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Somin Mukherji Senior Financial Analyst ADFD/WB Project Preparation and Appraisal Workshop Abu Dhabi, April 2010 Electrification for Rural Yemen Rural.

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Presentation on theme: "Somin Mukherji Senior Financial Analyst ADFD/WB Project Preparation and Appraisal Workshop Abu Dhabi, April 2010 Electrification for Rural Yemen Rural."— Presentation transcript:

1 Somin Mukherji Senior Financial Analyst ADFD/WB Project Preparation and Appraisal Workshop Abu Dhabi, April 2010 Electrification for Rural Yemen Rural Energy Access Project (REAP)

2 Key Characteristics - Yemen  Country of 22.4 million people with a high population growth rate of about 3%  Yemen is among the poorest countries in the Middle East Region with per capita income of less than US$870  The GDP is US$ 22.5 billion and the economy grew at an average of about 4.1 % per annum during  Oil exports have been the main source of Government revenue but reserves will decrease significantly without new discoveries  Other key sectors of economic activity include Agriculture, Industry, Manufacturing and Services Source: The World Bank 2

3 Power Sector Key Indicators PEC - Commercial Report 2005MWGWh Installed Generation Capacity (interconnected) Fuel: HFO + Diesel Isolated Generation Capacity Fuel: HFO + Diesel TOTAL Rental Generation (since 2007) (interconnected) Fuel: Diesel PEC Consumers (2005)Consumers (Mio - %)GWh (Sales) Urban %3.202 / 97% Rural % 92 / 3% TOTAL / 100% 3

4 Why Rural Electrification?  Yemen’s population is predominantly rural  Fragmented government investment in rural electrification  Subsidy-dependent national electric utility  Environmentally unfriendly diesel used for isolated generation  Most rural schemes are unsustainable due to lack of institutional mechanisms  Significant disparity between urban and rural electrification 4

5 Urban vs. Rural Electrification 5

6 A Familiar Institutional Challenge  Power sector dominated by state owned Public Electricity Corporation (PEC), undergoing gradual, difficult reform  Rural electrification until recently attached to PEC  Project decisions influenced by political pressure and social compulsions  Tariffs well below cost of service; collection performance unsatisfactory, RE is a drag on PEC’s financial recovery  Result: only 1 in 5 rural households have electricity today – that too of a poor service quality.  Order of the day: Implement adopted National RE Strategy - Rationalize investment planning, Demonstrate a model that can rapidly increase coverage, Apply least cost service options 6

7 Yemen´s RE Approach  Yemen´s Electricity Law of 2008 defining the pillars of the Power Sector Reform adopted by Parliament (March 2009)  Comprehensive grid and off-grid Rural Electrification Strategy adopted by the Government (July 2008)  Development of enabling Institutional framework underway (Creation of an independent Public Authority for Rural Electrification - April 2009)  Parallel Subsidy Reform Program being prepared  Strong donor interest catalyzed; AFD, USTDA, CIM, IsDB, and World Bank  Shift from PEC ad hoc project approach to developing scaled, regulated rural electric service providers  Actively engage communities in program ownership of rural electric service providers. 7

8 RE Implementation Strategy RE program 540,000 20% to 37%  The RE program will electrify about 540,000 households and is expected to increase access in targeted rural areas from 20% to 37% Rural Energy Access US$120  Phase-1 ( Rural Energy Access Project - REAP) will provide access to about 195,000 households ( new consumers, SHS), at a cost of app. US$120 million funded by IDA, AFD, IsDB, USTDA and CIM US$150 million  Significant additional Investments (Phase-2 and Phase-3) required for achieving the program goals ~ US$150 million 8

9 Service Territories and Off-Grid Target Areas 9

10 RE Institutional Framework 10

11 REA Organizational Structure 11

12 Thank you!


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