75800 September 2011 PPIAF Assistance in Mauritania In Africa, Mauritania is located between the Maghreb and West Africa. Its geographic position constitutes a strategic advantage and a great opportunity for the expansion of the country’s economy. However, many decades of severe droughts and lengthy armed conflicts have plunged Mauritania into a vicious circle of poverty and instability. Since 1960, when Mauritania declared its independence from France, various structural programs have been developed to construct large-scale infrastructure projects in the mining, energy, and manufacturing sectors. Most of these ambitious projects have not materialized for many different reasons that can often be linked to the political coups and frequent changes of governments or regimes. Despite these failed attempts to boost economic growth, the government of Mauritania has continued to design strategies for the development of its key infrastructure sectors. More recently, in 2008, the government of Mauritania decided to reinvigorate the energy sector that was facing severe financial and technical crises and was in need of urgent and swift reforms, including the restructuring of the Société Mauritanienne d’Electricité (SOMELEC), Mauritania’s public and vertically integrated utility. Private Participation in Mauritania’s Energy Sector For many years SOMELEC had been facing severe financial and technical crises. Despite the government’s continued support to the energy sector, SOMELEC was facing dire financial issues that threatened its ability to continue with its operations in 2007–2008. Among the reasons for this financial crisis were the increase in oil prices, especially with regard to the expensive emergency diesel generation; the severe deterioration of the generation assets; the high number of uncollected bills from private and public sector consumers coupled with an important number of non-technical losses; and the absence of adequate tariff increases over several years. This situation hindered the overall growth of the Mauritanian economy and had considerably decreased the quality and access to electricity services in most areas of the country. As a solution to this financial and operational crisis, SOMELEC requested technical support from PPIAF in 2008 to develop a restructuring plan for its corporate activities based on a comprehensive diagnostic of the power sector in Mauritania, including the overall sector environment. The objective of this activity was two-fold: 1) to assist SOMELEC in the short term to restore its financial, technical, and operational viability, which is a pre-requisite for any private sector participati on in Mauritania’s power sector; and 2) to identify options of sector reform measures that would lead to an enhanced private sector involvement in the power sector. Despite important delays due to political instability in Mauritania, the activity was finally closed in late 2009. All but one task (final workshop) were completed. The review included a comprehensive corporate and financial proposal for the restructuring of SOMELEC. It also recommended sectoral reforms to enhance private sector participation in the local electricity sector. The proposed reforms aimed to improve the institutional and legal framework for the development of the energy sector in Mauritania. In 2010, subsequent to the end of the political crisis, PPIAF approved a small follow-up grant to update the final report of the study on the restructuring of SOMELEC and to organize a dissemination workshop to present the findings of the study. The workshop, held in Nouakchott on June 2, 2010, was led by the Minister of Energy and Oil and attended by the Minister of Economic Affairs and Development, the Minister of Finances, the Director of Investment Promotion, and the Director General of SOMELEC. The focus of the discussions was on ways to increase private sector participation in the power sector in general and in SOMELEC in particular. However, other topics were also considered, such as public- private partnership options for developing a large power plant project. In 2011 the government of Mauritania received a €20 million grant from the Agence Française de Développement (AFD) to implement the energy sector reforms (some of which were recommended by the PPIAF-funded study), and to support the recovery plan of SOMELEC. Furthermore, the World Bank was approached by the government of Mauritania to support the development and financing of a new thermal 1 power station to be commissioned by 2013. The proposed project is sought to be developed in the form of an Independent Power Producer with strong private sector involvement under a public-private partnership financing. The restructuring and reform of the power sector was identified as a pre-requisite to develop this project as a public-private partnership and to attract private sector capital. PPIAF will monitor the progress of the two projects funded by AFD and the World Bank, as the resulting transactions may later be reported as outcomes of PPIAF support to the development of public-private partnerships in Mauritania. PPIAF has recently approved a grant for a study on the Public Expenditure and Financial Accountability for the City of Nouakchott. The implementation of this activity is expected to start in November 2011. In addition, the government of Mauritania has expressed interest in getting additional support from PPIAF to strengthen the capacity of its electricity regulatory body. Results of PPIAF Support to Mauritania’s Energy Sector Category Outputs Enabling environment reform  Review of the electricity sector in Mauritania, July 30, 2008 Analyses/assessments prepared  Diagnostic of the Société Mauritanienne d’électricité, July 30, 2008  Final recovery plan for the Société Mauritanienne Plans/strategies prepared d’Electricité, June 2010 Capacity and awareness building  Workshop on the restructuring of SOMELEC held in Nouakchott on July 21, 2008 Workshops/seminars  Dissemination workshop held in Nouakchott on June 2, 2010 Category Outcomes Enabling environment reform  Adoption of the recovery plan for the Société Mauritanienne Plans/strategies adopted d’Electricité at the final workshop held in Nouakchott on June 2, 2010  Institutional strengthening of the Société Mauritanienne Institutions created or strengthened d’Electricité, 2008–2010 Capacity and awareness building  Consensus on the need to restructure SOMELEC and to build a public-private partnership power plant so as to solve Consensus achieved ongoing issues related to the generation of electricity, June 2010 Looking Ahead: Moving the PPP Agenda Forward Mauritania’s 2001–2015 Poverty Reduction Strategy Framework and its associated action plan for 2011– 1 2015 lists infrastructure development as one of the cornerstones of the government’s program . Several projects have been identified in the energy and transport sectors for which private sector participation 1 http://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/Mauritania-RBCSP%202011- 2015x.pdf 2 may be a key element to their development and implementation. These projects have high potential of improving the socio-economic conditions of millions of Mauritanians who live in extreme poverty, and have no, or limited, access to basic social services. 3