0.2 1.1 0.8 0.7 0.2 3.3 3.1 0.3 1.0 0.8 1.0 0.0 3.1 3.1 0.3 0.8 0.8 1.2 0.0 3.1 3.1 0.3 0.7 0.8 1.3 0.0 3.0 3.0 0.3 0.7 0.8 1.2 0.2 3.0 2.8 0.2 0.7 0.8 1.1 0.2 3.0 2.8 0.2 0.7 0.8 1.1 0.2 3.0 2.8 0.1 0.7 0.8 1.2 0.1 3.0 2.9 0.1 0.7 0.8 1.3 0.3 12.5 11.2 1.1 11.5 10.1 1.0 11.3 9.7 0.5 12.0 10.4 0.0 13.0 11.4 -0.4 12.9 11.2 0.0 11.9 10.4 0.7 12.6 11.3 0.7 13.6 12.4 1.1 10.0 9.2 1.7 7.6 7.1 Oveall gpvtsavings IB deficit without grants 16deficit with grants M6foreignborings a6 dolestic borroing 0.6 1.7 9.1 1.2 2.3 7.0 2.0 2.5 6.3 2.9 2.5 6.4 4.2 2.5 7.6 4.1 2.4 7.5 3.8 5.8 0.4 2.4 67 2.2 7.5 7.6 1.9 8.2 5.1 3.9 1.2 7.0 0.8 6.3 91.7 32.7 26.7 6.0 1.8 2.6 15.4 49.2 59.0 33.6 ZS.3 &2 92.1 36.4 28.7 7.6 L8 2.9 19.3 56.7 55.7 321 23.6 2.4 92.8 39.7 30.4 9.3 3.8 3.2 23.3 64.1 531 30.1 229 2.6 94.5 42.8 31.5 11.3 5.1 3.4 25.5 69.3 51.8 28.3 23.4 2.6 97.4 44.8 32.0 12.8 6.1 3.6 27.1 72.9 MS. 26.9 257 2.6 99.2 100.1 104.7 46.0 46.7 49.0 31.9 31.6 31.5 14.1 15.0 17.6 7.0 7.8 9.6 3.7 3.7 3.8 28.7 27.5 26.1 75.6 7L1 75.9 53.2 53.4 5i.7 EL7 24.3 21.4 27.5 29.1 34.3 26 2.6 2L6 109.2 50.3 29.5 20.8 13.0 3.6 23.9 74.8 58.9 18. 40.8 2.6 I1I.3 41.5 24.6 16.9 9.2 3.1 21.9 63.8 59.9 11.7 4.1 2.6 93.5 34.1 19.7 14.4 7.2 2.6 22.3 56.7 59.3 6.0 53.4 2.6 23.1 21.1 20.4 20.9 23.0 24.9 38.2 45.5 50.7 7.3 1.8 L2 2.6 0.6 7.2 2.L L4 LS -0.5 L81 9.8 3.8 5.1 L6 2.6 2 2.5 -0.8 -0.4 33.0 13.0 2.6 3.0 14.4 35.4 37.5 9.2 7.2 2.6 2.6 L6 1.8 21.0 25.8 Debtservice/soP Debtsvice/Exports 7.3 7.8 21.9 21.5 8.7 9.7 22.6 23.8 EnergySector: leveue/6oP Interest/GOP hortisation6P Total debtservice/GOP Externaldet sec./Exports Uef./l;P . 1.8 0.9 0.3 1.3 0.9 0.6 Totalpublicdebt Eternal publicdebt Of uhich:-aentral gwt - publicent. - energy - other Externalprivatedebt] [Totalexternaldebt3 Domestic publicdebt Of ahich:-centralgovt - publicent. -eney - other Energystor debt Exterl froo bg*t Frvomoetay sector Frm private sector _Z Page 10 of 10 270 - Aouce; 1.8 0.9 0.3 1.2 1.1 1.2 1.3 0.9 0.3 1.2 1.4 2.0 1.2 1.1 0.3 1.4 1.7 2.9 26.5 .31.7 12.7 15.1 6.1 7.0 2.6 2.6 P2.6 2.7 1.4 L9 17.1 7.8 2.6 2.7 4.0 23.6 9.6 2.6 L9 L5 10.4 10.7 24.4 24.6 10.3 10.3 10.1 23.3 22.1 21.6 8.6 I18 7.6 15.6 1.1 1.3 0.4 1.7 2.1 4.2 1.0 1.7 0.7 2.4 L4 3.8 1.0 3.7 1.5 5.2 3.0 5.1 1.0 4.1 1.7 S.8 2.7 3.9 1.0 1.6 0.6 2.1 2.4 4.1 1.0 2.2 0.9 3.1 2.9 5.8 NOCZIM1; WorLd Bank; Evaluation bDOERD; iE$A; WCC;SENCOL; 1.0 3.0 1.3 4.2 3.6 7.6 Team Estimates. u9c1 *et4W 61*s d*o4* 9. 49. 9 '; *1 *494. .s *b11 %. gt '44 . -4949 :.:,.. 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C9Ci- " -t ex" Pt P44 Annex39 Page I of 5 - 274 GOVERNMENTCOMMENTSON DRAFT FINAL REPORT ir"iphbo: 78g6SECRET.'RY Tdcwiaphk Ads: IIRIGIIE.4& t, FOR ENERGYANrI WATER RESOURCES AND DEVELOPM.ENT Tck;TQpWftPrihate Bag7712 WOVVE. Causewy "',4 HamurmZimbabwe 3rd December 1991 Mr. J-U. Richter Senior Economist World Bank 1818 H Street. N.W. WashingtonD.C. 20433 U.S.A. Dear Sir EVALUATI ON FHR DRAFT FINAL REPORT: -INTEGRATED EVYALUATION FOR Z13BBW 1. ENERGY ST1gT?r.Gy Introduction We find that the value of the Report has improved i=menzely since the previous draft was considered. Your apprcacn wnich solicits our comments is much appreciated as we hope these will he incorporated in the Final Report. However we ob_erve that certain comments submitted to you during the previous review were largely left out, giving rise to our concern as the final report might persist in factoring out those issues which we feel are important. Enclosed are some specific comments we received from interested parties. particularly the Zimbabwe Electric,ty Supply Authority. the National Oil Company of Zimbabwe. the Wankie Colliery Company, Zimconsult. The Ministry's corments are given below and should be read together with those from the parties concerned. 2. Electricitv (a) Government's reasonc to r.o ah1.ad with KSE projec-v not been analysed: ' - the ics;te o. supplying peak demand from our own resources instead of from imports; - the requirement for security of supply; - preference to hydro power to fossil fuel from.coal Power station, or eas turbines. (b) The relaxation of loss of load probability LOLP has not been fully analysed. It would have assisted comprehension had different values of LOLP had been used, starting with Annex 39 Pane 2 of 5 275 5 houirs 3. until 20 hrs per year in steps of 5 hours, say. 9Aia Ait mentioned e-lsewhiere, coal is a plentiful resource in the country anxiways of utilizing iL snouid have been considered rather than to abandon offort oan ochemes which assess the pos3ibilit.y 4. o;- coal licueinction. r, Zq_ j~id I.pqL A1t,houigh the PiDeline and aireadv undez team is Additional way. aware that Storage commants made kloth the Facilities af3suming that nothin- happened in these areas are noV helpful. genuitie diaagreement on strategies in as-a-mattor-of-fact manner. 5. Feruka-itarare projects are the.e has Where there is should be spelt out Environmental InMP.act Because the terms of reference of the study left out renewable sources of energy, the title of the report is rather misleading. Woodfuel ia the most important energy source of energy in the country axd the use of solar energy in;luding biomaoe and solar photovoltaics wiil feature greatly in the provision of energy in the countryAs you are aware the World Bank, UNDP and UNIP have approved a photovoltaic project for Zimbabwe using the Glubal Rnvironment Facility with particular emphasis on addressing environmental concerns. Integrating these sources ot energlywould have completed the energy picture. 63 . qme> a1Q We hope that the final report will allow for the flexibility that iu necessary in any dynamic environment which iu responsive to the encl osed comments we have received fromi participarit:z in the Zimbabwe team. y *) i n 4 *It1 J.J. Chitauro SECLA QLEEI-GD-AD T02 T - 276 - Annex 39 Page 3 of 5 ESMAP-INTEGRATEDENERGYSTRATEGYEVALUATIONFQR ZIMBABlWE ZESA Comments on the Reoort In this position paper it must be stressed that the only real difference is the requirement for the Kariba South Extension, which as you know is not something new in the World Bank's stand to continually delayed this project over the last number of years. We would like to inform you That we at ZESA did perform a study review of the given draft report, this report was distributed to your staff and other consultants prior to the February 1991 meeting, the title of the report is "Zimbabwe Electricity -Supply Authority ESMAP Study Review," Corporate Planning Unit, January 1991 (copy attached to this paper). To quote the recommendations of the report: "It is ZESA preference to use a reliability criterion of i-LP cf 5 hrs/yr, but even using an LOLP of 20 hours/year the Corcorate that the conclusions and Planning Unit's findings are recommendations of ESMAP report be adjusted to reflect that the gas turbines option is not the least cost development plan, for 20 hours/ ear, the recommended plan is: a) b) c) Kariba South Extension (1998) latest Batoka (2002) If Batoka is delayed and this becomes evident by 1995 - 1996 Hwange # 7 Unit should follow KSE for 2000/01 depending on availability of import from Zambia beyond 1999. To meet the ZESA developed are: a) b) c) criteria Kariba South Extension Upper Zambezi (2000) Batoka (2002)." of 5 hr/year LOLP the plants to be (1998) or earlier In addition after the Februarv meeting ZESA's comments to th secord draft we~re forwarded to Mr Makina of EDM Consult, Harare this item is also attached to 1,his paper. On review of the Final draft we note that our comments have been In section 6.28 only the study results for 5hr/yr disregarded. (which is not indicated in the text) are still the only results shown, we again request that the 20 hr/yr values be shown which would indicate. _ 277 - Development Program Pi P2 P3 P4 P5 P6 P7 5 ~ nnex39 5 NPV (1989 Z$M) 5hrs/yr 20hrs/yr 3,856 3,836 3,758 3.529 4,058 3,982 4,062 3,409* 3,615 3,627 3,413* 3,747 3,851 3,931 *Note P1 and P4 under 20 hrs/yr are equivalent. Also as will be shown later in the paper an advancement of KSE to 1998 would decrease Case PI 20hrs/yr and result in a LCL= C"r/yr at a cost of Z$63 million. ZESA studies, however ind;ate- __nefits to KSE for a 1998 inservice date of 97.4 million dollars _ver Gas Turbines. Again this is as a result of the productiQr--sts and is discussed later. ESMAP did include cases as requested by ZESA wher-e t- Zambia purchase was deleted after 1999 in the section 6.34 the results shown are again for 5 hrs/yr and indicate very little ,_ choose between KSE and Gas turbines Case P1Z and P42. It is noted that they again choose not to include a Summary table where they have also considered 20hrs/yr. This section should have both results as suggested for section 6.28 and the table form part of Appendix 20. (Copy of table in our possession attached). Development Programs P1Z P22 P4Z P9Z P1oz NPN (1989 Z$MM 5hrs/yr 20hrs/yr 3,660 3,961 3,635 3,953 3,843 3,463* 3,516 3,726 - Under the 20 hrs/yr KSE has a advantage of Z$53 million. This sequence P1Z was asked to be further studied by removing the Gas Turbines in 2001, as it was felt it was more costly than advancing Batoka to 2002 rather than 2003. This was never done, it is expected this would have resulted in greater benefits to KSE vs Gas Turbines. In regard to our comments given in the report and sent later to ESMAP, to say the least, the majority have not been included in the final draft report, refer to Appendix 1 of the attached report. (ZESA's ESMAP Study Review). - Annex 39 Page 5 of 5 - Item 11 page vi of the report indicates that Gas turbines use would be very small and not exceed 70,000m of distillate, again this is the main point of contention between the study results and the methodologi used. ZESA's studies indicate upto a maximum of 3. 1,123,200m in the worst case and a minimum of 342,000m In dollar value this is equivalent to in the ESMAP Case US$1.5 million or Z$3.45 and for the ZESA cases $630.98 million and Z$38.9 million respectively. As stated in the ZESA report the higher value is greater than Zimbabwe's total liquid fuel 1989 estimated requirements. Subsequent to this report and our discussions at the February meeting, although not fully accepting the ZESA findingsz:ne ESMAP group hedged their recommendations in agreeing there were -elevant points in the ZESA report even though they would not accect an outright advantage to KSE over Gas Turbines. The draft final report in the body of the report has -neeefc-e been adjusted to indicate that either KSE or Gas Turbines ate reauired around 2000, thus ESMAP has accomplished the tasks Qif leaving Kariba South Extension still uo in the air. The only area where differences occur in the economic analysis is in the System Operational costs of the ESMAP program and the GCII program utilized by ZESA. The GCII model we feel provided a more representative output of plant operation than the model used in the ESMAP study and therefore results in greater costs of the Gas Turbines and total associated operational costs. As an example the ESMAP study assumes Hwange Stage 2 operating for many of the years at a capacity factor of 75% (See Annex 21 page 206, where the GCII model varies year to year as shown on Appendix 2 of the ZESA report. This is one of the reason for the different results and we at ZESA tend to place our recommendation for KSE over Gas Turbines on this basis that we support our results as well as for the reasons in the ESMAP report under Item 6.36. Again we must stress that the only real issue in the report is whether the best alternative of those available at the time cf writing of this report to follow Cahora Bassa is KSE or Gas Turbines. In conclusion, the choice of the next project after Cahora Bassa is still open to review up until a final commitment is taken. one must however weigh the prudence of the ESMAP recommendation of waiting until 1994 to make this decision. Annex-40 Page I of 3 - 279 - ESMAPREPLY TO GOVERNMENTCOMMENTSON DRAFTFINAL REPORT The World Bank INTERNATIONALBANK FOR RECONSTRUCTIONAND DEVELOPMENT tNTERNATIONALDEVELOPMENTASSOCIATION 1818H Street, N.W. Washington, D.C. 20433 U.S.A. 1202) 477.1234 Cable Address: INTSAFRAD Caeb Address: INDEVAS December20. 1991 Mr. J. 1. Chitauro Secretaryfor Energy and Water Resources and Development Ministry of Energy and Water Resource Development Harare Zimbabwe Dear Mr. Chitauro: Re: ZimbahbveIntegrated Energy Strategy Evaluation Thank you for your letter to Mr. Richter and your commentson the draft final report of this Evaluation. We are pleased to note that you considerthe document to be of enhan.eJ use to your Goverarnent, and we shall incorporatethe necessaryfactualcorrection'. Your letter raises a number of importantissueson which we would like to clarify our position in regard to the analysis and presentationof these issues in the final report. The report's basic premise is that least-costsolutionsare essentialto meetingZimbabwe's long-termenergy requirements,ensuring supply reliabilityto the economicallyfeasibledegreeand sustainedenvironmentalmanagementof energy operations. Maximumself-sufficiencyis not synonymouswithoptimalreliability; indeed,it can adversely affect supply reliability in those cases where the expansionof energy production capacity within the national boundaries creates requirements for, and dependenceon, high inflows of external capital, technologies.and expertise. The reportthereforerecommendswhat we considera cost-effectivetrade-off between additionalinvestmentand energysupplyreliability. The report has alsopointed outthe existence of a considerableand variedenergy resourcebase(paras.4.14.3); unfortunately,manyof these resources (wind and solar energy in particular) are uneconomic,as well as subject to severe technicallimitations, to provide energy but on a very limited and loclfizedscale. This is why the report did not give them extensivetreatment. The Karibi StmathExtencin *:heme has lhe'n wneprincipal issue related to energy investment. We reiterate the Evluation's recommendationto postponea decision on this scheme until around ;994 when the current uncertaintiesregardingthe likelvin-servicedate for Batoka1, future domesticdemand for electricity, and deliverabilityof electricityfrom Zambia will be resolved or at least considerably lessened. We would liketo emphasizethat throughoutthe preparationof this report. ZESA's comments and suggestionswere taken seriously into consideration. In particular, followingthe green cover draft review in February 1991, the possibilityof a shut-off of firm energy supplies from Zambia after 1999 has been analyzedextensively(see paras. 6.34-6.37 and Annex21 consistingof 11pages) and the abovestated conclusionsare basedon that analysis. A sub-issuerelatesto the considerationof gas turbinesfor sand-by/peak-loadsupply. As the report demonstrates,these units would not be needed for more than 250 hours p.a. at their peak in 2004, equivalentto 5% of nationalliquid fuels use projectedfor that year. It is not clear to us how ZESA can arrive at a gas turbine use approximatelyten times that high (which is the equivalentof their indicatedconsumptionof one millionm' p.a.), all the more since their projection -280 Mr. J. J. Chitauro - 2 - - Annex 40 Page 2 of 3 December 20, 1991 model was not made available to the Evaluation team and their note on projection methodology (incorporatedinto Annex 22) does not shed light on this problem either. The report has thoroughly analyzedthe electricitysupplyexpansionoptions, and its conclusionsare clear and conceptionallysound. We considerthat theyshould be treatedas final, with a recognitionthat ZESA's analysisof KSE, using different assumptions,arrives at differentconclusionson this issue. In regardto liquidfuels, we are pleasedto reemphasizethat the reportsupportsthe IFC-financed petroleum products pipeline project (paras. 6.106-6.109; 6.123), emphasizingthe requirement for increasingfuture privatesector participationin this venture. In regardto NOCZIM's commentson this undergroundstoragescheme,the basic issue is the economiccost of investmentin storagecapacity and of holding stocks. We upholdour conclusionthat the economiccosts of undergroundstorage and of extendingstorage capacityto six monthsstocks are considerablyhigher than a measuredexpansion.by means of above-groundsteel tanks, to three monthsof stocks. (This volume of stocks is considered adequateby renowninstitutions,such as the InternationalEnergyAgencyof OECD.) We have~attacned a copy of the detailedresponse of the Evaluationteam's specialist, Mr. Shillingford,to NOCZTIM's technicalcomments. Mr. Shillingfordhas long-rangingexperiencein the constructionand operation of underground as well as above-groundstorage schemes. He would be glad to pursue this matter independentlywith you if you so desire, and to review the May 15 report prepared by NOCZNIM's consultants,which thus far has not been made availableto the Evaluationteam. In regard to the coal subsectorstrategy,the schemesdiscussedwith WCC's technicalsta;f (e.g. opening new blocks; mining out pillars of existing mines) have been carefully considered in the preparation of the final report. Again. the Evaluationteam did not have access to specific project documentation,but it is the professionaljudgmentof our coal specialist,Dr. Stocks,that neitherproposal forms part of a least-costsolution. The report has thoroughlyanalyzedthe technical, economic, and institutionalissuesof coalgasificationschemes(paras. 6.90-6.98), demonstratingtheir non-viability. (In this context, it is interestingto note that SASOL/SouthAfricahave decidedto sharply curtailtheir coal conversionoperationsas these cannotcompeteany longerwith liquid fuels imports.) You pointout that the report's analysisof energyrenewablesis limited. The regionalas well as macroeconomicimplicationsof fuel-relateddeforestationare emphasizedin para 3.2 of the report. The Governmentand ESMNAP had agreedin early 1989that the EnergyStrategyEvaluationshouldnot include a detailedevaluationof forestryand woodfuelsissues. This wac becausethe report's focus was agreed to be on the capital-intensivesubsectors--electricity,coal, liquid fuels--andthe principalprojects within these subsectors. whereasinvestmentrequirementsfor biomass are likely to he relativelyrnir.Gr. T_.z approachwas reflectedin the UNDP/IPF Pros*ct Dtcument of August 15, 1989as agreed wiLh sour Government,and was confirmed by the communicationof the Departmentof Energy and .csoLrce reveloprnent followingthe main ESMAPmissionof January-February1990. We egr'-. thaatbiumass issues are critical for Zimbabwe's energy sector development,but at this closure stage of report preparation,we shall unfortunatelynot be in a positionto give these issues more extensivetreatment. We would therefore like to proposethat these issueswould be taken up in the context of an ESMAP CountryPaperon Zimbabwe,as discussedwithMessrs.McKechnieand Richterearlierthis year, together with the salient issuesof the electricity,coal, and lir* A fuels subsectors. We are in the processof makingthe necessaryrevisionsto eliminateany inconsistenciesand ambiguities that may haveremainedin this reportand we expectto issuethe BlueCover final report in January 1992. Given that we have thoroughlyanalyzedand reanalyzedall the major issuesraisedduring the fieldwork and the Green Cover review,and have exhaustedthe resourcesavailablefor the study, we hope you will acceptthat, with the necessaryfactualcorrections,the report can be consideredfinal. Mr. J. J. Chitauro - 3 - Annex 40 Page 31o 3 December 20, 1991 In view of their interest in this matter, I have taken the liberty of sending copies of this letter to Mrs. Guti, Deputy Secretary, and Dr. S. Mahlahla, Director National Planning Agency, Ministry of Finance and Economic Development; D. Dragic, Resident Representative, United Nations Development Programme; J. Brisman, Director of Infrastructure Division, Swedish International Development Authority, Stockholm (Sweden); and C. Poortman, Resident Representative, World Bank. With kind regards, Sine ly yours, Trevor Byer Division Chief ESMAP Strategy and Programs Division World Bank - 282 - Graphic 1 PERCENTAGEDISTRIBUTION OF GDP BY INDUSTRYOF ORIGIN 1980 1989 (TOTAL MillionZ$3226) (TOTAL MillionZ$4050) Minig(8.6%) Indus&Man(29.7%) Miig(7.2%) Indus&Man(29.%) Agtic(1420A Servies (47.3%) SOURCE: DOERD - EISNational income andexpense report,CSO NOTE: S Inconstant 1980 prices MSSGRPH.WK3/1ESSF3A/38.CGM (4.2%) Services(48.8%) - 283 - Graphic-2 ENERGYSUPPLYAND USESIN 1988 (inTOEx 1000) 3000 Supply use 2500E S < ySuPply Wood?el Production Transformation Coal Use Electcty @ Final consumption 0 NE Exports SOURCE: OOER0* EISfmtm World8ank 1988Energy BaW= IESAGRPH.WKI/ESSFOI .CGM UquldFuel Imports Energy sector - 284 - t8ranhic 3 FINALENERGY CONSUMPTION BYSECTOR (inTOEx 1000) IESSGRPH.WK3/lESSfO2.CGbl 2000 - 150 . 1000 50 WoodfuuI Residential industry coal 0 Transport F Other SOURCE: DOEROEtStomnWorldBanki988Energy Balance Electricity UquldA"el Agriculture Graphic 4 - 285 - ELECTRICITY SUPPLY1980 - 1990 (GWh) 12 10 _ 10~~~~~~~~~~~~~~~1 |6 - TOTAL - Imporo=ft 4 4 3 - Hwange - Kariba IESSGRPH.WK3/lESSfO5.CGM iS18 t981 M2 -.,- Kariba 198 iSS4 -,- Hwange, SOURCE: National Energy DOabo -ELsODU.WK1 NOTEtWhigrpIacuWve 198 1S8 t98 I=8 198 Oldthermal -_Imports 1990 coU oO~~~~~~~~~~~~~~c CA CD~~~~~~ Ca~~~~~ ~~~~0 l - 3 2 . 287 - AVERAGEELECTRICITY PRICES 1980 - 1990 Constant1980prices (Zcents/kWh) . - ssp.alsF3C 1.5 I ESSGRPH.WK3usESSF13.CGM . 190 1981 1982 SOURCE'DOWfD,ZESA 1983 1984 _ J _ 1988 _ I_fI. 1986 1987 1988 I._ 1989 1990 - 288- -Glahic AVERAGECOALPRICES 1980 - 1990 ton) Constant1980prices (Z$/metric 14 13 - 12 _ 11 10 '- 9~ lESSGGRPWH.KAESSF14.CGM 1l80 1981 19e2 SOURCE:DOERD,WCC 1983 1984 1985 lo" 1987 1988 1i89 1990 - 289 - traphic 8 YEARENDPRICESFORLIQUIDFUELS1980- 1990 Consnt 1980prices (cents/liter) 70 *V~~~~~// 40 30- OD3 I I 1S I 1961 I t982 .8- I 1983 Diesel SOURCIEDOEfG.NOCZIM 164 + i - lsow Blend I1 lows - 1 1S8 - I uow Kerosene I u9S Iwo - 290 Graphic 9 LIOUID FUELS COST BUILD-TIP October 1989 250 IESSGRPH.WK3/IESSF12.CGM 200 150NOCZIM Sling NC ce 1.SNsMSelm Selling NOCZIM~~~~~~~~~~~~~~~~Prc cm price 50 Blend Diesel Kerosene March 1991 250 t // A Sellng IESSGRPH.WKW3IESSF1I.CGM price 200 NOCZIM 150 cs Prim 100100~ NOCZIM NOCDIM costSlln &\\<)NCXMCost price 50~~~~~~~>0 Wend DiBese ForeC cost a Localcost a Dstbutorsmaaln NOCZaM selln price SOURCE Derved m Word nkESSreport-Table10 87113 blndIg ration ForBled assumirng Kersn Duty/Tas Retalmargin Graihic - 291 - 10 LIQUIDFUELPRICEBUILDUP October 1989& March1991 Currentprices(Z cents/Atr) 2oo Pumpp!ce 234CA ISO 8 IESSGRPH,WK3/IESSF16.CGM Pumpprioe 115C/t Pump price 100 - Pumpprice c/I s71 mh f ~~~~~~~~~~~~PUMP Price 03rwq 50 Dlesel89 E Forexost Diesel91 Blend89 a El Locatcost 2Rteall margin Duly/Tas/y SOURCE: DeivedfromWoHdBankESS repon- TableIC ForBlend,assumIn87n13blendingration Kerosene 89 Blend91 3 Kerosene91 Disrbutorsmargin - 292 - Graihic 11 ELECTRICITY DEMANDPROJECTIONS 1990-2010 (GWh) 20 10 lESSGRPH.WK3/lESSFO0.CGM 1m loiS 1992 lm 1104 16 a6 or 11 TrendCase =. isBase case- Poticyve Scenio SOURCE: DOERD.ZESA.Evaluation teamestmates NOTE:Graphcurvesae tromabsolutevalues Se am0 19I s 2 =0 case-PollcyNeutral 2006 am 20 my a S 0 - 293 -2010 tonsx- r ur COA6Ourp C -o Coknage WBase - gC lFOG Coal WankleCoking ± ac, "c rsaSce Coa ~~ nQWa p P Hwange werStationCoal to - 294 - Granhic 13 COAL DEMANDPROJECTIONS1990- 2010 (Metrictonsx-1000)--, a 7 4 -_ 3 2 W W I I: 1"90~l 1 l 1 TrendCase BaseCase/PolicyAcveScenario DOERD, WorldBankCOALFCAS.WK1 SOURCE: NOTE:Graphcures aretom absolutevalues I s ESSGRPH.WKaIIESSP08.CGM I I I I uI I I ams + mWtr am Scenario BaseCase/Pollcy-Neutral wex Z1"srre noo Wuol o4ao lwt GraDhic - 295 - 14 LIQUID FUELDEMANDPROJECTIONS 1990- 2010 (Cubicmeters x 1000) J500r 3000_,, 1000 I * 131 ion ion TrendCase 134 U 10*0 137 10 1ttP + 13Z1 U 210610a IESSGRPH.WK3/lESSF09.CGM I I t ' no t0alcI am SW Scenarno BaseCase/Polloy-Nsutra, Ba Case/PolicyActiveScnro OM teemestims, WorldBankREVOILFC.WK1 EvWaluion NOCZIM. DOERO, SOURCE: values Graphcurves arefromabsolute NOTE: am - 296 ENERGY SECTOR MANAGEMENTASSISrANCE PROGRAMME COMPLETEDACTIVrrES Coury Acvi*y Date Number 07/88 085/88 08/88 02/89 05189 08/89 087/88 098189 SUB-SAHARANAFRICA Africa Regional AnglophoneAfrica HouseholdEnergyWorkshop RegionalPower Seminaron ReducingElectric Power System Losses in Africa InstitutionalEvaluationof EGL BiomassMappingRegionalWorkshops FrancophoneHouseholdEnergyWorkshop InterafricanElectricalEngineeringCollege:Proposalsfor Shortand Long-TermDevelopment BiomassAssessmentand Mapping Energy Assessment Angola Power Rehabilitationand TechnicalAssistance Benin Energy Assesment Botswana Energy Assessment Pump ElectrificationPrefeasibilityStudy Reviewof ElectricityServiceConnectionPolicy Tuli Block Farms ElectrificationStudy HouseholdEnergy Iisues Study Urban HouseholdEnergy StrategyStudy BurkinaFaso EnergyAssessment TechnicalAssistanceProgram Urban HouseholdEnergy StrategyStudy EnergyAssessment Burundi PetroleumSupplyManagement Stats Report Presentationof EnergyProjects for the Fourth Five-YearPlan (1983-1987) ImprovedCharcoalCookstoveStrategy Peat UtilizationProject Energy Assessment Cape Verde Energy Asssmet HouseholdEnergy StrategyStudy Comoros Energy A ment EnergyAssessment Congo Power DevelopmentPlan C6te d'Ivoire Energy Assessment Improve BiomassUtilization Power SystemEfficiencyStudy Ethiopia Energy Assessment Power SystemEfficiencyStudy AgriculturalResidueBriquettingPilot Project BagasseStudy CookingEfficiencyProject Gabon Energy Assessment - 103/89 03/90 112/90 03/90 05189 4708-ANG 10/91 142/91 06/85 5222-BEN 09/84 4998-BT 01/86 047/86 07/87 071/87 07/87 072/87 02/88 05/91 132/91 01/86 5730-BUR 03/86 052/86 06/91 134/91 06/82 3778-BU 01/84 012/84 02/84 011/84 05185 09185 11/85 01/92 08/84 02/90 01/88 01/88 03/90 04t85 04/87 12/87 07/84 10/85 12/86 12/86 12/87 07/88 036/85 042/85 046/85 9215-BU 5073-CV 110/90 7104-COM 6420-COB 106190 5250-IVC 069/87 - 4741-ET 045/85 062/86 063/86 - 6915-GA - 297 Coantrj The Gambia - Acdtv Energy Assessment Solar Water HeatingRetrofitProject Solar PhotovoltaicApplications PetroleumSupplyManagementAssistance Ghana EnergyAssessment Energy Rationalizationin the IndustrialSector SawmillResiduesUtilizationStudy Guinea Energy Assessment Guinea-Bissau Energy Assessment RecommendedTechnicalAssistanceProjects ManagementOptionsfor the Electric Powerand Water Supply Subsectors Power and Water InstitutionalRestructuring(French) Kenya Energy Assessment Power SystemEfficiencyStudy StatusReport Coal ConversionActionPlan Solar WaterHeatingStudy Peri-UrbanWoodfuelDevelopment Power Master Plan Lesotho Energy Assessment Liberia Energy Assessment RecommendedTechnicalAssistanceProjects Power SystemEfficiencyStudy Madagascar EnergyAssessment Power SystemEfficiencyStudy Malawi EnergyAssessment TechnicalAssistanceto Improvethe Efficiencyof Fuelwood Use in the TobaccoIndustry Status Report Mali Energy Assessment(French) Islamic Republic of Mauritania Energy Assessment HouseholdEnergyStrategy Study Mauritius Energy Assessment StatusReport Power SystemEfficiencyAudit BagassePower Potential Mozambique Energy Assessment HouseholdElectricityUtilizationStudy Niger Energy Assessment Stats Report ImprovedStoves Project HouseholdEnergyConservationand Substitution Nigeria EnergyAssessment Date Number 11183 02/85 03/85 04/8S 11/86 06/88 11/88 11/86 08/84 04/85 4743-GM 030/85 03V85 03518S 6234-GH 084/88 074/87 6137-GUI 5083-4UB 033/85 02/90 04/91 05/82 03/84 05/84 02/87 02/87 10/87 11/87 01/84 12/84 06/85 12/87 01/87 12/87 08/82 100/90 118/91 3800-KE 014/84 016/J4 4676-LSO 5279-LBR 038/85 081/87 5700-MAG 075/87 3903-MAL 11/83 01/84 11/91 009/83 013/84 8423-MLU 04/85 07/90 12/81 10/83 05/87 10/87 01/87 03/90 05/84 02/86 12/87 01/88 08/83 5224-MAU 123/90 3510-MAS 008/83 070/87 077/87 6128-MOZ 113/90 4642-NIR 051/86 080/87 082/88 4440-UNI - 066/87 076/87 - - 298 - CowDq Rwanda SADCC SaoTome and Principe Senegal Seychelles Siea Leone Somalia Sudan Swaziland Tanzania Togo Uganda Zaire Zambia AcdWky Date Number Enery Aeasment Energy Asment (Englishand French) StatusReport mpovedChacoal CookstoveStategy ImprovedCharcoalProductionTechniques SADCCRogionalSector: RegionalCapacity-BuildingProgran for Energ Surveysand Policy Analysis 06/82 07/91 05/84 08/86 02/87 3779-RW 8017-RW 017/84 059/86 065/87 11191 - Energy Assessment EnergyAssessment Status Report Indusial Energy ConsetvationStudy PreparatoryAsistance for Donor Meeting Urban HouseholdEnergy Strategy EnergyAssessment ElectricPower SystemEfficiencyStudy EnergyAssessment EnergyAssessment ManagementAssistanceto the Ministryof Energy and Mining Energy Assessment Power SystemEfficiencyStudy StatusReport Wood Energy/ForestryFeasibility EnergyAssessment EnergyAssessment Pei-Urban WoodfuelsFeasibilityStudy TobaccoCuring EfficiencyStudy RemoteSensingand Mappingof Woodlands IndustrialEnergyEfficiencyTechnicalAssistance EnergyAmet Wood Recoveryin the NangbetoLake Power EfficiencyImprovement Energy Assessment StatusReport InstitutionalReviewof the Energy Sector EnergyEfficiencyin TobaccoCuring Industry Fuetwood/ForestryFeasibilityStudy Power SystemEfficiencyStudy EnergyEfficiencyImprovementin the Brick and Tile Industry TobaccoCuring Pilot Project 10/85 5803-STP 07/83 4182-SE 10/84 025/84 05/85 037/85 04/86 056/86 02/89 096/89 01/84 4693-SEY 08/84 021/84 10/87 6597-SL 12/85 5796-SO 05/83 003/83 07/83 4511-SU 06/84 018/84 11/84 026/84 07/87 073/87 02/87 6262-SW 11/84 4969-TA 08188 086/88 05/89 102/89 06/90 08/90 122/90 06/85 5221-TO 04/86 055/86 12/87 078/87 07/83 4453-UG 08/84 020/84 01/85 029/85 02186 049/86 03/86 053186 12/88 092/88 02/89 097/89 03(89 UNDP Tenninal Report 05/86 5837-ZR 01/83 4110-ZA 08/85 039/85 11/86 060/86 02/89 093/88 02/89 094/88 08/90 121/90 EnergyAssessment EnergyAssessment StatusReport Energy SectorInstitutionalReview Power SubsectorEfficiencyStudy EnergyStrategy Study Urban HouseholdEnergy StrategyStudy - 299 Cewaby Zimbabwe Acdivity EnergyAssessment Power SystemEfficiencyStudy StatusReport Power Sector ManagementAssistanceProject PetroleumManagementAssistance Power SectorManagementInstituion Building CharcoalUtilizationPrefeasibilityStudy lategrate Energy StrategyEvaluation Date Numer 06/82 06/83 08/84 04/85 12/89 09/89 06/90 01/92 3765-ZIM 005/83 019/84 034/85 109/89 11/90 10/82 05/83 04/84 02185 12188 05/89 12/89 06/83 - 101/89 105/89 4462-PU 11/88 05/91 091/88 120/91 07/91 11/81 09/84 02/86 04/87 12/88 02/90 12/90 03/87 09/91 06/85 08/83 01/85 139/91 3543-IND 022/84 050/86 067/87 095/88 107/90 124/90 068/87 9645-MA 5416-BA 4474-NEP 028/84 06/82 07/83 3882-PNG 006/83 10/84 10/84 06/83 05/86 05/82 07/83 01/84 03/86 023/84 024/84 4404-SOL - 119/90 8768-ZIM ASIA ANDTHE PACIFIC Asia Regional Bangladesh C'ina Fiji India Indonesia Malaysia Myanmar Nepal PapuaNew Guinea Pacific Householdand Runr Energy Seminar EnergyAssessment Priority InvestmentProgram StatusReport Power SystemEfficiencyStudy Small ScaleUses of Gas PrefeasibilityStudy County-LevelRural EnergyAssessments FuelwoodForestry PreinvestmentStudy EnergyAssessment Opportunitiesfor Commercializationof Nonconventional EnergySystems MaharashtraBagasseEnergy EfficiencyProject Mini-HydroDevelopmenton IrrigationDams and Canal Drops Vols. I, II and III 1nergy Assessment Status Report Power GenerationEfficiencyStudy Energy Efficiencyin the Brick, Tile and Lime Industries Diesel GeneratingPlant EfficiencyStudy Urban HouseholdEnergyStrategy Study BiomassGasifierPreinvestmentStudyVols. * & II SabahPower SystemEfficiencyStudy Gas UtilizationStudy EnergyAssessment EnergyAssessment Status Report Energy Assessment Status Report Enery StrategyPaper InstitutionalReview in the EnergySector Power Tariff Study SolomonIslands Enery Assessment SouthPacific PetroleumTransportin the SouthPacific SniLAnka EnergyAssessment Power SystemLoss ReductionStudy Status Report IndustrialEnergyConservationStudy 3873-BD 002/83 015/84 031/85 - - 3792-CE 007/83 010/84 054/86 - 300 Couti Activ Date Number Thailand Enery Assessm t 09/85 Rural EnergyIssuesand Options 09185 Accelerad Dissenumnation of Impwved Stovesand Carcoal Kilas 09187 NortheastRegionVillageForestty and Woodfuels PreinvestmentStudy 02/88 Impactof Lower Oil Pries 08/88 Coal Developmentand UtilizationStudy 10/89 Tonga EnergyAssessment 06185 Vanuatu EnergyAssessment 06/85 Western Samoa EnergyAssessmnmt 06/85 5793-TH 044/85 079187 083/88 - 5498-TON 5577-VA 5497-WSO EUROPE, MIDDLE EAST ANDNORTH AFRCA (EMENA) Morocco Pakistan Portugal Syria Tunisia Turkey Yemen Energy Assessment StatusReport HouseholdEnergyAssessment Assessmentof PhotovoltaicPrograms,Applications,and Markets EnergyAssessment EnergyAssesment ElectricPower EfficiencyStudy EnergyEfficiencyImprovementin the CementSector EnergyEfficiencyImprovementin the FertilizerSector Fuel Substitution EnergyAsssment EnergyAssessment Energy InvestmentPriorities HouseholdEnergy StrategyStudyPbase I 03/84 01/86 05/88 10/89 04/84 05186 09/88 04/89 06/90 03/90 03/83 12/84 02/87 03/91 4157-MOR 048/86 - 103/89 4824-PO 5822-SYR 089/88 099/89 115/90 - 3877-TU 4892-YAR 6376-YAR 126/91 LATIN AMERICA ANDTHE CARIBBEAN(LAC) LACRegional Bolivia Chile Colombia CostaRica Dominican Republi Ecuador RegionalSeminaron Electric Power SystemLoss Reduction in the Caribbean EnergyAssessment NationalEnergyPlan NationalEnergy Plan (Spanish) La Paz PrivatePower TechnicalAssistance NahuralGas Distribution PrefeasibilityEvaluationRural Electrificationand Demand Assessment Energy Sector Review Energy StrategyPaper Energy Assessmet RecommendedTechnicalAssistancePrjwects Forest ResiduesUtilizationStudy EnergyAssessment 04191 08/88 12/86 01/84 11/84 02/90 05/91 129/91 7129-4H 4655-CR 027/84 108/90 8234-DO EnergyAssessment Energy StrategyPhase 1 Energy Strategy 12/85 07188 04/91 5865-EC 07f89 04183 12/87 08191 11/90 03/91 - 4213-BO - 131/91 111/90 125/91 - - 301 - County Haiti Hondura Jamaica Mexico Panama Paraguay Peam Ac*l4y EeryAssnent Staus Report Energy Aussssment PetroleumSupplyManagement Energy A sment PetroleumProcurement,Refining,and DistributionStudy EnergyEfficiencyBuildingCode Phase 1 Energy EfficiencyStandardsand Labels Phase I ManagementInformationSystemPhase I CharcoalProductionProject FIDCO SawmillResiduesUtilizationStudy ImprovedCharcoalProductionWithin Forest Managementfor the State of Verauuz * Power SystemEfficiencyStudy Energy Asssment RecommendedTechnicalAssistanceProjects Status Report Energy Assessment Status Report Proposal for a StoveDisseminationProgam in the Sierra ergy Strategy Energy Assessment Saint Lucia St. Vincentand the Grenadines Energy Assessment Trinidadand Tobago EnergyAssessment Date Number 06/82 3672-HA 08/85 041/85 08/87 03/91 04/85 11/86 03/88 03188 03/88 09/88 09/88 6476-HO 128/91 5466-JM 061/86 08/91 06/83 10/84 09/85 09/85 01/84 08/85 02/87 12/90 09/84 138/91 004/83 5145-PA - 090/88 088/88 - 043/85 4677-PE 040185 064/87 - 5111-SLU 09/84 5103-STV 12/85 5930-TR 11/89 07/91 - 04/90 -- GLOBAL Energy End Use Efficiency:Researchand Strategy Guidelinesfor UtilityCustomerManagementand Metering Womenand Energy-A ResourceGuide The InternationalNetwork:Policiesand Experience Assessmentof PersonalComputerModelsfor Energy Planningin DevelopingCountries 012892 10/91 }> v( > J >s 1^ tE j - a-.- ' -' hAa-5,4 . POWER SECTOR INFRASTRUCTURE / juK'uut't / \ n t2- ZIMBABWE s X J ,rat ') .a,.*r ANt;O.A , IMRD22659 ~~~~~~~~~~~~~~~30 2a W [^h!^h^ M^AOft kC , ',-'' , 16' . ,. j N _MOZAMBIQUE R T Fi. E B q OQt5_. NAMIBI ,} \ . Vf .tnt'E N T R A N~~~~~~~~~~~~~~~~~ 20 SuistingPowerFacilit-ie E *-6 330kVTira,nimisionLines OtherMainTransmission Lines and MajorSubstations A' MoreThen One Circuit U Thermal Plants Vt ElectrificationZoneBoundaries Ar Caoered by DisiributionSystem N IN 22- * J / HydroPlant[Rehobilitation) B BOISWANA InlerntotinalBoundaries f so MILES I ° _°_28- 2L-Ro _ x , / /SWANA MOZAMBIQUE 22- I50 SO xtoo I , k s,i. Line (UederConstrfitnw 132kVTronsmission I I S2- 30__- 3 SEPTEMBER 1990 _.2 r MA_J l 29, W'lr ZAMBIA .- , , , IBRD22589 -06 \ NAMIBIA PI ZIMBABWE 0 BOTSWANA SOUTH f AFRICA -2s 26 Ta;; rta/h,, 2 / < 1 \ N T w 4 2 TaCAae.e u MATABA ZIMBABWE COA COAL>OCCURRENCES AND INFRASTRUCTURE 30 Mining Activity * Plant Cool-Washing MajorStateRoads HON \E 19 7 )7 MA AN D MASHON t/ >. / '. __z_.ot { Xt A LA N D* A L ./ r ' ANDK.. LA ANORTH \ ) \ \ <\ / \2 GWER ~~~~~~~~~~~~~~~~~~~~~~~~~~MAN 1C ICLw d...0 m Secondory StateRoads J PraposedRood Railroads - t -e OF COALFIELDS AW A W \/I Lth,BUL ZZiaN.W Capitals Province Province Boundaries. International Boundaries M A SV D TA OTECALIDSV COMMERCIAL INTEREST OTHER COALFIELDS 21 Malilongse 11 S rnomatello I Wankie 12 Honkora 22 Singwesi 2 Western Area 13 Dahbo 23 Urnzingeuani 3 Entrbo 14 Sebang. 24 Massabi 4 Lubimbi t5 Kaongo 5 Lubu 16 Sessami 6 Lusulu 17 Nebiri 22? 7 Sengwo B Mkwosine 1B Maro~uh-- 10 Bendeza 20 Dendero Bubye E b MainAirports Rivers t9 Morovo 26o 2,5 T S B/tar 22- 24 r 50 KILOMETERS ° Ai 2'r 2;b- / 2r 2? Ckcealasuaa ,sbr.dge SO U TH , A F RI C Avec / \.Tcaanrr _ 32- " e e n. BER 1990 SEPTEM ___ , ,_______________________________ * ,fsC?Qo 0 ZAMBIA 7sr - 1 ?, ,3IBRD Ž __F-_. ->-. IiA9 -. s / b. , t [1x,'Ca.327.A~~j BOTSWANA / I / E )W RIDA _g 7,~ )* SOUTH NA4A~~ 1( AND [,. \ MATABELE A.,4tQokTe1+ 9TX r ContractAreas PetrolbumRefinery ,31 PetroleumDisribution Cenferswith Roil-fed Depots _10' DanJeterRefineryPipeline -Mojor Slote Staxte Roads Secondaory -'--4- e -22' --- 'JM ,1 Ut _ T _ i/ f_ H0 N INFRASTRUCTUREA 21t \N yA9 SECTOR PETROLEUM . 19MainAAiBpLEts m ASSAI'll., AWrJD < MA SF1OQ B * NA - A^ ~~~~~ ~ 21091R _I 72 pt f \ A he2/ r0I KN E L. E ( D N jo.o Y t - ; |)~<X(/2' { 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 Soads T < H\ t) U \ \ \ . LtunE , Roilroods Rivers ProvinneCapitavls B0 T S W A N A \ '' v m -. / \. \ O \-._ , - - Provinlce Boundaries;I InternationalRoundorirs j \ N ~~~~~~~~~~~~~~~~~~~~C.> c,cuOO5oIoco _2 o 25S s0 2 lEO MILtES 2r 2tr ,/f Jl 2r e,5¢O a SOUTH - AFRICA - 31 / '4*...;2 °8,,V^ 33' I°9( SEPTEMBER

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