VZCZCXRO5373
RR RUEHMA RUEHPA
DE RUEHMV #1190/01 2831008
ZNR UUUUU ZZH
R 101008Z OCT 07
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 9328
INFO RUEHZK/ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASH DC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 03 MONROVIA 001190 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT PLEASE PASS OPIC FOR JOHN SIMON, ROBERT DRUMHELLER, DULCE 
ZAHNISER 
TREASURY FOR JOHN RALYEA AND RICHARD HALL 
DEPARTMENT FOR AF/W AND 
INR/AA FOR BERNADETTE GRAVES 
 
E.O.12958: N/A 
TAGS: ENRG EINV EAID LI
SUBJECT: LIBERIA: GRAPPLING WITH THE ELECTRICITY SECTOR 
 
¶1. SUMMARY:  Easing the dire shortage and addressing the cost of 
electricity is a top priority of Liberian President Ellen Johnson 
Sirleaf's government but balancing speed with a prudent strategy is 
a challenge.  The GOL believes the best solution is developing 
Liberia's abundant hydroelectric potential, but that will take 5-10 
years.  Currently Monrovia, with a population estimated at 1.5 
million people, receives 2.7 megawatts of power from diesel 
generators under the Emergency Power Project (EPP) supported by the 
USG and other international partners.  The EPP is a stopgap measure 
designed to meet the political imperative of restoring some light to 
Monrovia quickly.  While there is consensus on the need for 
private-sector participation in the power sector, the role of the 
crippled Liberia Electricity Corporation (LEC) needs to be 
clarified. 
 
¶2.  The GOL has appointed the International Finance Corporation 
(IFC) as advisor on developing a strategy to address Liberia's 
long-term power needs.  The IFC/GOL recently sought expressions of 
interest for a vertically integrated utility concession, and 
received eight responses.  However, splitting the sector by having 
an independent power provider (IPP) handle generation, while donors 
concentrate on less commercially attractive aspects such as 
transmission, distribution and rebuilding the LEC, may be a more 
attractive option.  There are no quick solutions, but the lack of 
reliable, sustainable power is a major constraint on Liberia's 
economic recovery.  Although the Emergency Power Project is a 
commendable first step, Liberians will judge the success of this 
government in large part by its ability to provide broad-based 
access to affordable electricity.  END SUMMARY 
 
REBUILDING FROM SCRATCH 
----------------------- 
 
¶3. Prior to the civil war, the state-owned LEC produced 209 MW of 
electricity, with 64 MW generated at the Mount Coffee hydroelectric 
dam near Monrovia, and the rest at turbine powered stations around 
the country.  LEC served over 35,000 customers with a distribution 
system comprising 420 km of 64 kV lines and 800 km of overhead and 
underground 12.6 kV lines.  Although many rural areas were never 
electrified, the pre-war grid included 10 manned and six unmanned 69 
kV transmission substations plus stand-alone generators in nine 
major population centers.  LEC was the only power utility in West 
Africa using American standard 120/208/380 volts - 60Hz. (Liberia 
has since moved to the 220-240v 50Hz European standard.)  Major 
companies produced an estimated additional 197 MW of electricity 
prior to 1990.  Power production facilities were completely looted 
and destroyed during the 14-year civil conflict and, except for the 
Emergency Power Program in parts of Monrovia, all electricity is now 
produced by point-of-use generators.  A recent OPIC survey estimates 
current demand in Monrovia by the largest private consumers at over 
12 MW.  That does not include residential, non-profit or government 
consumption. 
 
EXPENSIVE, LIMITED, AND POORLY MANAGED 
-------------------------------------- 
 
¶4. The LEC generates 2.7 MW under phase one of the donor-funded 
Emergency Power Project (EPP I) and expects to implement EPP II in 
February 2008 when additional diesel generators procured through a 
US$9,000,000 grant provided by Norway will be delivered.  EPP II 
will increase power generation in Monrovia by 7 MW.  The current LEC 
transmission and distribution system consists of 12 km of 
medium-voltage and 18 km of low-voltage network around Monrovia. 
The system follows major roads, serving 580 customers with a focus 
on schools and hospitals.  The European Commission has funded 
rehabilitation of three transmission substations and agreed to 
rebuild the high/medium voltage transmission line around Monrovia, 
although that project has been delayed. 
 
¶5. The cost of diesel-powered electricity under the EPP is US $.34 
per Kilowatt-hour, a prohibitive price for many consumers.  A study 
by USAID-funded International Resource Group (IRG), which provides 
policy, legal and regulatory assistance to the GOL, found that 
people actually spend more on electricity substitutes (candles, 
batteries, kerosene) than they would for even relatively expensive 
electricity from the grid.  IRG is implementing an innovative 
metering system that allows consumers to purchase small amounts of 
electricity as needed using pre-paid cards.  Assuming private 
investment in power generation, donors could channel funds to 
rebuilding LEC's management and technical capability and 
refurbishing the transmission and distribution system. 
 
¶6. As with its infrastructure, LEC's human resources were devastated 
by the war.  For example, LEC management is concerned about the gap 
in electrical engineers as the pre-war generation retires.  IRG is 
 
MONROVIA 00001190  002.2 OF 003 
 
 
working with the utility company to institute effective management 
and engineering capability.  The initial focus was on boosting 
collections and countering the culture of impunity regarding 
electricity theft ("it's from the government; it's free").  With 
collections now approaching 90%( up from 67% in April), IRG and the 
LEC are working to counter theft, currently at around 10% (down from 
17% in June).   Improving collection ratios and reducing theft will 
prove to private power providers that Liberia could be a viable 
market.  Eventually, as the system expands and collections increase, 
LEC would become a viable institution. 
 
BRIDGING THE GAP FROM DIESEL TO HYDRO 
------------------------------------- 
 
¶7. The EPP is a stopgap measure; the long-term answer lies with 
Liberia's abundant hydroelectric potential.   Rehabilitating the 
Mount Coffee hydroelectric power station near Monrovia is the 
obvious first step but requires major investment and at least 5-10 
years.  Chinese investors have expressed interest in rebuilding 
Mount Coffee through a build operate and transfer (BOT) program. 
However, the GOL has decided to await results from the U.S. 
TDA-sponsored feasibility study before making a decision.  Japanese 
investors have also expressed interest in providing 10 MW of power 
generation equipment.  In the medium term, a thermal plant built by 
an independent power producer is the most viable option.  This 
approach is complicated by the fact that there is, on average, an 
18-month lead time for Heavy Fuel Oil (HFO) power plants in the open 
market. 
 
¶8. The government has appointed the IFC as its advisor to implement 
a private sector-led solution to develop the power sector.  On 
August 31, the IFC in collaboration with the Ministry of Lands, 
Mines and Energy received eight Expressions of Interest (EOI) to 
develop and manage the power sector of Monrovia (construction of a 
new power plant, new distribution lines within the city of Monrovia, 
connecting new customers, hiring and training of staff and metering 
and collection of electricity sold).  The initial suggestion for the 
tenure of the vertically integrated utility concession ranged from 
eight to thirteen years. 
 
¶9. On September 20-21, the GOL/IFC held a meeting in Liberia for all 
companies who responded to the EOI that seven of the eight companies 
attended. The consensus from the majority of participants was that 
the proposed duration of the concession would be insufficient for 
the recovery of their investment and suggestions of 15-20 years were 
received.  Only one of the companies expressed an interest in the 
IFC's fully vertically-integrated IPP approach.  The IFC will take 
the feedback from this investor's forum and refine its suggested 
structure for the concession. 
 
¶10. Sustaining an IPP relies on commitments from creditworthy 
consumers.  One proposal, by OPIC, is to separate power generation 
from power transmission and distribution.  ArcelorMittal's $100 
million mining investment will require a total of 75 MW of power at 
the port of Buchanan and at the mine site in the interior.  Building 
a plant at Buchanan with heavy fuel oil offloading and storage 
facilities at the port and transmission lines to Monrovia and the 
Mittal mine site in Yekepa would leverage Mittal's power 
requirements to provide power for other credit-worthy consumers 
(such as factories and embassies).  The economies of scale of the 
larger plant would offset the cost of transmission and lessen costs 
associated with building separate plants in Monrovia and at the two 
Mittal sites.  (Note:  The port in Buchanan and the HFO facilities 
would need to be rehabilitated.  End note.)  A power generation 
project of that scale, without the requirement to provide 
transmission and distribution or manage the LEC, might well be more 
likely to attract private investment by an IPP. 
 
¶11. All large consumers surveyed (including Mittal, the cement 
company, the brewery, the soft-drink bottling plant, and the U.S. 
Embassy) anticipate increased electricity consumption by 2010/11. 
All would embrace the opportunity to stop self-generating power and 
purchase from an IPP.  OPIC has developed a creative strategy to 
guarantee payments from the large credit-worthy consumers to an IPP 
that could be leveraged to provide more affordable energy to a wider 
customer base.  Although the cost of converting from 60Hz to 50 Hz 
is a factor, most consumers thought it would be cost-effective. 
 
WEST AFRICA POWER POOL:  NOT YET AN OPTION 
------------------------------------------ 
 
¶12. Liberia is a member of the West Africa Power Pool (WAPP), and 
has embarked on a joint US$9.5 million project, sponsored by the EU, 
to share power with the Ivory Coast along the common border. 
Participation in WAPP drove the decision to convert from American 
 
MONROVIA 00001190  003 OF 003 
 
 
(120-127 v 60 Hz) to European (220-240v 50 Hz) generation. 
Eventually, Liberia could feed hydroelectric power into the WAPP 
grid, but it is not a short-medium term solution. 
 
¶13. COMMENT:  There are no quick solutions, but the lack of 
reliable, sustainable power is a major constraint on Liberia's 
economic recovery.  Although the Emergency Power Project is a 
commendable first step, Liberians will judge the success of this 
government in large part by its ability to provide broad-based 
access to affordable electricity. END COMMENT. 
 
BOOTH