Implementation of Prepayment System in Mozambique E D M PREPAYMENT SYSTEM

Implementation of Prepayment System in Mozambique MOZAMBIQUE – GEOGRAPHIC LOCATIONMOZAMBIQUE – GEOGRAPHIC LOCATION MISSIONMISSION BACKGROUND OF COMMERCIALIZATIONBACKGROUND OF COMMERCIALIZATION REORGANIZATION OF THE COMMERCIAL CYCLEREORGANIZATION OF THE COMMERCIAL CYCLE PROCESS CONSTRAINTSPROCESS CONSTRAINTS INTRODUCTION OF PREPAYMENT SYSTEM - MOTIVATIONSINTRODUCTION OF PREPAYMENT SYSTEM - MOTIVATIONS IMPLEMENTATIONIMPLEMENTATION FINANCINGFINANCING PREPAYMENT PROJECT REQUIREMENTPREPAYMENT PROJECT REQUIREMENT IMPLEMENTATION METHODOLOGYIMPLEMENTATION METHODOLOGY SYSTEMS COMPARISONSYSTEMS COMPARISON RESULTSRESULTS CHALLENGESCHALLENGES CONTRAINTSCONTRAINTS STRUCTURE AND NUMBER OF CUSTOMERSSTRUCTURE AND NUMBER OF CUSTOMERS

Implementation of Prepayment System in Mozambique Area: km 2 Population: 18 Millions Capital: Maputo MOZAMBIQUE

Implementation of Prepayment System in Mozambique MISSION: The operation of the public service of Generation, Transmission, Distribution and Commercialization of electricity in Mozambique, in defence of the interests and to the benefit of the consumer. VISION: With Energy we build the Future

Implementation of Prepayment System in Mozambique Structure and Total Number of EDM Customers SouthernCentralNorthern Total per Region Tariff Low Voltage201,53778,43156, ,034 Low Voltage High Consumers ,383 Medium Voltage ,535 High Voltage Total per Region203,20679,36456,384338,954

Implementation of Prepayment System in Mozambique Background of Commercialization – Before 1995 High Total Distribution Losses; Bad debt losses; Manual billing; Billing/collection system; No Commercial Procedures Manual; Low productivity; Low quality of service; Huge customers complains; high administrative costs.

Implementation of Prepayment System in Mozambique High Level of Losses - Comments Frauds; Bad collection ratio; Technical losses due to the distribution grid quality; Until 2003, some customers without meters; Obsolete meters; Manual Billing.

Implementation of Prepayment System in Mozambique Background of Commercialization – After 1995 More concern about commercial activities; Creation of the Commercial Department as a Central institution; Implementation of the Loss reduction Projects: -Restructuring of the Commercial activities; -Prepayment Projects. Implementation of Marketing activities; More readings and billing quality; More concern about inspections and premises disconnections.

Implementation of Prepayment System in Mozambique Reorganization of the Commercial Cycle (Post Paid System) Readings; Billing; Invoices Distribution; Collection; Inspections; Disconnections; Reconnections.

Implementation of Prepayment System in Mozambique Process Constraints Quality of readings; Quality of billing / number of complained Bills; Hard to locate customers premises; Hard to achieve a good collection Ratio; Debt recover difficulties; High management cost; Non effective for demand side management.

Implementation of Prepayment System in Mozambique INTRODUCTION OF PREPAYMENT SYSTEM - Motivations High Total Distribution Losses (about 43% in 1995); Bad debt (from domestic and public institutions); Bad readings Low quality of service; High running costs associated to the customers management; Low income Customers.

Implementation of Prepayment System in Mozambique Implementation Pilot Project in 1995, for 500 customers in Matola city; A similar project was carried out in Maputo city, for customers, in 1996; The huge number of meters have been installed since 2002, in extent of the B.O.T projects; Other projects;

Implementation of Prepayment System in Mozambique The Company adopted the following financing schemes: Turn key Projects; Projects financed by own funds; Projects financed by commercial credits and others (grid expansion credits). Financing Implementation Criteria Difficult access installations; Low purchasing power customers; Seasonal customers.

Implementation of Prepayment System in Mozambique Requirements of a Prepayment Project IT: Sales and management system (Software); System Master Station (SMS Hardware); Posts of sale; GIS/GPS System;

Implementation of Prepayment System in Mozambique Aerial photograph; Prepayment meters; Ready Boards; Communications; Private vending posts; Training; Customers information and advertisement; Revision of the commercial procedures; Management. Equipment and Services

Implementation of Prepayment System in Mozambique Geographical definition of the implementation area; Establishment of the Post of Sales sites; Area Mapping; Staff training; Installation of the hardware and the vending system; Installation of the hardware and GIS/GP; Customers information and advertisement; Meters installation; Storage of the meter geographic information. Implementation Methodology

Implementation of Prepayment System in Mozambique POSTPAIDPREPAID Readings and bills distribution No readings and no bills distribution Every month billingNo billing Necessity of disconnections and reconnections when bills not paid No disconnections and no reconnections Inspections to customers installations are required. Difficulties to locate installations (Suburbs). Easy to locate installations through GIS/GPS system. High management costLow management cost SYSTEMS COMPARISON

Implementation of Prepayment System in Mozambique POSTPAIDPREPAID Penalties for customers who pay their bills after the expire date. No penalties. Credits for customers (Between the consumption and payment) No credit for customers. Debt recover difficult Debt recover through the system Difficulties to achieve a good Collection Ratio Improvement of the Collection Ratio Huge administrative losses. Reduction of the administrative losses COLLECTION AND SALES COMPARISON

Implementation of Prepayment System in Mozambique POSTPAIDPREPAID Non effective for demand side management Stimulate the demand side management More complains from customers More transparency and reduction of complains; better quality of the service CUSTOMER QUALITY SERVICE COMPARISON

Implementation of Prepayment System in Mozambique Results The total distribution losses decreased from 43%, in 1995 to 18%, in 2005.

Implementation of Prepayment System in Mozambique Number of Customers Dez/2005 Post paymentPrepaymentTotal System Maputo City53,29856,975110,273 Maputo Province37,79616,88454,680 Macia4,3671,9226,289 Xai-Xai11,5682,86814,436 Chókwé4,7052,4727,177 Inhambane10,351 - Beira6,03722,78328,820 Chimoio15,925 - Tete10,5172,61013,127 Quelimane12,257 - Mocuba7,1992,0369,235 Nampula13,35611,40724,763 Nacala5,7966,83112,627 Lichinga8,285 - Pemba4,7343,2107,944 Angoche2,765 - Total EDM208,956129,998338,954 62%38%

Implementation of Prepayment System in Mozambique Results The number of customers increased to , in 2005; The quality of service improved; The company cash in flow increased; The collection Ration improved from 75%, in 1995, to 94%, in 2005; Ease to recover debt through the system.

Implementation of Prepayment System in Mozambique Challenges To cover all domestic customers with prepayment system (this is also EDM Police); installation of spit meters; To reduce the fraud customers premises vulnerability; Implementation of AMR in Beira City to monitor the losses; AMR to cover Maputo and Matola, for the same purpose.

Implementation of Prepayment System in Mozambique Constraints Huge initial investment (management system and meters); Meters´ life expectation short; High replacement meters cost.

Implementation of Prepayment System in Mozambique WITH ENERGY WE BUILD FUTURE

Implementation of Prepayment System in Mozambique THANK YOU FOR THE ATTENTION! Questions/suggestions?