- **Group 2: One vertically integrated utility with one or more generation companies.** Several subgroups are identified in Figure 1. One has a state-owned vertically integrated utility and a separate state-owned generation company. A second sub-group has one state-owned utility, which is the main utility, and some private generation companies, such as IPPs and emergency power producers (EPPs). A third sub-group has private generation companies and one vertically integrated utility that is under a long-term private concession (with investment responsibility, or without investment responsibility, such as in Gabon; the latter is sometimes referred to as an _affermage_ ).

- **Group 3: One main vertically integrated utility with other operators.** Many of the countries in this group are in Southern African. In most cases, the main state-owned utility sells electricity to other utilities performing distribution activities to end-users, including exports. One example is South Africa where Eskom sells to municipalities. Of the seven countries in group 3, five are included in this study, with Angola and Namibia excluded for lacking sufficient data.

- **Group 4: Partial vertical unbundling with and without other operations** . Three countries have some form of vertical unbundling with one operator managing T&D, and others managing generations activities. In Zimbabwe, these companies are under one holding company with separate operations and accounts. All are included in the study.

- **Group 5: Vertical unbundling with and without horizontal unbundling in distribution** . Four countries in SSA have vertical and horizontal unbundling and are the most advanced market structures in SSA, but do not have competitive markets. Nigeria underwent a major privatization process in 2014 as part of a major power sector reform process. Private ownership is 60 percent for distribution companies and, with one exception, at least 80 percent for generation companies. In Uganda, Umeme has a concession on distribution, and Eskom has a concession on some hydropower assets in addition to IPPs. All four are included in the study.

**Data from utility financial statements** . This study takes revenues and opex from utility financial statements. The study assumes that accounting is performed on an accrual basis, in accordance with the International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS).

- **Revenues** captured in the analysis concern only those directly related to electricity sales that are retained by power utilities. As mentioned earlier, reported revenues therefore reflect the amounts billed and not amounts collected. Subsidies in the form of direct transfers from the government or international donors are excluded. Revenues not directly related to sale of electricity are excluded, such as those earned from sale of water for the utilities that provide both services.

- **Operational expenditures** captured include all fixed and variable O&M costs, and taxes that are not rebated such as corporate income tax. All costs deemed to be related to capital costs are excluded because they are replaced by calculated annualized capex for existing assets. All loan repayments—interest payments typically recorded on income statements and principal payments typically recorded on cash-flow statements—are considered to be for capex. Other exclusions include depreciation, losses on foreign denominated debt, costs not directly related to electricity sales (such as costs of providing water services), and costs from extraordinary activities.

- **Utility financial statements** differ in quality and availability, as described in annex 1.2. Of the 39 reference utilities, 23 had their statements audited, 13 by international accounting firms and the

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