Privatisation provides no instant solution for electricity company

The privatisation of Cameroon's state-owned electricity company two years ago has brought much needed new investment to boost generating capacity, but power cuts persist and there is a long way to go yet before the country can keep its lights on all the time. Part of the problem is that Cameroon relies on hydro-electric dams to generate 90 percent of its power. Last July, following three years of drought, the dams dried out, the turbines stopped turning and much of the country was plunged into darkness by blackouts that lasted for several days at a time. The fact that electricity supplies became more unreliable after Cameroonians had seen their power bills go up by 10 percent prompted a backlash against AES, the US utility which paid US $69 million to buy the state power company Societe Nationale d'Electricite (Sonel) in 2001. Demonstrators marched through the streets of Cameroon's commercial capital Douala wearing T-shirts with the slogan "AES go home" and the company got a thrashing in the editorial pages of local newspapers. Heavy rains in July and August have since started to refill the dams and alleviate the situation. But to prevent a recurrence of such drastic power cuts, the company has started to build a new $75 million thermal power station, at Limbe, 70 km west of the Douala. Its five generators will use some of Cameroon's offshore oil to provide an extra 85 megawatts of electricity - increasing SONEL's overall generation capacity by 10 percent. That should go some way to preventing a repetition of severe power shortages at the end of next year's dry season, although AES-Sonel officials admit privately that Limbe will not provide enough additional electricity to stop the power cuts completely. In order to provide a reliable long-term power supply, AES is trying to raise US $500 million to build more hydro-electric dams and, for the first time, gas-fired thermal power stations. These would use Cameroon's so far unexploited reserves of natural gas. A large chunk of the new money sought would also be used to reduce the amount of electricity that is lost in transmission by upgrading Cameroon's network of high voltage power lines. Helen Tarnoy, the director-general of AES Sonel, admitted as she broke the ground for the new power station last week that Cameroon's electricity problems would not be solved overnight. "Effectively [the electricity company] was run as a government department,” she told IRIN. "That has presented many challenges and I would be the last to say that we are on top of all them". "Clearly, in the run-up to privatisation the instruction had come to pretty much put a halt to investment" she said, "so investment in the network was lagging behind demand". There were other problems too. AES inherited a bloated and inefficient workforce where a "job for life" culture had taken root, breeding complacency. The accounting staff was slow to crack down on customers who failed to pay their bills and the illegal tapping of electricity from power lines was rife. However, two years on, AES-SONEL's staff has been cut back from 4,000 to 3,500 through early retirement and natural wastage and employee attitudes are starting to change. It is proving more difficult, however, to diversify Cameroon away from its dependence on hydro-electricity and keep pace with an eight percent annual growth in demand. There are plenty of large rivers flowing down from highlands of the interior to the Atlantic coast on which to build new dams. However, it takes several years to bring a new dam into production and hydro-electric power stations are always vulnerable to drought. Most of AES-SONEL's existing dams are on the Sonaga River in southern Cameroon. But company officials pointed out that water flow rates fluctuate wildly from up to 6,000 cubic metres per second after good rains to as little as 100 cubic metres per second in drought years. Thermal power stations meanwhile have their own problems. They can be built more quickly, but they cost more to run. Jeremie Bitanga, the manager of the new power station at Limbe said: "This project is for the short term because thermal production is very expensive. Hydro power costs less than 5 CFA (1 US cent) per kilowatt, while thermal power from burning heavy fuel costs 40 CFA (15 US cents) per kilowatt." But with AES-Sonel under pressure to produce quick results, there is no alternative. "Hydro stations take up to six years to get online, but we plan to have this thermal plant in action before May," Bitanga said. In private, company officials expressed doubt the project could be completed on schedule. With thermal power costing more to produce and AES Sonel needing to recoup the cost of its investment, electricity prices are likely to rise further. But businessmen say they are prepared to pay so long as the get a reliable power supply. Michael Tamdio, an official at the Office of Free Trade Zones, said the prolonged power cuts in July forced many businesses in Douala to grind to a halt as computers and fax machines shut down and people could no longer recharge their charge mobile telephones. "Everybody felt the pinch," he said. "So many people were forced to buy a generator or close their doors to their customers, but that is a huge cost for a small business" he said. The employers' organisation GICAM demanded that the government waive import duty on generators to help relieve the crisis, but its plea fell on deaf ears. Some household electricity consumers say they would also be prepared to pay more for decent service. Luciane Ogada, a school teacher from Douala, told IRIN that cheap electricity was a false economy. "When we have long power cuts at home, for example, you have to throw away all the food in the fridge which is a waste of money. It is better to pay a little more and have a regular service," he said. However, Ogada was concerned that householders have to pay more for their electricity than large companies. "Firms like Alucam (which owns a large aluminium smelter) get special deals. It's not fair that there is one price for big consumers and a higher price for households" he commented. AES reckons it will be unable to finance all the investment that is needed simply by cutting costs and increasing prices. The American company says it can fund up to half the $500 million of additional spending that will be required over the next five years to give Cameroon a reliable electricity supply from its own cash flow. It is also prepared to raise a bit more by selling shares in its Cameroonian subsidiary on both the London and Cameroon stock exchanges. However, AES is looking to aid donors, particularly the World Bank and African Development Bank, to help bridge the gap. "This is one of the challenges of privatisation in emerging countries,” Tarnoy said. "The investment needs are so enormous and sometimes you question whether a private company can manage it all" She stressed that AES was not prepared to invest in Cameroon at a loss.” We are a business and have to make a return for our shareholders," Tarnoy said, "plus we have to make sufficient returns to invest in the next project.” For the time being, AES-Sonel must simply rely on better rainfall to fill its dams and get its power stations humming again. At the ground breaking ceremony for the company's new thermal power station at Limbe, tribal chiefs poured libations of water, wine and whisky on the ground to seek the blessings of their ancestors. But most Cameroonians are raising their eyes to the heavens to pray for more rain to keep the lights on.