Senegal: Senegal Electricity and Power Generation Sector

Overview

Senegal does not have any indigenous energy sources – except for some natural gas production in Gadiaga, located south of the capital city of Dakar. Therefore it has to rely on oil imports as a source of fuel for electricity generation to satisfy its strong electricity demand – which averages 9 to 10 percentgrowth per year. Demand will continue to grow spurred by a growth in GDP and by the government’s desire to expand electrical coverage throughout the country. The pattern of real GDP growth in Senegal has fluctuated in the past three years, from 2.5 percent in 2008 to a low in 2009 – 1.25 percent – to 4 percent in 2010 and a forecast of 4.4 percent in 2011. This upward trend reflects a recovery in the industrial sector, owing mainly to increased phosphate and cement production and continued strong construction activity.
The government’s large infrastructure projects – roads, new airport, Port of the Future – will contribute to sustained growth in the construction sector. The countrywide household electrification rate reached 33 percent in 2007 – 77 percent in urban areas and 16 percent in rural areas, and is expected to continue to rise. The rural electrification rate will reach 50 percent by 2012, which means that 3.8 million of Senegalese or 365 000 households in rural areas will have access to electricity compared to the current 102 000 households. In addition, the growth in the population rate is 2.8 percent per year.
Senegal’s consumer electricity tariff rate (CFA 105 per KW, around 23 cents at the current exchange rate of 1 USD equals CFA 450) is considered the highest in West Africa. Medium voltage electricity rate is CFA 99 per KW while high voltage is CFA 77 per KW.

The Major Players and the Institutional Framework

Nearly all the country’s electricity supply is generated thermally. Senelec, the state-owned utility, is the major producer with an installed capacity of 700 MW. Senelec accounts for 72.5 percent of electricity’s production while private sector investors licensed as Independent Power Producers (IPPs) have currently a combined capacity of 113.5 MW. IPP’s were first allowed in the industry following the 1998 electricity reform, which called for a public/private partnership in the sector.
In April 2003, the Government of Senegal published an information notice outlining further liberalization of the power sector using public/private partnerships. Production of electricity has become fully private and competitive with Senelec as the sole buyer. On the other hand, transmission and distribution remain a  Senelecmonopoly. Senelec will limit its generation ownership to currently owned plants. Under the new BOT act passed by Parliament in February 2004, the government of Senegal authorizes public-private partnership via Build-Own-Operate (BOO) infrastructure projects. All future projects in Senelec’s pipelineneed to follow the BOT scheme.

The other major players in the sector include:
- The Electricity Regulatory Commission (CRSE) established in 1998. The Commission regulates the electricity and power sector, including the approval of electricity tariffs
- The Senegalese Agency for Rural Electrification ( ASER) - created in 1999. ASER has the mission to increase the rural electrification rate..

Market Trends and Investment Plans

The government will vie with market forces as the dominant influence in the sector for many years to come. General Electric was the first Build-Own-Operate IPP to be installed in Senegal in October 2000. The project is a 56 MW combined cycle oil-fired power station. GE is the majority shareholder – 60 percent and the operator of the facility. Edison SPA owns 30 percent and the International Finance Corporation (IFC) the remaining 10 percent. The International Finance Corporation and Credit Commercial de France (now HSBC) are the project finance lenders. The deal is structured as a project finance package, with Senelec being the sole power purchaser under a 15 year Power Purchase Agreement.
In January 2008, President Wade inaugurated the Kounoune power plant, financed by the IFC with a partial guarantee of the World Bank. The government of Senegal in turn lent the “on-lent” fund to an IPP, Mitsubishi and Matelec S.A.L., a division of the Doumet Group from Lebanon. The new BOO plant has substantial generating capacity, which should reach 67.5 MW when it reaches full capacity, boosting the country’s generating capacity to the current 700 MW. The inauguration of Kounoune is a harbinger of more power-generating investments designed to alleviate the current power shortages experienced in Senegal, and in particular Dakar.
Senelec has outlined a vast investment program in the power sector for 2008-2015 at an estimated cost of USD 1.16 billion, subdivided as follows:

• USD 615.5 million for the construction of new power stations
• USD 217.8 million for the transportation
• USD 171.1 million for the distribution network.
• USD 151.1 million for civil engineering works

Senelec has mapped out an emergency program for 2007-2012, which dovetails into the bigger investment plan. This emergency plan, estimated at USD 389 million, addresses Senelec’s current production gap and focuses on the construction of the following new BOO power plants:

Regional Hydropower Development

Coal-fired plants

Agency to fund a feasibility study.

Distribution and Transmission

Rural Electrification