Publication: Private Participation in Electricity : The Challenge of Achieving Commercial Viability and Improving Services
Date
2007-05
ISSN
Published
2007-05
Author(s)
Tenenbaum, Bernard
Izaguirre, Ada Karina
Abstract
This document is about the private
participation in electricity. Private activity in
electricity in developing countries has stabilized at a
modest level since 2001. Private activity also became more
evenly distributed between International Development
Association (IDA) countries and non IDA countries. Private
activity in electricity remained concentrated in a few
countries. Investors generally prefer greenfield projects
structured as enclave projects, protected from many sector
risks. Electricity is not the only infrastructure sector
where this type of private investment predominates. Similar
arrangements have emerged in water and sanitation, where
greenfield water and sewage treatment plants sell to a
single customer through government-supported take or pay
agreements. Distribution is inherently riskier for investors
because it involves selling to thousands of customers who
purchase at prices that are highly visible and politically
contentious. To attract investment in distribution, a new
guarantee mechanism has been adopted. In overview, these
projects usually provide protection from major risks through
long-term contracts and often come with government payment
guarantees. If there is to be significant and sustained
private investment beyond greenfield generation projects, it
will need to be built on a platform of commercially viable
electricity distribution entities. If private participation
can establish such entities, it will create the best
foundation for future upstream private investment in generation.
Citation
“Tenenbaum, Bernard; Izaguirre, Ada Karina. 2007. Private Participation in Electricity : The Challenge of Achieving Commercial Viability and Improving Services. Gridlines; No. 21. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/d3678377-6141-5375-91f5-90599507e14c License: CC BY 3.0 IGO.”