1. Africa: Water Development, Hydropower & Growth
The Africa Infrastructure Consortium
Africa: Water Development, Hydropower & Growth

2. 3 Messages: Africa, growth, water development & hydropower
Africa’s ‘dual’ water resources legacy is a major constraint to growth
The infrastructure gap is huge & must be addressed in innovative ways
Hydropower: anchor infrastructure for multipurpose water development

3. A natural legacy : massive climate variability
much higher rainfall variability than USA
Risk of recurrent drought
Kenya: variability & shock

4. $2.39b infrastructure damage
Kenya
winter flood 97/98
$2.39b infrastructure damage
Kenya drought $2.41b losses

5. Kenya: climate, shock & competitiveness
- Drought & flood in Kenya: Impact 22% GDP/ annum - transport 50% - energy 13% - industrial production 29%
Source: Business Environment & Comparative Advantage in Africa: Evidence from ICA data; Jan. 2005
Investment Climate Assessment in Kenya:
low competitiveness, indirect costs 20-30% of total costs vs % for strong performers
transport 31% & energy 19% of indirect costs.

6. with drought in Kenya in 2000…..... massive flooding in Mozambique
-23%
+44%

7. Ethiopia: variability and growth
Infrastructure platform
Rainfall & GDP growth:
Ethiopia Country Water Resources Assistance Strategy: preliminary results of the baseline scenario (2005)
Impact of historical levels of variability on growth projections
38% decline in avg. projected GDP growth rate when historical levels of variability are assumed

8. Africa’s colonial legacy: many international rivers
60+ basins
More int’l rivers shared by 3 or more countries than any other continent
Every country has at least 1
37 countries have 2 or more
15 countries have 5 or more
future dev’t increasingly on int’l rivers
political complexity
requires capacity and resources
few clear int’l guidelines
no overarching authority

9. 3 Messages: Africa, growth, water development & hydropower
Africa’s ‘dual’ water resources legacy is a major constraint to growth
The infrastructure gap is huge & must be addressed in innovative ways
Hydropower: anchor infrastructure for multipurpose water development

10. River regulation, storage & poverty
Water storage in m3/cap 43
746
1,287
1,406
2,486
3,255
4,729
6,150
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Ethiopia
South
Africa
Thailand
Laos
China
Brazil
Australia
North
America
River regulation, storage & poverty
River regulation/storage needed to reduce impacts of drought/flood & often essential for poverty eradication
dams & reservoirs have been extensively implemented in developed countries, regulating almost all rivers
but, poorly implemented, they can cause significant adverse impacts on local communities & the environment

11. Water storage/security investment gap: proxy of 750m3/cap/yr (SA, 10% of USA)
Country
Additional Storage needed per person (m3)
Storage investments required per person
(US$)
Storage Investments Required
(US$ Billion)
Period needed at 5% current GDP investment per year (no pop. inc.)
(Years)
Lesotho
751
939
1.7 44
Namibia
542
678
1.3 8
Nigeria
402
503
67.3 32
Ethiopia
555
694
46.2
144
Kenya
307
384
12.1 24
Tanzania
610
763
27.4 60
Uganda
511
639
17.9 58
Burkina Faso
152
190
2.5 22
Senegal
683
854
9.9 40

12. World’s realistic potential developed: 33 %
Current hydro production: TWh/y
Realistic potential production: >8000 TWh/y
75%
69%
22% 7%
33%
With only one-third of hydro’s potential developed, it is clear that substantial new development will continue in South America, Africa and Asia.
In Europe, North America and Australasia, the market will focus on Upgrading/Modification, Renewables Incentives and Emission Trading.
49%
Current hydro generation: Africa = 80 Asia = Australasia = 43
Europe = N/C America = S America = 550 (TWh/year)
Source: World Atlas of Hydropower & Dams, 2002

13. Hydropower potential tapped
…electricity gap

14. E. Africa-Europe: Hydropower comparison
Popul. Mill.
GNP/cap $
HP pot. MW
HP dev. MW
Elec./cap kWh/yr
CO2 em. ton/c/yr
Ethiopia 61
105
45,000
700 22
0.00
Kenya 29
361
1,600
106
0.05
Rwanda 8
241
100 27 26
Tanzania 33
267
3,200
557 56
0.01
Uganda
298
2,800
278 38
Austria
23,333
18,300
11,700
6,457
1.51
France 59
22,128
26,000
25,200
6,539
4.32
Germany 82
22,430
8,000
5,600
5,963
4.50
Italy 58
18,808
22,800
15,267
4,732
2.98
Norway 5
36,889
47,200
27,873
24,422
3.23

15. 3 Messages: Africa, growth, water development & hydropower
Africa’s ‘dual’ water resources legacy is a major constraint to growth
The infrastructure gap is huge & must be addressed in innovative ways
Hydropower: anchor infrastructure for multipurpose water development

16. Hydropower can contribute to water security by supporting multiple objectives
‘new’ renewable
Power
Options analysis
thermal
nuclear
hydropower
Multi-purpose, by product
Single-purpose, primary
storage & regulation
Water resources
Multi-purpose options
irrigation
water supply
navigation, recreation..

17. Multipurpose water & power development
Maximizing economic, social & environmental benefits
Multiple source financing of public & private goods
Embedding multiple objectives in project concept & design
MP Offsets
Dam allocated to power
Transmission
Power Benefits
Carbon Credits
MP Benefits

18. Senegal River, OMVS, 35 yrs, now 4 countries…
Guinea Mali Mauritania Senegal

19. Senegal River: multipurpose development
Regulated flows below Manantali Dam: multipurpose benefits
255,000 ha irrigation
900 km navigation
Run-of river hydropower: Felou 60 MW; Gouina (180MW)
Power at 6c/kwh vs 22c/kwh for thermal
30,200 fiber optic comms with 1500 km joint power grid.
Reliable urban water supply: St-Louis, Dakar, Nouakchott
Multisector income generation: recessional agriculture, fisheries, agro-forestry, recreation
New investments to optimize/sustain multipurpose gains:
Irrigation expansion/rehab: 2ndry infrastructure ($60M);
Navigation: docking inf. & port at river mouth ($ 250M);
Felou hydropower: public finance (WB $75 M, EIB $40 M). Public & private funds needed for Gouina
25% of 1200MW hydropower potential developed; $600M for Guinea multipurpose (Kuku Tamba $300M; Balasa $100M & Boureya $200M

20. Senegal River development options…
Felou
Gouina

21. Niger: 9 countries, NBA, 40 years, renewal, joint planning commencing…
Benin Burkina Faso Cameroon Chad Côte d’Ivoire Guinea Mali Niger Nigeria

22. Zambezi: 9 countries, ZACPLAN 15 yrs, ZRC 2 yrs, joint development?
Botswana Malawi Namibia Mozambique Tanzania Zambia Zimbabwe

23. Nile River, Nile Basin Initiative, 9 years, (Commission
Nile River, Nile Basin Initiative, 9 years, (Commission?), 10 countries….
Burundi Egypt Eritrea Ethiopia Kenya Rwanda Tanzania Sudan Uganda

24. Nile: Kagera: Rusumo Falls Project
61 MW; renewable energy
Earliest on power date 2011
3.2 c/Kwh est. gen. cost at site
Total cost: $114M + $32M transmission
Environmental & social issues & opportunities

25. Possible Institutional Arrangements
Nile Basin Initiative / River Commission
Four-country basin-wide multi-purpose priority setting – Kagera TIWRM
Kagera Basin Management Structure
Coordination of multi-purpose basin development
and management initiatives
RRFP Joint Utility/Power Company
(Rwanda, Burundi, Tanzania)
Multi-Sectoral International Board
Power generation
Reservoir management
Environmental and social monitoring
Catchment management
MP investments
PPA
PPA
PPA
Electrogaz
Regideso
Tanesco
Power transmission
and distribution
Load promotion for public/private multi-purpose use

26. RF Project economic analysis - range of benefits
3. Downstream Benefits
e.g. downstream irrigation, flood protection, impact on water hyacinth in Lake Victoria
Off-taker Benefits
Direct power sales to national utilities, carbon credits
Uganda
4. Transmission corridor Benefits
e.g. rural electrification, indirect investment in schools and health centers
Rwanda
EIRR Power benefits: 20%
EIRR Power + MP benefits: 84%
DRC
Burundi
Tanzania
2. Project Area Benefits
e.g. irrigated agriculture, local navigation, sediment control, fisheries, business development
5. Regional Benefits
e.g. cooperation benefits between utilities, development of common energy and water policies, regional integration, peace and stability
6. Extra-Regional Benefits e.g. increased trade within the EAC region -

27. Major Blue Nile Reservoir Options
Regulation benefits of one dam

28. Logic of Joint Multipurpose Investments
on the Eastern Nile
Egypt
Growth Pole
Investments
Main Nile
Joint basin management
Watershed
Management & livelihoods
Regional
Transmission
Hydropower
Sudan
Blue Nile
Irrigated Agriculture
(Modernization/Development)
Large Storage
White Nile
Local
Community
Infrastructure
(to ensure local benefit sharing)
Ethiopia

29. Is there a “bankable” project …?
Financially viable
With an acceptable risk profile
In a suitable enabling environment

30. Financial vs Economic viability
ENJMP has very strong economic benefits:
Flood attenuation (Sudan 1999 floods cost $450 m.)
Increased area and reliability of irrigation
Reduced cost of sediment control
Power generation
Watershed management
But, power generation may be the only benefit convertible into a financial revenue stream.
Allocating concessional financing from MDBs and donors to monetize economic benefits can reconcile economic and financial benefits

31. Possible Financing and Implementation structure - Split Public-Private ownership

32. Preliminary financial estimates
1. Multipurpose Dam ($1 bln)
Financed in the public sector (MDBs and donors), justified by significant economic benefits
Revenues from taxes on MP related economic activities and water charges
2. Power complex and Transmission ($2 bln)
Financed in the private sector, e.g. sponsor equity and debt from commercial banks and ECAs, supported by MDB guarantees
Debt-Equity 75/25 and energy tariff between 5-7 US cents would generate ROE in excess of 20%

33. MDB Guarantees will widen role of private sector
But risks are significant….
MDB Guarantees will widen role of private sector
Without
With

34. Eastern Nile Joint Multipurpose: some early conclusions
Private funding achievable, subject to energy price and public sector support (i.e., split private-public scenario)
Substantial amount of concessional funding required to monetize non-power benefits (e.g. from MP dam) .
MDB support in the form of guarantees will attract commercial lenders
Will require strong legal & institutional regime to ensure enabling environment in place

35. The World Bank’s Hydro Portfolio: Africa up…
Pipeline
Currently, the Bank’s hydro portfolio is mixed, with run-of-river, new storage and rehabilitation projects. Africa currently accounts for about 14% of the portfolio in terms of numbers of projects, although the dollar amounts are a smaller proportion (large projects in China have tended to dominate the financial picture).
In terms of financial instruments, the Bank is increasingly looking at innovative approaches and combinations of approaches (e.g., IDA grants with risk guarantees) and is also moving into carbon funding of all size of hydro.
Looking to the future, Africa’s share of the pipeline for projects is more robust: about 30%. There is of course some uncertainty about how many of these project swill move to full appraisal, but the change in volume is noteworthy.
NOTE TO DAVID: the numbers are not very specific for Africa for two reasons: (i) we are still dependent on identifying hydro projects through “word of mouth” and perusal of PADs -- hence, I am not sufficiently confident in the numbers yet to go deeper than direction indicators; and (ii) pipeline numbers include both PID and no-yet-PID projects, so we don’t want to invite to many detailed questions (which detailed numbers tend to engender!)
Current portfolio

36. Back in hydropower responsibly
1. Regional cooperation
Exploiting returns from riparian cooperation and web of dependency for integration and peace
2. Sharing benefits
Managing hydraulic infrastructure for multiple purposes, for multiple beneficiaries
3. Environmental and social protection
Adopting new standards and ensuring meaningful consultation
DAVID: This and the next slide provide two ways of getting the message across about how hydro is different this time around, from the Bank’s perspective anyway. They are based on the messages we used a year ago in Norway, but I have refined the adaptive management message, wrapped multi-purpose with sharing benefits and added financial architecture.
This one is text and photos (except I deleted the nice photos and animation b/c they made the file way too big); the other the Kuznets curve.
4. Adaptative design
Responding to changes in societal values, technology and markets
Financial architecture
Seeking new combinations early in the planning process

37. The Modified Kuznets Curve: Back in hydropower responsibly
Regional cooperation
High
No investment
Sharing benefits
Adaptive mgmt
Financial
architecture
Environmental & Social Costs
DAVID: The diagram is modified from 4th World Water Forum (by the way, I liked the changes you made from Norway – especially a “no investment” line that makes a lot more sense). The changes from 4WWF are:
Addition of a third curve (green dash-dot-dot). This is the line that we would get from more proactive adaptive management through good monitoring, experimentation and flexible design. It moves the point at which one starts reversing damage and so, over the life of the project, reduces overall impact.
Recast the drivers of moving the curve down to match the broader messages of “new hydro”.
Public participation
Low
Development Benefits
Low
High

38. Many innovative mechanisms to share benefits with affected people:
Revenue streams more ethical than one-time compensation
Revenue sharing: royalties tied to power generation or water charges
Development funds: financed from power sales, water charges, etc
Equity sharing or full ownership: local authority equity with share in profits and risks
Taxes paid to regional or local authorities: fixed tax (eg on dam’s property value) or tax on project sales or net income
Preferential electricity tariffs & other water-related fees for local or regional authorities
….affected people could be within nations or in other nations

39. 3 Messages: Africa, growth, water development & hydropower
Africa’s ‘dual’ water resources legacy is a major constraint to growth: political leadership is moving basin programs
The infrastructure gap is huge & must be addressed in innovative ways: ICA has a key role to recognize & support this
Hydropower: anchor infrastructure for multipurpose water development: many projects now ready for financing…

40. Thank you
CIES AND INVESTMENTS