PPIAF Support to the West African Power Pool (WAPP)

While laudable and essential, integrating West Africa’s electricity markets and developing the necessary generation remains a large and complex undertaking in terms of coordination and capital costs. Likewise, it creates significant project risks. The anticipated investment requirements to develop the needed electricity transmission lines and power generation capabilities will be in total close to $24 billion2.  Due to the large capital needs and the regional and thus inherently more complicated nature of the project, direct private sector investment in the WAPP has been low to date with the public sector and International Financial Institutions (IFIs) contributing the majority of funding.  Ultimately though, by supporting the infrastructure development and the enabling environment for WAPP, the public sector’s and IFI’s support will spur the creation of a regional electricity market. This in turn will encourage private sector investment along the energy supply chain. Particularly, it will promote more private sector activity in the energy generation sector where more Independent Power Producer (IPPs) will be conceived due to the presence of a viable market for power generation – a result of the WAPP infrastructure. This also ensures greater likelihood that IPP’s recover their investment costs. In this sense, the public investment in the WAPP projects is seen as crucial in leveraging additional and vital private sector investment. In a post-financial crisis environment, public sources of finance need to perform this vital role in investing in higher-risk transformational infrastructure, which can open markets and increase economic activity, consequently sparking increased private sector investment. The WAPP project provides a perfect example of this important enabling role for public finance.

 

PPIAF has done its part to support WAPPs mission over the past seven years, supporting five activities targeted at bolstering the enabling environment and infrastructure development of segments of the WAPP system. In 2005 and 2006 PPIAF’s support aimed at fostering a robust legal and regulatory environment that would ensure a successful WAPP. For example, in 2005 PPIAF supported a study that provided a roadmap to guide the development of a WAPP information coordination center, designed to strengthen coordination and information sharing between ECOWAS member states.  Likewise in 2006, PPIAF supported a business plan that served as a framework to steer the operations – the corporate governance, organizational structure, performance standards, and monitoring and evaluation – of the then newly created WAPP Secretariat for three years.

 

Between 2008 and 2010 PPIAF’s support to the WAPP focused on strategies for infrastructure development and capacity building. In 2008 PPIAF supported the development of a “PPP Blueprint for implementing WAPP priority projects.” The blueprint aimed to help the WAPP Executive Board promote public-private partnerships in the form of special purpose vehicles, designed to help accelerate the development of key cross border transmission infrastructure. As electrical utilities in ECOWAS increasingly interconnected and cross border trading grew, the rules and standards managing these processes required strengthening and reassessment. In 2009 PPIAF supported a study which assisted the Regional Regulatory Body overseeing WAPP to reassess its rules and develop guidelines for contractual practices for transactions involving the engagement of parties in the regional electricity markets, covering national and regional IPPs.

 

Currently PPIAF is supporting an activity that is further developing and finalizing the various legal agreements involved in establishing a special purpose company to construct, own, operate, and maintain the 1,411 km transmission line connecting Côte d’Ivoire, Sierra Leone, Liberia, and Guinea with the WAPP system.