This report provides a primer on the performance of electricity utilities in sub-Saharan Africa, reflecting on the current landscape of power sector and utility challenges, the reforms undertaken to address performance failures, opportunities for a utility of the future amid the global energy transition, governance frameworks available to assess performance (like the infrastructure regulatory system and World Bank's Utility Performance and Behavior Today [UPBEAT] platform), and the prospects for changing the political economy of state-owned utilities to significantly improve transparency, accountability, and performance. It provides foundational knowledge on how to use financial statements and economic tools so that nonexperts can assess the financial health of a utility for the purposes of demanding greater accountability. It also provides insights on why energy sector power purchase agreements (PPAs) should be made more transparent for greater public accountability. Further, the primer lays out the need for an enhanced role of civil society in advocating for improved transparency and greater civil participation in the governance of state-owned utilities and how regulation can be of further help. The key takeaway is that state-owned enterprises should be subject to commercial governance arrangements, including mandatory and stringent contracts and exposure to some private capital as well as stakeholder annual general meetings, open to the public, similar to those that occur in the private sector. This report complements three other reports published for Ghana, Kenya, and South Africa. Each of those reports focuses on understanding the specific governance conditions surrounding their respective national electricity utilities. All these reports together are intended to build the programmatic and campaigning capacity among civil society actors to enable them to engage in improving the governance of electricity utilities. As such, the intended audience for this report is, first, members of civil society, and then policymakers and energy sector practitioners who are concerned about the operations of their national electricity utilities and who are contemplating advocacy and programming to improve their performance
Authors
- Collections
- Research reports & discussion papers
- DOI
- https://doi.org/10.21201/2024.000035
- Pages
- 59
- Published in
- Kenya
- pages
- 60
Table of Contents
- EXECUTIVE SUMMARY 6
- Introduction 7
- challenges posed by utilities in sub-saharan africa 13
- Technical Inefficiencies 13
- Commercial Inefficiencies 13
- Underpricing/ Below-cost tariffs 14
- Financial distress 14
- Governance failures 15
- Frameworks for evaluating utility governance and performance 15
- underlying Context of power sector reform 19
- Current Landscape of Reforms in Sub-saharan africa 21
- reforms and the need to improve Transparency of Power Purchase Agreements 23
- Policy Levers, Lessons for Reforms, and utility performance 25
- key ratios for Assessing Utility Financial Performance and Sustainability 27
- Debt-Service Coverage Ratio 28
- Debt-to-Equity ratio 30
- Cash (self-financing ratio) 31
- Interest-coverage ratio 32
- Current Ratio 33
- Gross profit margin 34
- Net profit margin (after tax) 34
- Collection Rate 35
- Debtor Days ratio 36
- Creditor Days ratio 37
- strengthening the Role of Civil Society in Utility Governance 38
- Changing the Political Economy of Governance in Utilities 38
- The Role of Civil Society in Improving Governance 39
- A Call to Action and Agenda for civil society Engagement with Utilities 41
- Conclusion and Recommendations 42
- APPENDIX: Using three-Way Financial Statements as an Advocacy Tool for Improving Performance 45
- References 55
