REVISED FINAL REPORT April 2017 Task A: Sector performance and structural sector reform Deliverable 2: Rapid assessment of the sector performance Report produced in April 2017 Data & analyses up-dates available within Task C and Task A final reports and within Task C Technical & Financial improvements reports Disclaimer and copyright note This document has been prepared only for the International © 2017 Bank of Reconstruction and Development ("IBRD") and solely PricewaterhouseCoopers for the purpose and on the terms agreed with the IBRD in our LLP agreement dated 21 March 2017 relating to Task A. All rights reserved. In this The scope of our work was limited to a review of documentary document, 'PwC' refers to the evidence made available to us. We have not independently UK member firm, and may verified any information given to us relating to the services. sometimes refer to the PwC network. 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Strategy& | PwC Prepared for The World Bank 1 Objective is to rapidly identify the issues affecting the sector – Analyses are then further deep-dived in following reports Considerations on current report Document objectives • Revise the Libyan electricity demand towards 2030 • Review the Libyan electricity sector, by business area (generation, transmission, distribution & supply) • Identify preliminary considerations on the country’s supply & demand balance • Provide an high-level overview of the sector governance and structure Document intends to: The document is NOT • Review the electricity demand projections towards 2030 • Rapidly identify at a high-level the issues affecting the Libyan electricity sector in order • The document does not represent the final to provide to the project team members with assessment of the Libyan sector performance an overview and the preliminary directions on (this assessment is to be made with the following which to focus on with the next deliverables deliverables planned within Task A and Task C) (including Task B and Task D) • Allow project team members and stakeholders to initiate discussions on the real issues affecting the Libyan sector today Strategy& | PwC Prepared for The World Bank 2 Demand Generation Transmission Distribution and supply Supply / demand balance Governance and sector structure References for analysis update Strategy& | PwC Prepared for The World Bank 3 The results of the rapid assessment of the Libyan demand can be summarized in four points Summary of rapid assessment of demand 1 Demand (peak) • Demand peak has reached ~7 GW in 2016, and has continued to grow (+4% CAGR) since 2012, although rate almost halved compared to the pre-2011 levels (+8% CAGR) growing but at lower • Peak demand occurs both in summer and winter rate • Density and growth is concentrated in the Tripoli, West and Middle regions 2 • Historical electricity consumption has increased slowly since 2012 (+3% CAGR) ranging between 26-32 TWh Slowly increasing • Libya is a fully electrified country and, among the closest regional peers (e.g. Egypt, Algeria, yearly consumption Tunisia, Morocco, etc.), shows the highest pro-capita consumption, fostered by both higher GDP and lack of a cost-reflective and progressive tariff framework 3 Obsolete (and • Latest forecasts were developed by KEPCO in 2007-2008 with a 2025 horizon overestimated) • KEPCO projections assumed a series of mega-projects (investments planned by the Libyan Government) boosting demand, which today are on hold demand forecasts • KEPCO projections result obsolete and partially overestimated (especially the scenario with mega- for 2025 projects), creating the need for an estimate revision 4 Revised demand • Revised KEPCO projections recently up-dated by GECOL estimate consumption to be ~88 TWh in 2030 projections, • Alternative scenarios developed on revised GDP and population assumptions (compared to 2008) extended to 2030 estimate Libyan demand and consumption by 2030 within a range of 13-18 GW and 60-80TWh Strategy& | PwC Prepared for The World Bank 4 1 Peak demand growing but at lower rate Electricity demand (peak) growth has slowed down but yet continued after 2011 events, reaching ~7 GW in 2016 Peak demand1 evolution GW Pre-2011 Post-2011 9.0 8.0 +4% 7.0 7.0 6.6 6.8 6.5 6.0 6.0 5.8 +8% 5.0 4.0 3.9 3.0 2.6 2.0 1.0 0.0 2000 2005 2010 2012 2013 2014 2015 2016 1) GECOL estimates are derived from the KEPCO load forecast model, which takes into consideration the time/season of each distribution regions peak load requirements. The forecast peak is therefore unconstrained, but is less than the sum of distribution circle peak loads (under investigation/confirmation by GECOL) Source: GECOL data collection ID4, Strategy& analysis Strategy& | PwC Prepared for The World Bank 5 1 Peak demand growing but at lower rate Peaks occur both in summer and in winter … Monthly peak demand evolution (GW) 6.3 6.6 6.5 6.5 6.5 6.5 6.1 6.1 6.3 6.2 6.3 6.3 6.4 5.9 5.8 6.0 5.4 5.4 5.3 5.2 5.0 5.1 5.3 +30% +46% 4.5 2013 2014 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 6.9 6.7 6.8 7.0 6.5 6.6 6.7 6.7 6.6 6.8 6.6 6.4 6.2 6.4 5.8 6.0 6.0 5.9 5.6 5.6 5.2 5.1 +36% 5.2 5.4 +30% 2015 2016 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: GECOL data collection ID4, Strategy& analysis Strategy& | PwC Prepared for The World Bank 6 1 Peak demand growing but at lower rate … And are concentrated in the Tripoli, West and Middle regions, also in terms of growth Peak demand evolution – Breakdown by region Peak load (GW) Tunisia 30% 12% 10.0 +1.3 26% 7% (GW) 8.0 Egypt 6.6 7.0 6.0 Algeria Tripoli Benghazi 6.0 5.8 4.0 25% 22% 4% 2.0 35% 30% 0% 0.0 West Middle Green Mountain3 2010 2012 2014 2016 Legend 8% 6% Population (Inhab./ km2) 2006 Distribution of peak load x% by region (2016, GW) 1 >500 South 51-500 11-50 y% Participation to the growth of total peak load (2010-16, GW) 2 Niger Chad 1-10 Sudan <1 1) [Regional peak (GW)] / [Total peak (GW)]; 2) [Regional peak growth (GW)] / [Total peak growth (GW)]; 3) No regional growth can be explained by problems with the transmission system (esp. in the mountainous region in and around the city of Beida); loads shedding is frequent due to challenging environmental conditions, not yet completed substations, and lines and damages occurred because of clashes; Source: General Information Authority of Libya, GECOL data collection ID4, Strategy& analysis Strategy& | PwC Prepared for The World Bank 7 2 Slowly increasing yearly consumption Overall, Libyan consumption has increased slowly since 2012 (with some fluctuations) Historical electricity consumption evolution TWh Pre-2011 Post-2011 +3%1 35 32 29 30 29 30 27 26 25 20 17 15 12 10 5 0 2000 2005 2010 2012 2013 2014 2015 2016 Actual Estimate based on Net Generation and Technical losses2 1) From 2011 onwards, political turmoil has destabilized consumption correlation with underlying drivers (e.g. GDP, population – details in Appendix) – Decrease from 2014 is mostly explained by the instable geopolitical situation in Libya, driving worsening reserve margins and load shedding; 2) Estimate was based on ID24 Gross Generation & Plant own consumption, and Technical losses from ID24 Generation & ID2/ID37 Consumption; Source: GECOL data collection ID2, GECOL data collection ID37, Strategy& analysis Strategy& | PwC Prepared for The World Bank 8 2 Slowly increasing yearly consumption Similarly to peak demand, density is concentrated in the Tripoli, West and Middle areas Consumption evolution – Breakdown by region1 Consumption (TWh) +2.5 Tunisia 37% 15% (TWh) 40.0 145% -33% 31.7 29.5 Egypt 30.0 27.0 26.2 Algeria Tripoli4 Benghazi 20.0 17% 16% 8% 10.0 -63% 76% 30% 0.0 West5 Middle6 Green Mountain7 2010 2012 2014 2016 Legend 7% -53% Population Distribution of consumption (Inhab./ km2) 2006 x% by region (2016, TWh) 2 >500 South 51-500 11-50 y% Participation to the growth of total consumption (2010-16, TWh) 3 Niger Chad 1-10 Sudan <1 1) Based on Energy supplied to 11kV distribution network (consumption data breakdown by region still to be provided); 2) [Regional consumption (TWh)] / [Total consumption (TWh)]; 3) [Regional consumption growth (TWh)] / [Total consumption growth (TWh)]; 4) Includes the central government and Jfara; 5) Includes Western Mountain and Gharyan; 6) Includes Tarhouna ; 7) Includes Green Mountain and Derna; Source: General Information Authority of Libya, GECOL data collection ID21, Strategy& analysis Strategy& | PwC Prepared for The World Bank 9 2 Slowly increasing yearly consumption Compared to its regional peers, Libya shows the highest pro- capita and residential electricity consumption … Consumption pro-capita regional benchmark (2015) Electrification 100% 99.9% 100% 99.1% 99.8%2 99.2% Rate1 5 4.8 4 Consumption 3 2.5 pro-capita 1.7 (MWh/year/capita) 2 1.3 1.3 0.9 1 0 Libya Jordan Egypt Algeria Tunisia Morocco Libyan pre 2011 events share of residential Other Residential consumption 35% 100% Share of 48% 56% 53% 59% 62% 61% residential consumption (%) 52% 44% 47% 38% 39% 41% Libya Jordan Egypt Algeria Tunisia2 Morocco 1) Electrification rate stands for % of population access to electricity. Data refers to 2015, latest historical data-point available 2) Data refers to 2014, latest historical data-point available Source: GECOL data collection ID2, Strategy& analysis, BMI Research Database, Corporate Annual Reports, Electricity Sector Regulatory Agencies Annual Reports Strategy& | PwC Confidential property Date here Prepared for The World Bank 10 2 Slowly increasing yearly consumption … fostered by both higher GDP and lack of a cost-reflective & progressive tariff framework Consumption pro-capita and tariff benchmark (2016) MENA O&G-rich countries EU example Regional peers 16.6 Consumption 11.4 9.0 pro-capita (MWh/year/capita) 4.8 4.7 2.7 1.8 1.4 1.4 0.9 73.4 GDP Pre 2011 events pro-capita1 39.1 34.7 GDP pro-capita ($’000/capita)2 21.1 12.9 4.0 2.6 4.9 4.2 3.3 Oil & Gas 3 3 4 0 2 0 1 2 0 0 reserves Min Tariff Max Tariff 82 Tariff 53 44 39 42 framework3 25 ($cent/kWh)2 13 14 18 18 10 17 19 11 5 3 3 3 3 3 Qatar UAE S. Arabia Italy Libya Jordan Egypt Algeria Tunisia Morocco 1) Real GDP (reference year: 2010); 2) Conversion to USD based on exchange rate PPP, 3) Residential tariff Source: GECOL data collection ID2, Strategy& analysis, BMI Research Database, BP workbook, Corporate Annual Reports, Electricity Sector Regulatory Agencies Annual Reports Strategy& | PwC Confidential property Date here Prepared for The World Bank 11 3 Obsolete (and overestimated) demand forecasts for 2025 Demand (peak) forecasts were developed by KEPCO in 2007- 2008, with a 2025 horizon 2008 Libyan electricity demand (peak) projections GW Observable projections Remaining (available) projections 20 15 Estimate including a series of infrastructure investments boosting demand (“mega-projects”) 10 Business-as-usual estimate (without large investments) 5 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Actuals KEPCO estimate (with mega projects) KEPCO estimate (without mega projects) Source: KEPCO, GECOL data collection ID4, Strategy& analysis Strategy& | PwC Prepared for The World Bank 12 3 Obsolete (and overestimated) demand forecasts for 2025 KEPCO assumed a series of Government plans (mega- projects) to kick-in -- Today such projects result on hold Original Mega-projects plan Mega-projects impact on consumption and demand TWh Project Sector Period 30 26.3 25.0 New housing project Residential sector 2008-2016 25 21.5 20 Foreign Investors 15 Commercial 2009-2013 10.7 project 1 10 5.8 5 0.3 Foreign Investors 0 Commercial 2009-2019 project 2 GW Tourism project Commercial 2009-2013 8 6.8 6.8 5.9 Universities Commercial 2008-2013 6 Transportation Commercial 2009-2013 4 3.0 2 1.6 Free Zone Industrial sector 2010-2015 0.1 0 2008 2009 2010 2015 2020 2025 Source: KEPCO study Strategy& | PwC Prepared for The World Bank 13 3 Obsolete (and overestimated) demand forecasts for 2025 KEPCO developed also consumption projections towards 2025 2008 Libyan electricity consumption projections TWh Observable projections Remaining (available) projections 80 60 40 20 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Actuals KEPCO estimate (with mega projects) KEPCO estimate (without mega projects) Note: GECOL has stated that KEPCO estimate was based on GECOL sales data (energy invoiced, net of commercial losses) Source: KEPCO, GECOL data collection ID2, Strategy& analysis Strategy& | PwC Prepared for The World Bank 14 4 Revised demand projections, extended to 2030 Recently GECOL defined a partial (and yet unofficial) update of KEPCO estimates, assuming mega-projects kick-in by 2017 Demand projections (GW) Consumption projections (TWh) GW TWh 20 100 18 16 2025-2030 view 80 not available 14 12 60 10 8 40 6 New 2020 13.1 New 2020 56.7 4 20 GECOL 2025 15.9 GECOL 2025 76.2 2 (GW) 2030 (TWh) 2030 88.0 0 0 2016 2017 2024 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2016 2018 2019 2020 2021 2022 2023 2025 2026 2027 2028 2029 2030 KEPCO estimate (with mega projects) KEPCO estimate (without mega projects) Latest GECOL estimation Note: New GECOL projections are based on the shift of mega-projects to 2017; the rationale behind the new consumption projections are the introduction of additional unserved loads (because of generation shortages) and the adjustments of the old KEPCO estimates (based upon invoiced energy and not total energy) Source: KEPCO, GECOL data collection ID2, GECOL data collection ID4, Strategy& analysis Strategy& | PwC Prepared for The World Bank 15 4 Revised demand projections, extended to 2030 To revise the available 2008 KEPCO projections, we have also developed two alternative scenarios Applied approaches for GECOL demand projections to 2030 Scenario Consumption forecast Demand (peak) forecast • Regression analysis of historical consumption1 vs. GDP and population Continuous political • Projections based on new IHS and BMI GDP and A instability scenario population estimates2 (each consumer category estimated separately3) • No mega-projects assumed to kick-in • Regression analysis of historical consumption1 vs. Forecast built separately for each scenario GDP and population according to the following methodology: • Projections based on IHS and BMI GDP and • Correlation of historical peak load and actual Slow political stability electricity consumption1 (estimated based on B population estimates (each consumer category scenario separately estimated) electricity generation and net import, net of • Mega-projects impact from KEPCO 2008 study, own consumption and technical losses) assumed to kick-in 2022 (see following slide) • Demand (peak) forecast based on consumption forecast growth rate • Regression analysis of historical consumption1 vs. GDP and population • Projections based on IHS and BMI GDP and Slow political stability C population estimates (each consumer category scenario – UPDATED separately estimated) • Mega-projects revised impact (latest update), assumed to kick-in 2022 (see following slide) 1) Historical consumption estimated from historical net generation and technical losses; 2) Latest available IHS and BMI forecasts; 3) Weights applied for each consumer category are 100% population for residential and agriculture clients, 100% GDP for industrial clients and 50%-50% population and GDP for commercial clients; Source: IHS (IHS Markit, Information Handling Services), BMI (BMI Research, Business Monitor International) Strategy& | PwC Prepared for The World Bank 16 4 Revised demand projections, extended to 2030 The new scenarios incorporate the changed economic conditions and perspectives compared to pre-2011 levels … Libyan macroeconomics projections GDP (Bil. USD) – UN Statistics 1 CPI (%) – Central Bank of Libya 2 +11.9% 60 +9.2% 40 69.0 55.1 20 39.3 39.4 31.8 27.1 0 14.6 2000 -20 2005 2010 2015 2020 2025 2030 -40 2000 2005 2010 2015 2020 2025 2030 Population (Million) – UN Statistics 1 GDP Growth (%) – UN Statistics 1 +1.0% +1.6% 150 7.1 7.4 6.3 6.3 6.7 5.3 5.8 0 2000 2005 2010 2015 2020 2025 2030 2000 2005 2010 2015 2020 2025 2030 -100 1) Historical data edge 2014; 2) Historical data edge 2015 Source: IHS Strategy& | PwC Prepared for The World Bank 17 4 Revised demand projections, extended to 2030 … And include an updated view on “mega-projects” ramp-up (now estimated to start in 2022) and impact “Mega-projects” ramp-up projections TWh Period of renewed political stability and public investments 24 23.3 21.5 Scenario B 22 Mega-projects 20 Political instability 18.7 (KEPCO 2008 period conservatively impact) 18 assumed to last for five 17.1 more years 16 15.1 14 13.1 12 Revision of the impact 10.7 10.2 10 of the 650 development 9.5 Scenario C projects in GECOL’s 8.2 8 database 7.5 Mega-projects 6.7 (latest update) 5.8 5.7 6 4.7 4 2.5 2 0.3 0.0 0.0 0.0 0.0 0.0 0.1 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Source: KEPCO, IHS, Strategy& analysis Strategy& | PwC Prepared for The World Bank 18 4 Revised demand projections, extended to 2030 The new yearly estimates, project consumption to increase within the range of ~60 and ~80TWh in 2030 … New Libyan electricity consumption projections TWh 90 B 80 70 C 60 A 50 40 30 Year A A B B C 20 2020 40.2 40.2 40.2 Reference case 2025 50.5 63.6 56.3 10 (TWh) 2030 59.9 83.1 70.1 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Actuals A. Continuous political instability scenario KEPCO with mega-projects1 B. Slow political stability scenario KEPCO without mega-projects1 C. Slow political stability scenario - UPDATED Latest GECOL estimation 1) Unclear whether these projections are based upon real consumption data or GECOL sales; Source: KEPCO, GECOL data collection ID2, Strategy& analysis Strategy& | PwC Prepared for The World Bank 19 4 Revised demand projections, extended to 2030 … With demand (peak) estimated between ~13GW and ~18GW New Libyan electricity demand (peak) projections GW 20 B 15 C A 10 Year A B C 5 Reference 2020 8.9 8.9 8.9 case 2025 11.1 13.9 12.3 (GW) 2030 13.1 18.2 15.4 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Actuals A. Continuous political instability scenario KEPCO with mega-projects B. Slow political stability scenario KEPCO without mega-projects C. Slow political stability scenario - UPDATED Latest GECOL estimation Source: KEPCO, GECOL data collection ID4, Task A – Attachment A: Demand Forecast, Strategy& analysis Strategy& | PwC Prepared for The World Bank 20 Demand Generation Transmission Distribution and supply Supply / demand balance Governance and sector structure References for analysis update Strategy& | PwC Prepared for The World Bank 21 Libyan generation sector today is fully managed by GECOL, who produces electricity through 15 thermal power plants Libyan power generation overview Libyan power generation in a nutshell Zawia Tripoli Derna Benghazi Generation capacity • Nameplate: 10.3 GW Tobruk Khoms (2016) • Installed: 7.5 GW Misurata Zwetina Technology mix • Steam turbine: 14% West Mountain Khaleej (% of installed capacity • Gas turbine: 48% by technology, 2016) • Combined Cycle: 38% No. of units 68 (of which active 61), (2016) 15 thermal power plants Sarir Sector operator 100% GECOL No. of FTE employed 5,326 employees (11% of total in the generation FTEs) sector (2016 y/e) Generation asset value 1.28 Bn LD (Net asset value, 2014) Technology Number of FTEs per Steam turbine Gas turbine Combined Cycle MW installed capacity 0.52 FTEs / MW (2016) Sources: GECOL data collection ID1, GECOL data collection ID12, GECOL data collection ID17, GECOL data collection ID22, Strategy& analysis Strategy& | PwC Prepared for The World Bank 22 Up-dates available in Task A&C Final Reports The results of the rapid assessment of the Libyan power generation sector can be highlighted within 7 key aspects Summary of rapid assessment of generation sector 1 • Nameplate capacity has grown steadily since 2010 to ~10GW, but the effective installed Decreasing effective capacity (impacted by increasing suspended units) dropped (7.5 GW vs. 8.0 GW) installed capacity • Gas and Combined Cycles technologies represent the majority of the installed base 2 Poor generation • Plant availability is constrained by a number of factors, and when compared to the nameplate performance capacity is extremely low (~54%) 3 Slowly growing • Electricity generation has remained generally stable since 2012, ranging between 36 and 38 electricity TWh production 4 Efficiency & • Gas has progressively substituted LFO and HFO in the Libyan power generation mix • Fuels remained subsidized at fixed prices, well below market levels affordability improv. • Switch to cheap gas has contributed in reducing cost of energy (-56%) and increase through gas efficiency (+19%), but room for improvements seems still to exist 5 Decreasing but • O&M spending cuts (forced on GECOL by circumstances), and improved generation efficiency through the gas switch have led generation OPEX to decrease unbalanced OPEX • Salaries expenditures have substantially increased since 2010, with Libya productivity among evolution the lowest in the region 6 • Projects execution lags behind plan, with only 23% of the planned investments for 2010-2016 Delays in project being actually realized, while +2.7 GW capacity increase is still expected for 2017 execution • Generation CAPEX was not always fully approved and covered by Government funding 7 Significant but out- • Going forward, GECOL relies upon a significant capacity increase plan dated investments • Plan was lastly updated in 2010, where sector and country circumstances were different plans towards 2030 Strategy& | PwC Prepared for The World Bank 23 Up-dates available in 1 Decreasing effective installed capacity Task A&C Final Reports Despite the introduction of new generation capacity, installed capacity has decreased since pre-2011 events … Power plant capacity evolution (GW) Despite the increase in nameplate Variation Power Plant Inst. cap. Delta by plant type 2010 (MW) 2010-16 (MW) capacity from 8.3 to 10.3GW, effective installed capacity %, 2010-16 -22% Steam 1,365 -301 decreased from 8.0 to 7.5GW Khaleej 0 +350 Tripoli West 370 -370 Nameplate Khoms Steam 480 0 10.3 capacity +23% Misurata Steel 254 -85 Tobruk 131 -66 Derna 130 -130 8.3 Suspended Combined Cycle 4,065 -400 -10% Zawia 1,440 -165 Benghazi North 915 -450 Benghazi North 2 570 +250 Misurata CC 570 +250 Zwetina 570 -285 Gas 2,159 +497 Effective +23% Western Mountain 624 +312 8.0 7.5 Installed -5.9% Khoms Gas 600 0 capacity Tripoli South 500 0 Zwetina Gas 150 -100 Sarir 285 +285 Small GAS units 403 -268 -67% Total 7,992 -472 2010 2016 Source: GECOL data collection ID22, Strategy& analysis Strategy& | PwC Prepared for The World Bank 24 Up-dates available in 1 Decreasing effective installed capacity | Nameplate capacity evolution Task A&C Final Reports … Nameplate capacity has continued to grow between 2012 and 2016 … Nameplate capacity evolution GW Pre-2011 Post-2011 +3% 11.0 10.3 +4% 9.9 9.9 10.0 9.6 9.0 9.0 +10% 8.3 8.0 7.0 6.8 6.2 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2007 2009 2010 2012 2013 2014 2015 2016 Note: Misalignments between ID1 – ID22 and ID23 are identified Source: GECOL data collection ID1, GECOL data collection ID22, GECOL data collection ID23, KEPCO, Strategy& analysis Strategy& | PwC Prepared for The World Bank 25 Up-dates available in 1 Decreasing effective installed capacity | Effective installed capacity evolution Task A&C Final Reports … But with increasingly suspended units the effective installed capacity decreased to 7.5GW (vs. 8GW in 2010) Effective installed capacity evolution Suspended units1 (e.g. long-term maintenance, cannibalized units) GW Pre-2011 Post-2011 Effective installed capacity 11.0 10.3 9.9 9.9 10.0 9.6 9.0 9.0 8.3 -6% +2% 8.0 +10% 7.0 6.8 6.2 6.0 5.0 4.0 8.0 7.9 7.6 7.7 7.5 7.1 3.0 6.1 6.4 2.0 1.0 0.0 2007 2009 2010 2012 2013 2014 2015 2016 1) The installed capacity includes all nameplate capacity of generating units available in that year, including the small Diesel and Gas turbine (most of them out of life time) and excludes the generating units suspended in that year (over-time / long-term maintenance, cannibalized units) Source: GECOL data collection ID1, GECOL data collection ID22, GECOL data collection ID23, KEPCO, Strategy& analysis Strategy& | PwC Prepared for The World Bank 26 1 Decreasing effective installed capacity | Effective installed capacity evolution Installed capacity density and growth is concentrated in Tripoli and the Middle regions … Effective installed capacity overview – Breakdown by region1 Effective installed capacity (GW) Tunisia -0.5 38% 17% 10.0 (GW) -35% -42% 8.0 8.0 7.1 7.6 7.5 Egypt Algeria Tripoli Benghazi 6.0 4.0 12% 22% 1% 2.0 +66% -51% -42% 0.0 West Middle Green Mountain 2010 2012 2014 2016 Legend 8% +60% x% Distribution of installed capacity by region (2016, GW) 2 South y% Participation to the growth of total installed capacity (2010-16, GW) 3 Niger Chad Sudan 1) Breakdown does not include installed capacity of small and rented gas / diesel plants; 2) [Regional installed capacity (GW)] / [Total installed capacity (GW)]; 3) [Regional installed capacity growth (GW)] / [Total installed capacity growth (GW)]; Source: General Information Authority of Libya, GECOL data collection ID22, Strategy& analysis Strategy& | PwC Prepared for The World Bank 27 1 Decreasing effective installed capacity | Effective installed capacity evolution … While suspended units are predominantly in the Benghazi and Middle regions Suspended capacity evolution – Breakdown by region1 Suspended capacity (GW) 37% of Tunisia installed 8% 17% 4.0 +2.4 7% 8% (GW) Egypt 3.0 2.8 Algeria Tripoli Benghazi 2.3 2.0 2.0 0% 37% 7% 1.0 0% 24% 8% 0.4 0.0 West Middle Green Mountain 2010 2012 2014 2016 Legend 9% 10% x% Distribution of suspended capacity by region (2016, GW) 2 South y% Participation to the growth of total suspended capacity (2010-16, GW) 3 Niger Chad Sudan 1) Breakdown does not include suspended capacity of small and rented gas / diesel plants; 2) [Regional suspended capacity (GW)] / [Total suspended capacity (GW)]. Distribution of supended capacity by region does not add up to 100% due to missing data: suspended capacity by plant was estimated from Inst. capacity data; 3) [Regional suspended capacity growth (GW)] / [Total suspended capacity growth (GW)]; Source: General Information Authority of Libya, GECOL data collection ID22, Strategy& analysis Strategy& | PwC Prepared for The World Bank 28 Up-dates available in 1 Decreasing effective installed capacity Task A&C Final Reports Gas and combined cycles plants represent today the majority of the nameplate and effective installed base Libyan power generation overview (2016) On-line Nameplate Eff. inst. Power Station date Capacity capacity1 (year) (MW) (MW) 1 Derna 1985 130 0 Zawia Tripoli Derna 2 Tobruk 1985 130 65 11 Benghazi 14 1 6 Tobruk Khoms 3 Khoms Steam 1982 480 480 12 2 Misurata 9 8 3 4 13 Zwetina 4 Misurata Steel 1990 507 169 West Mountain 5 7 Khaleej 15 5 Khaleej 2014 350 350 6 Tripoli South 1994 500 500 7 Zwetina Gas 1994 200 50 8 Khoms Gas 1995 600 600 10 Sarir 9 West Mountain 2005 936 936 10 Sarir 2010 820 570 11 Zawia 2000 1,485 1,275 12 Benghazi North 1995 945 465 13 Misurata CC 2010 820 820 14 Benghazi North 2 2007 820 820 Technology 15 Zwetina 2010 820 285 Steam turbine Gas turbine Combined-cycle Small gas/diesel plants N/A 7592 135 Total 10,302 7,520 1) The installed capacity includes all nameplate capacity of generating units available in that year, including the small Diesel and Gas turbine (most of them out of life time) and excludes the generating units suspended in that year (over-time / long-term maintenance); 2) Calculated value, to be confirmed Source: GECOL data collection ID1, GECOL data collection ID22, GECOL data collection ID23, Strategy& analysis Strategy& | PwC Prepared for The World Bank 29 Up-dates available in 2 Poor generation performance Task A&C Final Reports Libyan plant availability is very limited when compared to the nameplate capacity Suspended units (e.g. long-term Available capacity evolution maintenance, cannibalized units) Unavailable capacity1 (e.g. insufficient fuel GW Pre-2011 Post-2011 from pipelines, summer temperatures, sand) Available capacity 11.0 10.3 9.9 9.9 10.0 9.6 9.0 9.0 8.3 8.0 7.0 6.8 6.2 -1% 0% +5% 6.0 5.0 4.0 3.0 5.7 5.6 6.1 5.8 5.6 5.5 4.9 4.8 2.0 1.0 0.0 2007 2009 2010 2012 2013 2014 2015 2016 1) Contribution of both Time availability and Capacity availability still to be confirmed – KEPCO attributes the main reasons behind the difference between Installed and Available capacity to high temperatures and severe sand dust from deserts (temperature in Libya soars up to 40 degrees Celsius during July and August, and outputs of CCGT and Gas turbine decrease when the surrounding temperature becomes high) Source: GECOL data collection ID1, GECOL data collection ID22, GECOL data collection ID23, KEPCO, Strategy& analysis Strategy& | PwC Prepared for The World Bank 30 Up-dates available in 2 Poor generation performance Task A&C Final Reports Plant availability has continuously worsened in respect to the overall gen. capacity but remained stable on active units Libyan power generation performance evolution Availability of Nameplate capacity (%) Availability of Effective installed capacity (%) Gross Generation [TWh] / (Nameplate Cap. x 8760) Available Capacity / (Installed. Cap. x 8760) 0.6% -3.8% 68% 79% 78% 76% 64% 72% 74% 62% 71% 59% 56% 54% 2010 2012 2013 2014 2015 2016 2010 2012 2013 2014 2015 2016 Source: GECOL data collection ID1, GECOL data collection ID22, GECOL data collection ID23, Strategy& analysis Strategy& | PwC Prepared for The World Bank 31 3 Slowly growing electricity generation Overall electricity generation has remained mostly stable since 2012, ranging between 36 and 38 TWh Electricity generated Electricity generated (ID 37) 31.5 31.0 34.4 36.8 35.4 N/A TWh -1% 40 37.9 37.7 36.2 36.4 35 34.0 32.5 30 25 22.4 20 15.3 15 10 5 0 2000 2005 2010 2012 2013 2014 2015 2016 Electricity Generated (ID24) Source: GECOL data collection ID24, Strategy& analysis Strategy& | PwC Prepared for The World Bank 32 4 Efficiency and affordability improvements through gas Gas has progressively substituted LFO and HFO as power generation fuel Average fuel used to produce electricity %, 2010-20161 CAGR 100% 2010-2016 Comments 80% 41% • Current power generation fuel mix is mostly based upon natural gas (~80%) 60% 80% +14% • Power generation from oil (marine oil and diesel) are expected to phase out due to its high cost of production and import 40% 42% • Given national extensive gas reserves, gas is likely to remain a favored fuel 20% • Certainty on upstream investment and -17% improved physical infrastructure are 13% 17% crucial to enabling gas role in national 8% -11% power generation mix 0% 2010 2011 2012 2013 2014 2015 2016 Natural Gas LFO HFO Notes: chart indicates the mix of power output calculated in MWh 1) 2011 data interpolated based on 2010 and 2012 value; 2) Based on International fuel prices in local currency Source: GECOL data collection ID20, GECOL data collection ID24, Strategy& analysis Strategy& | PwC Prepared for The World Bank 33 4 Efficiency and affordability improvements through gas Fuels have remained at fixed prices well below market (but also officially-set?) levels GECOL prices paid vs. market levels1 Fuel price evolution (2015, % and LD / m3 and LD/1000m3 for gas) (GECOL price paid 2002-2016, market levels 2015) Market 377 555 344 price1 100% 377.1 NOC has continued to LD/ 1000m3 NG invoice GECOL the previous2 LD/ 1000m3 rate of 8.4 LD/ 1000m3 8.4 8.4 8.4 8.4 20.0 73% 554.8 90% 98% LFO 150.0 LD/ m3 66.0 86.0 36.0 56.0 27% 344.2 10% HFO 2% LD/ m3 36.0 18.4 18.4 18.4 18.4 Gas LFO HFO Differential to international Price paid (by GECOL) 2002-05 2006 2007 2008 2009-16 fuel price in local currency 1) International fuel price in local currency; 2) In 2008, a Governement decree officially set a gas price increase which, however, was never implemented Source: GECOL data collection ID20, Strategy& analysis Strategy& | PwC Prepared for The World Bank 34 4 Efficiency and affordability improvements through gas Libyan electricity generation costs (variable) has thus substantially decreased Variable cost of thermal energy by fuel Avg. variable cost of thermal energy (market prices vs. subsidized prices) (resulting from GECOL fuel mix) Price paid today LD/ MWh -98% NG 70 41 40 45 35 LD/ MWh 31 59.9 60.3 60 55.3 0.8 50 83 91 82 -73% N/A LFO 45 51 40 39.4 39.7 LD/ MWh 13.9 30 20 75 -90% 59 57 10 6.8 5.9 HFO 43 4.4 5.7 5.0 LD/ MWh 29 3.0 -56% 0 3.0 2010 2012 2013 2014 2015 2016 2010 2012 2013 2014 2015 2016 International market prices International market prices scenario Subsidized price paid by GECOL Subsidized prices paid by GECOL Source: GECOL data collection ID20, GECOL data collection ID24, Strategy& analysis Strategy& | PwC Prepared for The World Bank 35 4 Efficiency and affordability improvements through gas The switch to cheap gas has also contributed to increase Libyan generation efficiency (+19%) … Libyan power gen cost and efficiency comparison 2010 2016 Variable cost of energy input (fuel) Variable cost of energy input (fuel) (LD / MWh) (LD / MWh) avg. 30% avg. 35% (+19%) 15 15 12 12 9 9 Efficiency Cost avg. 6.8 6 6 3 3 avg. 3.0 (-56%) Thermal Thermal 0 0 0% 10% 20% 30% 40% 50% 60% Efficiency 0% 10% 20% 30% 40% 50% 60% Efficiency (%) (%) Size: energy input (TWh) Source: GECOL data collection ID20, GECOL data collection ID24, Strategy& analysis Strategy& | PwC Prepared for The World Bank 36 4 Efficiency and affordability improvements through gas … However, further room for improvements seems to exist … Power generation improvement potential Analysis of plant utilization vs. production cost (2016) Size: nampl. capacity Utilization (%)1 80% 10 3 7 4 70% 9 6 13 9 2 6 3 1 1 60% 8 4 7 2 11 50% 5 40% 14 30% 8 12 20% 5 11 Steam plant 13 10% Combined Cycle plant 10 0% Gas plant 12 0 10 20 30 40 50 60 Small/rented plants3 Variable cost of energy output 1 Khoms Steam 4 Benghazi North 7 Zawia 10 Derna (LD / MWh) 2 Misurata CC 5 Zwetina Gas 8 Misurata Steel 11 Khaleej Analysis of fuel utilization 2 (%) 3 West Mountain 6 Tripoli South 9 Khoms Gas 12 Sarir 100% GAS 50% gas – 50% oil 100% OIL 13 Tobruk 2 9 5 7 14 12 11 Improvement 3 4 6 8 1 13 10 potential 1) Plant utilization, based on the nameplate capacity; 2) % of total fuel used by plant; 3) Respective geographical locations not included in the map (data not provided) Source: GECOL data collection ID24, Strategy& analysis Strategy& | PwC Prepared for The World Bank 37 4 Efficiency and affordability improvements through gas … In 2016 for example, 18% of production was still generated by plants fueled with oil (possible gas supply constraints?) Fuel type by plant (2016) GAS-based production (MWh) OIL-based production (MWh) Utilization1 1 Khoms Steam 61% 79 2,484 6.6 TWh 2 Misurata CC 4,428 120 18% of total 63% 3 Western Mountain production 64% 5,264 0 (2016) 4 Benghazi North 4,933 299 63% 5 Zwetina Gas 1,197 177 20% 6 Tripoli South 2,370 395 63% 7 Zawia 6,491 1,144 59% 8 Misurata Steel 330 223 25% 9 Khoms Gas 3,340 304 Possible 69% 12 Sarir 0 1,052 constraints on 16% gas supply? 14 Small/rented plants 15 403 35% 10 Derna 0 2 0.2% 11 Khaleej 0 503 21% 13 Tobruk 0 194 17% Theoretical savings (2016). Scenario based on: Steam plant 224 Mn • CC plants 100% fueled with gas, at 85% utilization CC plant LYD 1) Plant utilization, based on the nameplate capacity • Sarir plant 100% fueled with gas, at 2016 utilization Gas plant Source: GECOL data collection ID24, Strategy& analysis Small/rented plants Strategy& | PwC Prepared for The World Bank 38 5 Decreasing (but unbalanced) OPEX evolution OPEX declined driven by lower fuel and O&M expenditures, but savings were partially offset by salaries increase Power generation operating costs overview Mn LD Delta % 2010 2015 2010-15 900 868.2 800 742.5 37.6 715.0 Salaries1, 2 205% 114.9 700 583.2 592.0 60.1 600 Maintenance -86% 514.1 8.3 500 16.7 Materials for O&M 2.2 -87% 400 300 9.9 Various Service 1.3 -87% 200 687.2 100 Fuel cost 446.9 -35% 0 Fuel Transp. 23.1 2010 2011 2012 2013 2014 2015 -73% to Gen. Stations 6.2 33.6 # Generation employees2 (GECOL) Other expenses -64% 12.3 5,326 Note: no headcount evolution available 1) Personnel expenses growth driven by both FTEs growth and salaries increase (details on FTEs evolution and salaries increase still to be provided by GECOL) 2) Generation FTEs and salaries include Generation and Generation Projects general departments headcount and personnel costs Source: GECOL data collection ID13, GECOL data data collection ID17, Strategy& analysis Strategy& | PwC Prepared for The World Bank 39 5 Decreasing (but unbalanced) OPEX evolution Power generation productivity is among the lowest in the region Generation productivity benchmark (2015) GWh / FTE 18 17.2 16 14 11.7 12 10 9.5 8 6.8 6 5.0 4 2 0 Tunisia1 Morocco Jordan Algeria Libya Egypt Electricity Generated 18 30 19 65 36 175 (TWh) FTEs in N/A 1,738 2 1,620 2 6,791 5,326 35,006 generation Note: includes Sonelgaz, ERC, CEGCO, SEPGCO, AES, QEPCO, STEG, ONEE-BE, Masen, and EEHC Generation Companies 1) Refers to 2014 y/e, last historical data available; 2) Number of employees in generation estimated from % distribution of FTEs by activity Source: GECOL data collection ID17, GECOL data collection ID24, Corporate Annual Reports, Electricity Sector Regulatory Agencies Annual Reports, Strategy& analysis Strategy& | PwC Prepared for The World Bank 40 Up-dates available in 6 Delays in project execution Task A&C Final Reports Projects execution lagged behind plan, with only 23% of the planned investments for 2010-2016 being actually realized Planned capacity expansions (nameplate) vs. realized GW, 2010-2016 Under construction Generation On-line MW1,2 Old plan and contracted type date 4 9 Sarir Gas 285 2011  3 Ubari 750 2012  Misurata I 250 2011  Combined 5 77% Benghazi North II Cycle 250 2011  Zwetina I 250 2013  3 Khaleej (or Gulf) Steam 1,400 2013  2 Tripoli West II 1,400 2014  Generation On-line Planned MW1,2 type date Under Planned Total Planned, Actually Misurata II Combined 750 2014  Construction Projects contracted realized Militah Cycle 1400 2015  2010-20164 & Contracted 2010-2016 2010-2016 and under construction Bumba Gulf - 1,500 2015  2010-2016 Tripoli East Steam 350 2018  1) Nameplate capacity breakdown by plant still to be provided (data to be confirmed) 2) Considering the entry into force at full capacity; 3) Plant extension has been fully commissioned but due to technical or operational problems some unit  Projects planned in 2010, fully finalized in 2016 Are either suspended, out of service or not operational; full operation is thus estimated in 2017  Projects planned in 2010, partially finalized in 2016 4) Data inconsistency about nameplate capacity to be resolved (possibly includes also additional plants) Source: GECOL data collection ID1, GECOL presentation (2010), Strategy& analysis  Projects planned in 2010, still not operative in 2016 Strategy& | PwC Prepared for The World Bank 41 6 Delays in project execution CAPEX slowed down substantially, and despite this the expenditures were not always fully ratified by Government Generation CAPEX evolution1 Since 2012, Government did not always approve the CAPEX actually expensed by GECOL Mn LD 2,000 1,936 -36% 1,500 1,191 1,223 1,000 704 502 485 500 137 0 2010 2011 2012 2013 2014 2015 2016 CAPEX (effectively expensed by sector opreator) CAPEX approved by Government Note: In accordance with Libyan subsidized tariff framework, to date all investment in electricity infrastructure (incl. generation capacity) has been made by Gov’t, either directly or indirectly; CAPEX is normally compensated to GECOL ex-post, with Ministry of planning approving the proposed CAPEX budget, and Ministry of Finance allocating such funding Sources: GECOL data collection ID15, Strategy& analysis Strategy& | PwC Prepared for The World Bank 42 Up-dates available in 7 Significant but outdated investments plans towards 2030 Task A&C Final Reports Going forward, GECOL relies upon a significant capacity increase plan (name-plate) … Nameplate capacity planned expansion GW, 2017-2030 Under construction Generation On-line MW and commissioning type date 16 14.6 Khaleej 1,050 2019 13.9 Steam Tripoli West II 1,400 2020 14 13.0 12.4 Ubari 470 2018 11.8 12 Ubari 154 2017 10.3 Alhoms II Gas 524 2017 10 Tripoli South I 141 2017 Zahra 94 2017 8 7.0 Generation On-line 6 Planned MW 4.6 type date Tripoli East 1,400 2021 4 Tobruk 700 2021 1.7 1.1 Steam 2 Derna 700 2022 0.9 2.0 3.3 0.6 Benghazi West 1,400 1.8 1.5 0.6 2026 0.9 0.8 0.4 0.9 0.7 0 -0.3 -0.6 -0.2 -0.2 Sabha 855 2021 -1.3 Gas Tripoli South II 855 2023 -2 Misurata II 750 2021 2028 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2029 2030 Militah 1,640 2021 Combined Zwetina II 820 2021 Cycle New capacity (nameplate, cumulated) Under constr. & contr. Tubrok 820 2022 AbouKammash 820 2025 Planned Divestments Source: GECOL data collection ID1, GECOL data collection ID23, GECOL presentation (2010 ), Strategy& analysis Strategy& | PwC Prepared for The World Bank 43 Demand Generation Transmission Distribution and supply Supply / demand balance Governance and sector structure References for analysis update Strategy& | PwC Prepared for The World Bank 44 The transmission system today is fully operated by GECOL and is composed of ~16,000km of 22okV and 400kV lines Libyan transmission system overview Libyan transmission network in a nutshell Abukamash Zawia Derna To Tunisian Network Tripoli Benghazi Transmission • 200kV (majority) Homs Mrawa Tamimi Tobruk network components • 400kV (new lines) Misurata Rowies Sirt Shakshuk Bani Walid Brega To Egyptian • 13,706km of lines Egdabia Net work Ghdames Zamzam Ras Lanuf 200kV network • 81 substations GMMR Abunjim Jaloo • 15,458MVA of capacity Hoon • 2,290km of lines Shati Sarir W. 400kV network • 14 substations W.Ariel Sarir Sebha N. Semnu • 9,600MVA of capacity Fajij Sebha Ubari Tazerbo Kufra Aawinat Traghen Network operator GECOL No. of employees operating the 4,508 network (2015) Three overall: # of interconnection - 2 with Tunisia points: - 1 with Egypt Transmission asset value 934.7 Mn LD 400 kV 220 kV Substation Interconnection point (Net asset value, 2014) Sources: GECOL data collection ID1, GECOL data collection ID12, GECOL data collection ID17, Strategy& analysis Strategy& | PwC Prepared for The World Bank 45 Up-dates available in Task A&C Final Reports The results of the rapid assessment of the Libyan transmission sector can be summarized in 4 key areas Summary of rapid assessment of transmission sector 1 Structurally weak / • Network has suffered from substantial damages in the past years, which caused inefficiencies to damaged network the grid operation & management 2 Stable technical • Libyan transmission losses have remained constant at pre-2011 levels at ~1.8% performance • Technical performance is in line with regional peers 3 Continuous cost • Transmission OPEX are continuously increasing, driven by salaries increase 4 Decreasing • CAPEX in transmission have substantially decreased investments and • Government has not always approved CAPEX actually expended by the sector operator unclear new • GECOL is pursuing plans to reinforce the transmission system with 400kV lines, but the status of projects status implementation is uncertain and seems to lag behind Strategy& | PwC Prepared for The World Bank 46 1 Structurally weak / damaged network In the last years the transmission system has suffered from damages, evidencing structural weaknesses Structural network weaknesses Damages / issues overview Abukamash To Tunisian Zawia Derna Tripoli Benghazi • Since 2011 the Libyan transmission system Network Homs Tobruk suffered many incidence of damage due to: Misurata Mrawa Tamimi Rowies – Military clashes between factions Bani Sirt Brega To Egyptian Shakshuk – Acts of vandalism and theft Walid Zamzam Ras Lanuf Egdabia Net work Ghdames • Overall lines, sub-stations & cables were affected Abunjim Jaloo • Incidents led to isolation of complete regions until GMMR GECOL was able to repair or replace the Shati Hoon Sarir W. damaged infrastructure (in some cases repairs Sebha N. W.Ariel Sarir took several months or even years) Semnu • Most severe and longest lasting cases are Fajij Sebha Ubari Tazerbo Kufra damages in the south and west of Benghazi city in Aawinat Traghen 2014/2015 (yellow circle in the map), which led to: – Separation of network into an Eastern and Western section – Load shedding in Benghazi – Shortages in generation in the Western network and consequent load shedding • Other damages to the transmission have led to prolonged outages in the south western and south eastern regions, with consequent isolation of power plants or reduction in supplies • In almost every case GECOL has been able to 400 kV 220 kV Substation Interconnection point eventually repair, replace or compensate for the damaged parts of the network Issues / damages occurred in the period 2011-2016 Sources: GECOL data collection ID2, GECOL data collection ID22, Strategy& analysis Strategy& | PwC Prepared for The World Bank 47 2 Stable technical performance PRELIMINARY Technical performances remained constant, with losses generally maintained at pre-2011 levels Evolution of transmission losses1 Electricity entering distribution system (2015) (%)2 TWh and % 3.0% 40 2.5% 2.5% 35.4 1.8% 2.5% 2.4% 34.8 35 -0.6 30 36.2 TWh 2.0% (ID 24) 1.8% 1.7% 1.7% 25 1.5% 20 100% 98.2% 1.0% 15 1.7% 1.8% 1.7% 1.8% 1.6% 10 0.5% 5 0.0% 0 Electricity Transmission Electricity 2010 2011 2012 2013 2014 2015 generated Losses entered the Inconsistency vs. Generation (ID24)3 (ID37) distribution Transmission Losses incidence on Generation (ID37) network 1) Transmission losses are assumed by GECOL based on the load flow studies (further investigations ongoing); 2) Transmission losses: (net electricity generated – electricity entered the distribution network) / (net electricity generated); 3) Additional transmission losses if generation data from ID24 is considered (delta ID24 vs. ID37 is proportionally distributed between transmission and Distribution losses of ID37); Source: GECOL data collection ID24, GECOL data collection ID37, Strategy& analysis Strategy& | PwC Prepared for The World Bank 48 2 Stable technical performance PRELIMINARY Performances showed are in line with regional peers Benchmarking sample (2015) Transmission losses benchmarking (2015) 2 Transmission grid length (%) as % of total T&D grid length 40% Libya Egypt 4% 35% 30% Morocco 4% 25% Algeria 4% 20% Tunisia1 2% 15% Algeria 10% Egypt Libya 2% Jordan Morocco 5% Tunisia1 Jordan 2% 0% 0 100 200 300 400 500 0% 1% 2% 3% 4% 5% Total Length of the T&D System (‘000 km) Note: includes Sonelgaz, NEPCO, STEG, ONEE-BE and Egyptian Electricity Transmission Company 1) Data refers to STEG annual report 2014, last available data point; 2) Indicate numbers are estimated Sources: GECOL data collection ID1 and ID37, BMI Research Database, Corporate Annual Reports, Electricity Sector Regulatory Agencies Annual Reports, Strategy& analysis Strategy& | PwC Prepared for The World Bank 49 3 Continuous cost increase OPEX have continuously increased, mostly driven by salaries Transmission O&M cost overview Mn LD Delta % 2010 2015 140 +6.7% 2010-15 130.4 128.5 119.2 37.6 120 113.1 Salaries1 +187% 108.0 100 92.8 18.6 Maintenance 11.4 -39% 80 69.6 6.2 Materials for O&M 0.3 -96% 60 16.0 40 Various Service 4.1 -74% 20 0.4 Fuel cost 0.8 +74% 0 Fuel Transp. 0 2010 2011 2012 2013 2014 2015 to Gen. Stations 0 N.A. # Transmission FTEs1 (GECOL) - 2016 13.9 Other expenses 4.0 -71% 4,508 Note: No headcount evolution available 1) Transmission FTEs and salaries include Transmission, Transmission Projects and Control general departments headcount and personnel costs Source: GECOL data collection ID13, GECOL data collection ID17, Strategy& analysis Strategy& | PwC Prepared for The World Bank 50 4 Decreasing investments and unclear new projects status CAPEX in the transmission sector slowed down substantially and was not always fully approved by Government … Transmission CAPEX evolution1 Mn LD Since 2012, Government did not always approve the 1,200 1,174 CAPEX actually expensed by GECOL 1,100 1,000 900 800 -35% 700 600 500 484 446 400 305 300 163 191 200 86 100 0 2010 2011 2012 2013 2014 2015 2016 CAPEX (effectively expensed by sector opreator) CAPEX approved by Government Note: In accordance with the Libyan subsidized tariff framework, CAPEX expenses are separately covered by the government through ad-hoc capital injections; CAPEX is normally compensated to the sector operator (GECOL) ex-post, with Ministry of planning approving the proposed CAPEX budget, and Ministry of Finance allocating such funding 1) Includes both new transmission grids investments and major overhauls; data on the exact split of the two components has not been received Sources: GECOL data collection ID15, Strategy& analysis Strategy& | PwC Prepared for The World Bank 51 4 Decreasing investments and unclear new projects status PRELIMINARY … And the status of GECOL plans to reinforce its network to 400kV by 2020 remains unclear (and seems to lag behind) Libyan transmission system investment plan (400kv, 2015) Line Length Mellitah Bumba Gulf (From / To) (km) To Tunisian Zawia Tripoli Al-Beida Al-Rowais/Abu-Arqub 231 Network Benghazi Surman South Sidi Bannur North Tobruk Abu-Arqub/Al-Tabbah 38 Al-Gwarsha Benghazi Homs Abu-Arqub/Surman South 85 Misurata Benghazi South Al-Tabbah Sirt West Surman South/Zawia 24 Rowies Abu-Arqub Bani Zawia/Tripoli West 89 Ras Lanuf Egdabia Ghdames Walid To Egyptian Tripoli West/Tripoli South 20 Net work Tripoli South/Sidi Bannur 55 GMMR Sidi Bannur/Homs 78 Hoon Homs/Misurata 139 Misurata/Sirt 252 Sarir Sirt/Ras Lanuf 272 Ras Lanuf/Egdabia 239 Sebha Egdabia/Benghazi West 126 Benghazi West/Al-Gwarsha 23 Al-Gwarsha/Benghazi South 32 Benghazi South/Benghazi North 25 Benghazi North/Al-Beida 180 Al-Beida/Bumba Gulf 191 Bumba Gulf/Tobruk 80 Sirt/Hoon 272 Egdabia/Sarir 400 Sebha/GMMR 260 Abu-Arqub/Bani Walid 150 Bani Walid/Sirt 300 Egdabia/Tobruk 400 Under Construction Contracted Zawia/Mellitah 32 Substation Interconnection point % of projects completion (2015)1 5% 1) KPI provided on transmission sector projects – KPI to be further clarified Sources: GECOL data collection ID1, Strategy& analysis Strategy& | PwC Prepared for The World Bank 52 Demand Generation Transmission Distribution and supply Supply / demand balance Governance and sector structure References for analysis update Strategy& | PwC Prepared for The World Bank 53 The distribution and supply sector provides power to over 1.2Mn customers, with supply mostly concentrated in Tripoli Libyan distribution and supply sector overview 1 Libyan distribution & retail in a nutshell • 66 kV Tripoli Distribution network • 30 kV Benghazi 37% Green • 14,311 km lines 15% 66 kV network • 195 substations West Middle Mountain • 4.359MVA of capacity 17% 16% 8% • 11,142 km lines 30 kV network • 460 substations • 13,884MVA of capacity South Distributor operator GECOL 7% No. of employees employed 21,339 in distribution (2016 y/e) Retailer GECOL No. of employees employed in electricity 8,829 sales (2016 y/e) Tariff framework Fully regulated Consumption distribution (%) Tariff type Fixed No. customers (2016) 1.2 Mn 1) Does not include Public Entities consumption (836 GWh in 2016) Source: GECOL data collection ID1, GECOL data collection ID2, GECOL data collection ID17, GECOL data collection ID36, Strategy& analysis Strategy& | PwC Prepared for The World Bank 54 Up-dates available in Task A&C Final Reports The results of the rapid assessment of the Libyan distribution and supply sector can be summarized in 5 key areas Summary of rapid assessment of distribution and supply1 sector 1 • The technical performances of the Libyan distribution network have mostly remained at pre- Constant technical 2011 levels (~14%) performance • Performances are in line with regional peers 2 Heavy and • Sector suffers from considerable (and continuously increasing) commercial losses (~60%) worsening • Retail business is further negatively affected by increasing levels of non collection, proven by commercial losses a continuously increasing level of receivables and bed debt • Libyan situation is critical also when compared to the regional peers 3 Increasing costs / • Operating cost are continuously increasing (+11% CAGR since 2010) and are mostly driven overstaffing by salaries 4 • Distribution CAPEX have continuously decreased (-13% CAGR) Decreasing • CAPEX expensed by sector operator was not always recognized / approved by Government investments • Development plan on distribution and supply infrastructures is unclear 5 Unbalanced and non • Sector is fully regulated by the Government transparent tariff • Tariff framework is structurally unbalanced: in absolute terms, of ~2Bn LD in production structure costs, the system allows to recover only ~170Mn LD (~9% of total production cost) 1) Supply sector shall be also referred to as retail sector or customer service sector Strategy& | PwC Prepared for The World Bank 55 1 Constant technical performance The technical performance of the distribution network have remained at pre-2011 levels … Evolution of Libyan distribution losses1 Electricity consumed vs. generated (2015) (%)2 TWh and % 20% 19.3% 18.9% 18.5% 40 35.4 1.8% 13.4% 35 15% -0.6 30.1 13.8% 12.9% 13.1% 30 36.2 TWh (ID 24) -4.7 25 10% 20 100% 12.8% 13.7% 12.9% 13.4% 15 84.8% 12.3% 5% 10 5 0% 0 Electricity Transmission Distribution Electricity 2010 2011 2012 2013 2014 2015 generated Losses Losses consumed Inconsistency vs. Generation (ID24) 3 (ID37) Distribution Losses incidence on Generation (ID37) 1) Distribution losses assumed with measurements made by GECOL (further investigations ongoing); 2) Distribution losses: (electricity consumed – net electricity generated) / (net electricity generated); 3) Additional distribution losses if generation data from ID24 is considered (delta ID24 vs. ID37 is proportionally distributed between transmission and distribution losses of ID37); Source: GECOL data collection ID2, ID24, ID37, Strategy& analysis Strategy& | PwC Prepared for The World Bank 56 1 Constant technical performance … And is aligned with regional peers Benchmarking sample (2015) Distribution losses benchmarking (2015) Distribution Grid (%) 100% Tunisia1 Algeria 17% 95% Morocco Egypt 90% Jordan Algeria Jordan 14% 85% 80% Tunisia1 14% 75% Libya 13% 70% Morocco 11% 65% 60% Libya Egypt 9% 55% 0 100 200 300 400 500 0% 5% 10% 15% 20% Total Length of the T&D System (‘000 km) Note: includes Sonelgaz, JEPCO, IDECO, EDCO, STEG, ONEE-BE and EEHC Distribution Companies 1) Data for Tunisia refers to STEG annual report 2014, last available data point Sources: GECOL data collection ID1, GECOL data collection ID37, Corporate Annual Reports, BMI Research Database, Strategy& analysis Strategy& | PwC Prepared for The World Bank 57 2 Heavy and worsening commercial losses and bed debt The distribution and supply business is affected by huge commercial losses … Evolution of Libyan commercial losses Electricity generated vs. invoiced (2015) (%)1 TWh and % 70% 65% 40 24% 35.4 60% 35 60% 15% 30 50% 47% -5.4 41% 25 40% 36.2 TWh (ID 24) 20 60% 30% 100% 15 20% 20% 8.9 10 -21.1 10% 5 25% 0% 0 Electricity Technical Commercial Electricity 2010 2011 2012 2013 2014 2015 generated Losses Losses2 invoiced (ID37) Commercial Losses incidence on Generation (ID37) 1) Commercial losses: (electricity consumed – electricity invoiced) / (net electricity generated); 2) Different from Commercial losses incidence (%) calaculated in ID37, which are based only on a part of Total energy generated (i.e. excluding energy generated at 34-66kV) Source: GECOL data collection ID37, Strategy& analysis Strategy& | PwC Prepared for The World Bank 58 2 Heavy and worsening commercial losses and bed debt … Further aggravated by increasing bed debt Electricity collected vs. generated Evolution of GECOL receivables (e2015) TWh & % Mn LD 36.2 TWh 40 (ID 24) 2,400 2,269 15% 35.4 2,200 35 1,928 1,971 15% 2,000 30 1,800 -5.4 1,611 1,600 25 1,320 1,400 20 60% 1,200 100% 1,000 15 800 10 600 -21.1 10%2 5.62 400 5 -3.4 15% 200 0 0 Electricity Techn. Comm. Non paid1 Electricity generated Losses Losses collected 2010 2011 2012 2013 2014 2015 (ID37) Receivables N/A 1) Non paid (%): (electricity invoiced – electricity collected) / (net generation); 2) Estimation based on revenues collected (only partial breakdown by sector available) and current tariff structure Source: GECOL data collection ID7, GECOL data collection ID12, GECOL data collection ID21, GECOL data collection ID37, Strategy& analysis Strategy& | PwC Prepared for The World Bank 59 2 Heavy and worsening commercial losses and bed debt The Libyan commercial situation appears critical also when compared to its regional peers Commercial losses benchmarking1 Receivables on total sales benchmarking Commercial Losses (%) Electricity Commercial A/R (%sales) Receivables Generated Losses y-o-y change (TWh) (TWh) N/A %, 2014-15 Jordan2 8.6% 18.0 1.54 Jordan2 26.4 15% Libya 59.6% 36.2 21.1 Libya2 449.1 8% Morocco 4.2% 29.9 1.24 Morocco N/A N/A Egypt 3.4% 175 5.98 Algeria 52.4 15% Algeria 0.2% 64.7 0.15 Egypt 79.2 27% Tunisia2 0.1% 17.7 0.01 Tunisia2 25.4 -17% 0% 20% 40% 60% 0% 200% 400% 600% 1) Commercial losses are estimated as Gross Generation + Imports - Technical Losses - Billed electricity. Data referring to these items are retrieved from last available annual report for the following companies: JEPCO, IDECO, EDCO, GECOL, ONEE-BE, EEHC Distribution Companies, Sonelgaz and STEG distribution companies 2) Refers to 2014 y/e, last historical data available with y-o-y change 2013-14; 3) Sales exclude government subsidies Source: GECOL data collection ID12, GECOL data collection ID13, GECOL data collection ID24, GECOL data collection ID37, Corporate Annual Reports, Strategy& analysis Strategy& | PwC Prepared for The World Bank 60 3 Increasing costs / overstaffing Operating costs have continuously increased, mostly driven by salaries Distribution & supply operating costs evolution Delta % Mn LD 2010 2015 2010-15 11% 800 711 722 246 +157% 687 Salaries1 700 658 634 600 25 Maintenance +113% 53 500 466 423 548 84 482 514 Materials for O&M -98% 400 369 2 300 43 312 Various Service -77% 269 10 200 100 245 1 177 173 174 Fuel cost +8% 110 100 1 0 Fuel Transp. 0 2010 2011 2012 2013 2014 2015 to Gen. Stations 0 N/A # sector employees1 23 Distribution 21,339 Other expenses -2% (GECOL) 23 Supply 8,829 1) Distribution FTEs and salaries include Distribution, Distribution Projects and Medium Voltage general departments headcount and personnel costs Source: GECOL data collection ID13, GECOL data collection ID17, Strategy& analysis Strategy& | PwC Prepared for The World Bank 61 4 Decreasing investments and unclear development plan Distribution sector CAPEX have slowed down since 2010, and was not always fully approved by Government Distribution CAPEX evolution1 Mn LD Since 2012, Government did not always approve the 1,500 CAPEX actually spent by GECOL -13% 1,000 783 635 486 500 399 314 330 279 0 2010 2011 2012 2013 2014 2015 2016 CAPEX (effectively expensed by sector opreator) CAPEX approved by Government Note: In accordance with the Libyan subsidized tariff framework, CAPEX expenses are separately covered by the government through ad-hoc capital injections; CAPEX is normally compensated to the sector operator (GECOL) ex-post, with Ministry of planning approving the proposed CAPEX budget, and Ministry of Finance allocating such funding Sources: GECOL data collection ID15, Strategy& analysis Strategy& | PwC Prepared for The World Bank 62 5 Unbalanced tariff framework Fuel prices are heavily subsidized by Government, and the tariffs are set at fixed levels… Subsidized fuel levels Tariff framework, by customer type Tariff are fixed 377 555 344 regardless of 100% Residential 20 the consumed volumes LD/ 1000m3 Small 30 agriculture 73% Heavy 90% 31 98% industrial Large 32 agriculture Light 42 27% industrial 10% 2% Commercial, Public 68 & Street lighting Gas LFO HFO LD / MWh (or Dirhams / Kwh) Differential to market price Price paid (by GECOL) Source: GECOL, Strategy& analysis Strategy& | PwC Prepared for The World Bank 63 Up-dates available in 5 Unbalanced tariff framework Task A&C Final Reports … Within this framework, tariffs are structurally unable to recover costs (set 44% below system costs) … System costs vs. max theoretical revenues (2015) Dirham / kWh 71 Avg. system 65 cost 65 (Dirham / kWh) 58 Costs structurally 52 uncovered with 44% 44% current tariff framework 45 39 32 26 19 Avg. tariff Large Agriculture Small Agriculture 56% 56% Heavy Industrial Light Industrial (% of avg. cost) State Offices Commercial 13 Street Light Residential 6 0 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 Cost – tariff balance Consumption (TWh) by customer type (2015) Dashed area: Total 2015 GECOL costs Sources: GECOL data collection ID7, GECOL data collection ID13, GECOL data collection ID37, Strategy& analysis (1.95 Bn LD) Strategy& | PwC Prepared for The World Bank 64 Up-dates available in 5 Unbalanced tariff framework Task A&C Final Reports … Furthermore, an additional 38% of total costs cannot be recovered due to commercial losses … System costs vs. revenues (2015) Dirham / kWh 71 Avg. system 65 cost 65 (Dirham / kWh) 58 Costs structurally 52 uncovered with 44% 44% current tariff framework 45 39 32 Commercial 26 losses 38% 38% (consumption 19 not invoiced) Large Agriculture Small Agriculture Heavy Industrial Light Industrial State Offices Commercial 13 Street Light Residential Avg. 6 18% 18% revenues (% of avg. cost) 0 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 Cost – tariff balance Consumption (TWh) by customer type (2015) Dashed area: Note: Avg. revenues are estimated bottom-up by each segment (suffers light misalignment vs. FS) Total 2015 GECOL costs Sources: GECOL data collection ID7, GECOL data collection ID13, GECOL data collection ID37, Strategy& analysis (1.95 Bn LD) Strategy& | PwC Prepared for The World Bank 65 Up-dates available in 5 Unbalanced tariff framework Task A&C Final Reports … And when considering the poor collection effectiveness, system is only able to recover ~9% of its production costs … System costs vs. actual collected revenues (2015) Dirham / kWh 71 Avg. system 65 cost 65 (Dirham / kWh) 58 Costs structurally 52 uncovered with 44% 44% current tariff framework 45 39 32 Commercial 26 losses 38% 38% (consumption 19 not invoiced) Large Agriculture Small Agriculture Heavy Industrial Light Industrial State Offices Commercial 13 Street Light Residential Non paid2(collection 9% ineffectiveness1) 6 Avg. collection 9% 9% (% of avg. cost) 0 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 Cost – tariff balance Consumption (TWh) 1) Estimation based on revenues collected in ID21 (only partial breakdown by sector available) by customer type (2015) Dashed area: 2) ~10% previously indicated refers to volumes, while 9% are revenues (effective of different tariffs) Total 2015 GECOL costs Sources: GECOL data collection ID7, GECOL data collection ID13, GECOL data collection ID21, GECOL data collection ID37, Strategy& analysis (1.95 Bn LD) Strategy& | PwC Prepared for The World Bank 66 Up-dates available in 5 Unbalanced tariff framework Task A&CPRELIMINARY Final Reports … Thus, of the 2Bn LD system costs incurred, Libya today is only able to recover ~170Mn LD Summary of system costs vs. actual collected revenues (Bn LD, 2015) Unbalance resulting from 1.95 current tariff Unbalance D&A 10% structure considering also commercial Real unbalance Other 12% -0.85 losses considering OPEX 0.85 also collection effectiveness Fuel 23% -1.61 -1.78 1.09 (-91%) Salaries 55% 0.34 0.17 Total GECOL Costs Max. Commercial Revenues2 Non paid Actual costs structurally theoretical loss collected uncovered revenues1 revenues 1) Sum of (Tariff by customer type) x (Consumption by customer type); Based on electricity consumed 2) Sum of (Tariff by customer type) x (Invoiced energy by customer type); Based on electricity invoiced; 0.34Bn LD slightly differ from GECOL P&L (0.33Bn LD) Source: GECOL data collection ID2, GECOL data collection ID7, GECOL data collection ID13, GECOL data collection ID37, Strategy& analysis Strategy& | PwC Prepared for The World Bank 67 Demand Generation Transmission Distribution and supply Supply / demand balance Governance and sector structure References for analysis update Strategy& | PwC Prepared for The World Bank 68 Up-dates available in Task A&C Final Reports Libya is increasingly unable to meet peak demand mostly because of the high capacity unavailability S/D evolution Reserve GW 11% -9% -1% -7% -6% -12% -18% -21% margin1 11 10.3 9.6 9.9 9.9 10 9 8 8.3 9.0 ! Delta 7 6.8 peak 6.2 6 5 4 3 2 1 0 2007 2009 2010 2012 2013 2014 2015 2016 Demand (peak demand)2 Unvailable capacity due to suspended units Demand (lowest monthly peak)2 Installed capacity at risk - subject to availability Demand (annual average demand)2,3 Available capacity Nameplate capacity 1) (Available capacity – Peak demand) / (Peak demand); 2) Demand at generation level; 3) Annual consumption / 8760 Source: GECOL data collection ID1, GECOL data collection ID2, GECOL data collection ID4, GECOL data collection ID22 and ID23, Strategy& analysis Strategy& | PwC Prepared for The World Bank 69 Reserve margins are thus very low, especially in the Southern and Western macro-region Reserve margin1 evolution – Breakdown by region and macro-region2 Western macro-region Eastern macro-region Reserve margin1 -25% -16% (%) Tunisia -2% 7% 20% -39% -33% -26% 10% 10% (delta) Egypt Algeria 0% Tripoli Benghazi 0% -1% -10% -7% -10% -20% -14% -57% -22% -87% -20% -30% +4% -24% -40% -27% -40% West Middle Green Mountain 2010 2012 2014 2016 Legend -40% +50% x% Reserve margin by region (2016, %) 3 South -26% Central macro-region y% Reserve margin growth by region (2010-2016, abs. growth) 4 Niger Chad Reserve margin by Sudan macro-region (2016) 1) (Available capacity – Demand) / (Demand), with Demand at generation level; 2) Breakdown does not include small and rented gas / diesel plants capacity; 3) (Regional available capacity – Regional demand) / (Regional demand); 4) (Regional reserve margin 2016) – (Regional reserve margin 2010) Source: General Information Authority of Libya, GECOL data collection ID4, GECOL data collection ID22, Strategy& analysis Strategy& | PwC Prepared for The World Bank 70 There are import lines, but their utilization is negligible Libyan import / export (GWh) Ability to import depends on: • Available capacity in neighboring countries 0.0% 0.0% 0.1% 0.2% 0.2% 0.1% 0.5% • Capacity in the import lines 1,000 Tunisia • Commercial conditions 800 Wheeling 600 485 505 GWh 400 Algeria Libya 200 162 Egypt 64 67 0 0 10 16 13 55 1 0 0 0 Neg. 0.2% 0.0% 0.0% 0.1% 0.4% 0.7% Niger 1,000 Chad Sudan 800 600 GWh 400 Notes 214 • In 2015, due to the Libyan national grid division between 200 85 124 120 35 1 42 34 East and West, import/export flows have increased 0 0 0 21 12 0 0 • In February 2017, national grid has been 2010 2011 2012 2013 2014 2015 2016 reconnected/restored, restoring the import/export flows % of total country consumption Export Import Note: Interconnections are currently only for import/export between Libya/Egypt and Libya/Tunis (no wheeling across national networks) Source: GECOL data collection ID2, GECOL data collection ID3, Strategy& analysis Strategy& | PwC Prepared for The World Bank 71 Up-dates available in Task A&C Final Reports Going forward, maintaining the capacity status-quo, the gap in reserve margins will continue to worsen Do nothing scenario – Supply-Demand evolution Reserve GW -21% -29% -38% -43% -48% -52% -55% -58% margin1 14 12 10.3 10.3 10.3 10.3 10.3 10.3 10.3 10.3 10 8 6 4 2 0 2016 2018 2020 2022 2024 2026 2028 2030 Demand (peak demand)2 Unvailable capacity due to suspended units Demand (annual average demand)2,3 Installed capacity at risk - subject to availability Available capacity Nameplate capacity 1) (Available capacity – Peak demand) / (Peak demand); 2) Demand at generation level; 3) Annual consumption / 8760 Source: GECOL data collection ID1, GECOL data collection ID2, GECOL data collection ID4, GECOL data collection ID22 and ID23, Strategy& analysis Strategy& | PwC Prepared for The World Bank 72 Demand Generation Transmission Distribution and supply Supply / demand balance Governance and sector structure References for analysis update Strategy& | PwC Prepared for The World Bank 73 Up-dates available in Task A&C Final Reports Within this context and perspectives, Libya shall focus upon four groups of initiatives and several options Improvement options/ initiatives going forward Improve Increase Improve Manage operational capacity commercial demand performance performance Strengthen Complete ongoing Reduce T&D system capacity-additions Introduce energy commercial (outages and (under construction efficiency measures losses technical losses) /contracted) Increase plant availability Apply demand- Launch new capacity- (capacity and time) and Improve credit collection optimization incentives expansion projects utilization (new tariff) Increase plant efficiency Explore import supply and switch to gas potential Control operating expenses (salaries) Immediate priority Additional priorities Source: GECOL, Strategy& analysis Strategy& | PwC Prepared for The World Bank 74 NON-EXHAUSTIVE The geo-political situation in Libya is continuously evolving and today observes the presence of four predominant forces Current Libya geopolitical situation (Q1 2017) I II • Elected democratically in 2014 I is also called Council of III Beida / Deputies and linked to the I II Tobruk House of Representatives Government • Strongest in East Libya has loyalty of LNA under command of Khalifa Haftar II Government • In 2015 the UN has led dialogue endorsed and later installed the of National interim government IV Accord • Suggested Gov’t has 17 (GNA) and ministries and is led by PM Allies Responding to both Fayez al-Sarraj I and II III • Also called General National National Congress (GNC) (Expired) Salvation • Based in Tripoli and established Government after operation “Libyan Dawn” IV • Local forces and minorities (e.g. Other Amazigh, Tuareg, Tebu, etc.) forces • Federalist groups / movements Note: Geopolitical map is non-exhaustive, based upon different publicly available sources Source: Public available sources; Strategy& analysis Strategy& | PwC Prepared for The World Bank 75 The political disorder had substantial impacts on the energy sector structure and governance Key events in Libya since 2011 2011 2012 2014 2015 End of An elected parliament, Elections were held and a new Late in 2015, the UN led revolution the General National parliament was elected -- dialogue endorsed and later Congress was However, there was a conflict installed as the internationally established for a over legitimacy between the recognized government of Libya transitional period that newly elected parliament in the GNA also known as the lasted 18 months Eastern Libya and the expired Unity Government. one in Tripoli, resulting in both (It hasn’t been recognized by parliaments and governments the competing governments, contesting power. prolonging the conflict) • Political turmoil has had a negative impact on the energy sector • After the 2011 revolution, a Ministry of Electricity and Renewable Energy was established by the GNC however this Ministry was later dissolved by the GNA in 2016 • An energy authority was established in the east. However, the authority has neither the power nor the geographical reach over the West, where the majority of consumption / generation is concentrated • Currently, energy sector reform programs were put on hold, and there is an overlap in the role and mission of the different entities under the late Ministry of Electricity and Renewable Energy and no regulatory agency is in place to oversee the operation of the energy sector Strategy& | PwC Prepared for The World Bank 76 The governance and sector structure today is mostly centered around the institutional bodies and GECOL Power sector value chain and structure Primary Energy Power Generation In scope Transmission Distribution Supply Supply Generation Renewables 1 Institutional (1) Government of National Accord / (2) National Salvation Gov. / (3) Tobruk Gov. Ministry of body/ sector (Ministry of planning approves capital projects budget and allocate the funds energy (TBC) to GECOL through Ministry of Finance) governance 2 Regulatory No official regulatory authority is in place today authority 3 Policy and Mostly un-changed from GPC decrees of pre-2011 regulation 4 Key electricity - operator Oil & gas GECOL GECOL 5 9 companies involved in general contracting, consultancy, project management, EPC, Other players Overhauls and servicing, O&M for utilities, IPP and power plants, general contracting Source: GECOL, Strategy& analysis Strategy& | PwC Prepared for The World Bank 77 1 Institutional body / sector governance After 2011 events, the institutional bodies that control and lead GECOL have continuously changed Evolution of the sector governance in Libya Prior to 2007 2007-2009 2009-2011 2012 - 2014 Current General People’s General National Three General People’s General People’s Committee Council competing Committee Committee gov’t forces GPC of Ministry of GPC of Energy Electricity and Electricity, Water and Industry Renewable Energy & Gas GECOL GECOL GECOL GECOL GECOL • GECOL had • GPCoEWG was • GPCoEWG was • The PM included Although continuously governance established with dissolved, and Ministry of Electricity evolving, GECOL today oversight from the GECOL reporting to it GECOL now reports and Renewable is officially controlled by GPC of Energy and • Changes resulted in to the GPC directly energy in his cabinet three institutional Industry confusion over roles of • Without ministerial which was bodies: GECOL and the GPC representation, subsequently ratified • Government of of Electricity, Water, & GECOL is subject to by the GNC National Accord Gas in several key more remote, less • The Ministry has • National Salvation functions technically undergone personnel Government knowledgeable changes, but has • Transitional Gov’t oversight otherwise remained stagnant Focus in the next slide Source: GECOL, Strategy& analysis Strategy& | PwC Prepared for The World Bank 78 1 Institutional body / sector governance NON-EXHAUSTIVE Today GECOL is influenced by three competing Governments Current governance structure overview (Q1 2017) House of IV Other forces Key actors GNC Representatives1 (no role within (Expired 2014) (HoR) - legislature GECOL) II Gov. of III I National National Tobruk Gov. Government Accord Salvation and LNA forces (GNA) Presidency Government (Sept 2014) Institutions Council Cabinet of (Head of state) ministries (17 – to be ratified) Designated authority Electr. & Renew. Gen. Assembly General for energy (Gov. / industry Energy Assembly reps) Authority2 Board of GECOL BoD GECOL BoD Directors Chairman 1 Chairman 2 GECOL Managing Managing MD director 1 director 2 Indirect control / influence BU / dpts / GECOL business units / Direct control support East region support divisions, etc. Leadership internationally recognized 1) HoR legitimacy is derived from the Skheirat accord (where GNA was created) 2) Authority set-up under the transitional government after the 2014 events Source: GECOL, Strategy& analysis Strategy& | PwC Prepared for The World Bank 79 2 Regulatory authority No regulatory authority (except for an on-purpose agency for renewables investments) is operational REAoL Overview REAoL Board of Directors • REAoL is a governmental agency established in CEO 2007 with no regulatory powers Technical collaboration • The main objective and position of REAOL is to and Agreements promote renewable energies in Libya, but has no Supporting services ability to instruct or enforce Contracts and Legal • REAoL state objectives include: affairs Energy Efficiency – Implement of renewable energy in various Training and Capacity forms building Internal Audit – Raise the contribution of renewable energy in the national energy mix – Encourage and support the industries related to Budget and Finance Planning and Studies renewable energy Projects Department Department Affairs Department – Propose the legislation needed to support Solar Panels Projects Budget Solar Energy planning renewable energy Wind Projects Accounting Wing Energy planning Heat Transformation Inventory Projects Marketing Studies and Local projects Source: GECOL, Strategy& analysis Strategy& | PwC Prepared for The World Bank 80 3 Policy and regulation In terms of policy and regulation, the latest most important initiatives in the field of energy were taken in 2012 … Evolution of Libya policy and regulation 2 4 Decree 17 – Decree 76 – Decree 1 – Decree 193 – GECOL Decree 82 – Policy Increase electric Reduce the amendments of established, under regulating the tariff based on domestic GECOL Articles the supervision of electricity services domestic monthly electricity use of Association, GPC of Electricity 1 consumption tariff 1984 1986 1996 1997 2004 2007 2012 3 Decree 518 & Law 5 – Decree 426 – Decree 15 – Decree 33 – 429 – Finance Investment, GECOL Establishment Electricity Ministry of Electricity Policy & Admin, formed few JVs with Renewable domestic use Organization structure HR Policy International Energy Agency exemption and Department companies of Libya for 2011 mandates # Key tariff regulation milestone Source: GECOL, Strategy& analysis Strategy& | PwC Prepared for The World Bank 81 3 Policy and regulation … And important interventions in 2012 were also made in the sector governance Key Libyan policy and regulation Policy / Regulation Area / focus Description (year) Decree 15 & 325 Payment exemption Exemption for electricity domestic use for electricity consumed in 2011 (2012) Decree 193 (2012) Governance General Assembly to form the BoD and assign an Internal Auditor department Decree 33 (2012) Governance Ministry organization structure and department mandates The Decree of the Minister of Economics to Reduce the domestic electricity use Decree 1 (2012) Regulation tariff to 0.2 DHM GECOL restructuring based on the Minister’s Decree 33 – (2012) regarding the Decree 82 (2012) Governance Org Structure of the Ministry of Electricity and Renewable energy and its mandates CBL funding the Capex through LCs (in accordance/ line with Chapter 3 of the Decision 191 (2010) Funding General budget. A Committee formed consists of members from Ministry of Planning, Ministry of Finance, CBL. Decision 76 (2004) Regulation Increase electric tariff based on domestic monthly consumption Decree 82 (1997) Regulation Electricity tariff has been set across the different categories Source: GECOL, Strategy& analysis Strategy& | PwC Prepared for The World Bank 82 4 Key players The key (and only) operator of the Libyan electricity sector is GECOL, the country’s vertically integrated operator GECOL high-level overview GECOL • Operation of 15 TPP • Installed (nameplate) capacity of • The Libyan General Electric Company was ~10 GW established based on the law number 17 in the Generation • Generation mix mostly made of year 1984 gas-fired (gas turbine or combined cycle) • GECOL is responsible for: • ~5,300 employees1 – Generation of electricity • 2,290 km of 400kV lines with 14 – Supply of electricity substations – Distribution of electricity • 13,706 km of 220kV lines with 81 Transmission substations – Planning and constructing facilities to supply • Interconnection with Egypt and electrical power Tunisia • ~4,500 employees2 – Operation and maintenance of electrical power equipment • 14,311 and 11,142 km of 66 and – Development of electricity supply 30kV lines respectively with more – Sales of electricity Distribution than 650 substations and supply • 1.2Mn customers – Operating and dispatching services for • ~30,000 employees3 (of which ~ generation, supply, distribution and retail sales 21,300 in distribution) of electrical power 1) Include Generation and Generation Projects general departments; 2) Include Transmission, Transmission Projects and Control general departments; 3) Include Distribution, Distribution Projects, Medium Voltage and Consumer Services general departments Source: GECOL, Strategy& analysis Strategy& | PwC Prepared for The World Bank 83 4 Key players GECOL today is organized among a number of divisions and business units GECOL governance structure1 GECOL Total: 882 45.068 48.703 Board of Directors (BoD) Managing Director (MD) 1331 Other Support Services Managing Director Planning & Projects Strategic Plan PMO Office Sub Dept. Contracts 207 179 Public Relations Southern Experts & Legal Affairs & Dev. Accounts Dept. Consultants Office Transmission 253 Planning 164 Health Services Experts and Projects Studies & Dev. Dept. Consultants Office Eastern Experts Generation 387 Distribution 1072 Follow up Dept. Projects Projects &Consultants Office Support Services Support Business Operations Business Network Operations Network Asst. Managing Services Asst. Managing Operations Asst. Managing Operations Director Director Director 1.154 15.461 8.829 4.939 2.577 Procurement 1.132 HR & Consumer Distribution Generation Transmission & Stores Communication Services 2.785 429 4.806 438 1.678 General Services Financial Affairs MV Networks ICT Control 1) Number of FTEs includes police and collaborators # FTEs Source: GECOL data collection ID17, Strategy& analysis Strategy& | PwC Prepared for The World Bank 84 5 Other players Further to GECOL, another 9 companies (mostly controlled by GECOL) are involved in the sector (as service providers) List of companies operating under GECOL / Libyan Comments Electricity Holding Company GECOL Name Foreign partner Field of activity • Over the years, Libya has set up a stake number of companies serving the Public Electrical Works 100% -- electricity sector Company (PEWCO) • In 1993, the General People’s Committee Electrical Construction India: Bharat Heavy 51% Company (ECCO) Electricals Ltd (49%) decree no. 112 transferred the ownership General contracting to GECOL Company for Mechanical Bulgaria Energoimpex 51% and Electrical Engineering (49%) • In 2014, the Council of Ministers decree Electrical Projects Bosnia Energo-invest no. 342 led to the establishment of the 51% Company (ELPCO) (49%) Libyan Electricity Holding Company Arab Company for Egypt: Egyptian Consultancy • GECOL took action to transfer its shares Engineering Services and 51% Electric Holding services, project to the new Holding Company Consulting (ACESCO) Company (49%) management • Due to several issues over the last period, Electrical Industrial 51% Malta: Medelec Equipment assembly the Holding company still nominally Company (EICO) Switchgear Ltd (49%) and manufacturing answers to the Board of GECOL Algec GT Services Overhauls and 51% GE (49%) servicing of gas • GECOL, in this context, is thus in effective Company (Algec) turbine units control of the subsidiaries either directly or UAE: Oasis Operation and through the Holding Company Libyan Oasis Energy and 55% International Power Ltd management of Water Company (LOEWC) (45%) utilities, IPP BVI: Award Group O&M services for PP, Global Electricity Services 30% Holding Ltd (49%), overhauling, general Company (GESCO) 1) LAICO: Libyan African Investment Company LAICO1 21% contracting Source: GECOL, Strategy& analysis Strategy& | PwC Prepared for The World Bank 85 Up-dates available in Task A&C Final Reports Libya should thus also aim to improve sector structure, governance and policies Improvement initiatives GECOL SECTOR Improve Increase Improve commercial Manage Improve structure, operational capacity performance demand governance & performance policies Strengthen Complete ongoing Reduce Improve sector T&D system capacity-additions Introduce energy structure and policy commercial (outages and (under construction efficiency measures changes losses technical losses) /contracted) Apply demand- Increase plant Launch new Set cost-reflective Improve credit optimization availability (capacity, capacity-expansion tariffs collection incentives time) and utilization projects (new tariff) Increase plant Ensure State Explore import efficiency and financial support supply potential switch to gas Control operating expenses (salaries) Immediate priority Additional priorities Source: GECOL, Strategy& analysis Strategy& | PwC Prepared for The World Bank 86 Demand Generation Transmission Distribution and supply Supply / demand balance Governance and sector structure References for analysis update Strategy& | PwC Prepared for The World Bank 87 Analyses performed in Tasks A&C after the Rapid sector assessment have further revised the issues affecting Libya … Libya electricity sector issues Complex geo- political and economic situation Weak sector 1 governance Low results accountability Sector structure 2 (monopoly) 3 Increasing costs 6 7 8 9 10 4 Commercial Low financial Heavy burden Low Poor operating Low service losses & poor sustainability on state investments performance quality collection Commercial If GECOL does not losses improve operating performance it can not improve service Poor quality and solve its collection financial issues Unbalanced 5 tariff Source: Strategy& analysis Strategy& | PwC Prepared for The World Bank 88 …and have identified among all, 6 root-causes on which Libya shall focus its efforts going forward Libyan electricity sector root-causes The continuously evolving geo-political situation and the connected instability and uncertainty, has negatively Weak sector impacted the electricity sector (since 2012, Libya has been unable to release the necessary policy and governance regulation initiatives) Sector GECOL is still operating as monopolist, with no private participation (no IPPs) and no competition. This sector structure structure has inhibited the accountability of results, reducing incentives for performance improvements (monopoly) Increasing Partially linked to the two previous issues, FTE and salaries increases have negatively impacted GECOL P&L costs offsetting the fuel costs savings achieved (through the shift towards gas generation) Commercial The challenging socio-economic situation, the absence of a clear legal framework and the poor invoicing and losses and collection practices, has led to a dramatic rise in commercial losses and bad debt, severely impacting GECOL poor collection financial condition Government decisions to reduce tariff (residential clients) and the inability to adjust the tariff scheme against Unbalanced the rising costs have led GECOL to a structural inability to re-cover its system costs, leading to a burden on tariff Libyan state Geo-political instability, damages, lack of planning and inability to keep-up with the required sector investments Poor operating led to delayed projects and low installed capacity availability (linked to unit cannibalization, scarcity of fuel performance supply and lack of adequate O&M), with negative consequences on service quality Source: Strategy& analysis Strategy& | PwC Prepared for The World Bank 89 Further deep-dives on the generation, transmission and distribution issues can be found in Task C Poor operating performance issues identified within Task C # # # # MV & Sector Generation Transmission Control Distribution Deficient asset Issue / Overdue Damaged substations Failure of installation and concern maintenance and overhead lines communication links maintenance identified practices O&M Improve maintenance Incorrect and unsafe of overhead lines & O&M practices S/S2 DC systems Transformers failures Inadequate fuel Operational and 30kV network supply deficiencies earthing Delayed investment Delayed capacity Delayed substation Delayed control Delayed and replacement expansion projects rehab. programs projects investments projects Skills shortage Poor sector operating performance 1) For further detail, see “Task C – 4.2. Improving GECOL technical performance report; 2) Substations (S/S) Source: Improving GECOL technical performance report, Strategy& analysis Strategy& | PwC Prepared for The World Bank 90 Analyses up-dates are to be found in the various deliverables of Task A and C (i.e. Task C. 4.2 for GECOL technical issues) Project approach Task A Rapid assessment of sector performance, structure, financials & structural reform 1 2 Rapid assessment of 3 4 5 Project set-up & Regulatory Restructuring of Project review and the sector inception report reform key actors recommendations performance 1 2 3.1 4.1 5 Rapid sector High-level Option study for GECOL Findings review & Data collection performance assessment options for sector reform restructuring recommendations Approach, methodology 3.2 4.2 Sector reform & Roadmap for establishing review and data Contains preliminary electricity act of LEMRA collection analysis on GECOL Task C Institutional development and performance improvement of GECOL 1 2 3 Financial performance 4 Customer service 5 Inception Institutional Project review and assessment & performance report Development recommendations financial models improvement 1 2.1 3 4.1 5 Improving financial Strategy for institutional Tariff framework Findings review & Data collection performance of customer development review recommendations service Approach, methodology 2.2 Process mapping & Tariff structure 4.2 Improving technical review and data identification of gaps in set-up and reform performance collection staff, skills, perform. pathway 2.3 Manpower / org. Tools (excel model) rationalization review and trainings Contains findings 2.4 Contains updated analysis on GECOL generation, summaries of all ERP System review transmission, distribution (as well as financials) analyses performed Strategy& | PwC Prepared for The World Bank 91