Commercial Frameworks for Energy Investment

Regional Issues and Cooperation

Mahama KappiahECOWAS Commission

May 2008

ECOWAS VISION

develop interconnection and power exchange

between Member States

create an open and competitive

regional electricity market

harmonize legislations and standards

for power sector operations

use flared gas in Nigeria to feed Power stations

in neighbouring countries(WAGP)

promote and protect private investments in energy projects

create a sustainable enabling environment for Investment in the West African Power Sector

Rationale of the WAPP

Abundant EnergyAbundant EnergyResources within Resources within ECOWAS regionECOWAS region

Uneven distribution ofUneven distribution of Energy ResourcesEnergy Resources

Inadequacy power Inadequacy power supply to meet demandsupply to meet demand

WAPPWAPP

DEVELOPMENTDEVELOPMENTOF A REGIONAL OF A REGIONAL POWER MARKETPOWER MARKET

(Optimization (Optimization of resources of resources

use) use)

DEVELOPMENTDEVELOPMENTOF POWER OF POWER

SUPPLYSUPPLY INFRASTRUCTUREINFRASTRUCTURE

•Hydro & ThermalHydro & Thermal•Interconnection linesInterconnection lines

Weak Infrastructure Base Weak Infrastructure Base for Energy Tradingfor Energy Trading

The ECOWAS Energy Protocol

A legal framework for cooperation in the Energy Sector

• Modeled on the European Energy Charter• Drafted by the WAPP Institutional Working Group (IWG)• Signed by the ECOWAS Heads of States and

Governments on January 31, 2003

• Ratified by Member States’ parliaments • To ensure free trade of energy, equipment, products and

services related to energy among Member States• Define non–discriminatory rules for regulated trade activity

and dispute resolution

Art 6: Open access to power generation and transmission facilities…

Art 7: Freedom of transit without discrimination -- even in case of dispute, transit must be guaranteed until the conclusion of the dispute resolution…

Art 9: Access to national capital market on a basis no less favourable than that for the national companies…

Art 11: Permit investors to employ any key personnel they want regardless of nationality and citizenship…

Main Provisions of the ECOWAS Energy Protocol

Art 12: “No less favourable treatment” principle is applicable to restitution, indemnification, compensation or other settlement following a war or armed conflict, state of national emergency, civil disturbance, or other similar events…

Art 13: Nationalisation or expropriation is forbidden in the area, except when it is carried out of public interest… The amount of compensation is based on market value before the decision and includes interest for any payment delay…

Main Provisions of the ECOWAS Energy Protocol

Main Provisions of the ECOWAS Energy Protocol

Art 14: Guarantee the freedom of transfer, into and out of the area without delay and in a freely convertible currency, of capital and payments related to the investment activity

Art 19: Each Contracting Party shall strive to minimize in an economically efficient manner harmful environmental impacts

Regional Electricity Regulatory BodyRegional Electricity Regulatory Body

• Need of a common framework for regional trading in electricity to ensure compliance with ECOWAS Energy Protocol principles

• Unrestricted power exchange among Member States within a competitive framework ; • an open and competitive regional wholesale power

market with non-discriminatory, transparent and fairly priced network access ;• harmonization of operational, safety and tariff rules

cross-border power exchanges ;• harmonization of national market rules in conformity

with the rules and principles of the regional regulator• dispute resolution ;• Protection and promotion of private investments• ensure the protection of environment and

development of energy efficiency.

withoutPPP PPP under consideration

PPP

RR

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RR Régulation body Régulation in project

Source : AFD / TID

--Regulation mechanisms in ECOWAS regionRegulation mechanisms in ECOWAS region

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MISSIONS OF THE REGIONAL REGULATOR

1. Contribute to the implementation of a local context favorable for public and private investments

2. Ensure regulation of regional electricity exchanges

3. Assist ECOWAS Commission in the definition of the strategic orientation of the regional policy and in the harmonization of policies and national power structures

4. Support the establishment of the regional market and its opening to competition

MISSIONS OF THE REGIONAL REGULATOR Adoption of the proposed ERERA Missions

5. Supervise regional market operation

6. Ensure communication with and between actors in the sector

7. Establish efficient procedures for dispute resolution between stakeholders (mediation, conciliation, arbitration)

8. Assist national regulators at their request

9. Provide assistance and advice to actors who request it

PHASE II Build-up

24 months

PHASE I1.1. Development

28 months1.2. Transition6 – 8 months

CONTINUOUS SYSTEM

ERERAERERA

Regional Regulation Development Office Régionale (RRDO)

RRDO

ADOPTION OF THE SUPPLEMENTARY ACT BY HEADS of GOVERNMENTS

PUBLICATION OF THE SUPPLEMENTARY ACT

CREATION OF ERERAVALIDATION

FEASIBILITY STUDYVALIDATION OF ERERA

SPECIFICATIONS

ERERAERERARegulation

Experts ERERA

Thank you for Your Attention