ANGOLA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE

**Figure 5. The average Angolan consumer pays extremely low prices for power**

<!-- Start of picture text --> 50<br>45<br>40<br>35<br>30<br>25<br>20<br>15<br>10<br>5<br>0<br>Liberia Chad Sierra Leone Cape Verde Senegal Burkina Faso Mali Uganda Niger Kenya Congo, Rep. Rwanda Benin Cote d'Ivoire Namibia Madagascar Cameroon Ghana Botswana Mozambique Lesotho Tanzania Zimbabwe South Africa Ethiopia Botswana Nigeria Angola Malawi DRC Zambia<br><!-- End of picture text --> _Source:_ Derived from Briceño-Garmendia and Shkaratan (2010); Angola data from IFC staff estimates and for 2011. _Note:_ DRC = Democratic Republic of Congo.

In part due to these low tariffs, Angola’s power sector faces a dire financial situation. The two central actors in the sector are the power utilities ENE and Empresa de Distribuição de Electricidade (EDEL). ENE produces power and distributes around 30 percent of it in the south and central region. EDEL buys power from ENE and distributes the remaining 70 percent in the north of the country. Both companies receive direct subsidies from government as well as implicit subsidies through low fuel prices. Angola charges very nominal prices for fuel when compared to other oil-producing nations or to its oil-importing neighbors (table 3). Recent data on the magnitude of direct subsidies are not available. But the historical record shows that the power utilities were unable to attain financial sustainability despite the major subsidies they were receiving. In 2000 ENE received a direct subsidy of $150 million plus fuel subsidies that together covered 25 percent of its costs, and _still_ registered losses of over $4 million. In 2001 EDEL’s revenues from sales did not cover the cost of energy purchase from ENE even after the direct subsidy from the government was included, resulting in financial losses of $15 million.

**Table 3. Angola pays very little for diesel per liter compared to several oil-producing neighbors**

|US cents/liter|2004|2006|2008|
|---|---|---|---|
|Angola|29|36|39|
|Cameroon|83|107|104|
|Congo, Rep. of|59|67|57|
|Namibia|65|87|88|
|South Africa|80|84|45|
|_Source:_GTZ 2009.||||

One problem is the cumulative underpricing of energy along the production chain.

Cost-recovery challenges plague Angola’s power system **Table 4. Power underpricing per kilowatt-hour (US cents per kWh)** (table 4). ENE produces power at Cost of $0.16 per kWh. Around 70 <u>production/purchase EDEL Consumer</u> percent of the power is sold to <u>ENE 16 2.2 4.2</u> EDEL at a bulk supply tariff of <u>Underpricing by ENE</u> 13.8 11.8 $0.022 per kWh, recovering only <u>EDEL 7 4.2</u> 14 percent of production costs. <u>Underpricing by EDEL 2.8</u> _<u>Source:</u>_ <u>AICD estimates based on World Bank (2010a) and IFC staff estimates.</u> The other 30 percent of ENE’s power is distributed to customers in the central and southern areas of Angola at a price of $0.042 cents per kWh, recovering only 26 percent of the costs of production. For EDEL the cost of purchase and

||Cost of<br>production/purchase|EDEL|Consumer|
|---|---|---|---|
|ENE|16|2.2|4.2|
|Underpricing byENE||13.8|11.8|
|EDEL|7||4.2|
|Underpricing by EDEL|||2.8|
|_Source:_AICD estimates based|on World Bank (2010a) and IF|C staff estima|tes.|

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