|**Element**|**Description and assumptions**|
|---|---|
||- Subsidies in the form of direct transfers. Direct transfers may contribute to opex that are<br>passed through the utility such as emergency power rentals, and capex costs such as direct<br>investment costs and associated expenditures such as implementation of environmental and<br>social management plans. Examples include grants received from national governments (e.g.,<br>the government of Botswana transferred US$91 million to the state-owned utility in 2010 and<br>2011) and donors (e.g., the state-owned utility in Liberia reported grants from Norway, Global<br>Partnership for Output-Based Assistance, and the World Bank).<br>- Impairment of receivables, and cancellation of impairments of receivables (described further<br>below).|
|**Operation**<br>**and**<br>**maintenance**<br>**costs**|All opex directly related to the sale of electricity are captured, including<br>- variable costs such as power purchases and consumables related to self-generation (fuel costs,<br>water, lubricants)<br>- fixed costs (property costs, staff costs including corporate functions and salaries associated<br>with system operations).<br>Costs not directly related to electricity sales are excluded, such as costs of providing water<br>services and identified on financial statements as extraordinary activities.|
|**Capital costs**|All costs related to loan repayments are assumed to be entirely related to capex for assets used<br>in the generation, transmission, and distribution of electricity and are therefore excluded from<br>cost-of-supply estimations because capex is calculated separately based on existing assets.<br>Payments include principle payments—which reflect the repayment of previous capital<br>expenditures made by the utilities, typically recorded on cash flow statements—and interest<br>payments, typically recorded on income statements. Other financing costs may include realized<br>costs, including fair-value losses on cross-country and interest rate swaps, and other financial<br>liability payments. Losses on currency exchange reflect a devaluation of the local currency<br>relative to the loan currency. Depreciation costs on existing assets and property, and unrealized<br>fair-value losses on cross-currency and interest rate swaps are also excluded.<br>Unbundled sectors require a slightly different approach. With the exception of Nigeria, the<br>dominant state-owned distribution utility is used as the primary source of information. To<br>capture all loan payments in the value chain, particularly for generation investments which<br>typically constitute the major outlays, loan payments recorded in the financial statements of<br>state-owned utilities upstream of distribution are identified and included. To avoid double<br>counting, the cost of power purchases for the distribution company are reduced by the same<br>amount.|

_Source_ : World Bank staff.

# A1.3 Impairments, bill collection rates, and cash collected

Impairment of receivables represents non-collection of billed amounts, but the timing becomes an issue because the amounts could have been billed in the preceding financial years. For this reason, this study excludes impairment of receivables and provisions for impairments from calculations and instead uses utility-reported bill collection rates for the purpose of quantifying collection inefficiencies. When reported, bill collection rates are assumed to represent total cash collected in a given year as a proportion of total revenue billed in the same year.

Bill collection rates were not available in seven countries and assumptions had to be made. A 99-percent bill collection rate was assumed for utilities with publicly accessible audited accounts available for 2013 or later (Botswana, Gabon, Mauritius, the Seychelles, and Swaziland). An 87 percent bill collection rate 72