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                 Commercial & Operational Performance Assessment of
                       Selected SAPP Power Utility Members

                              EXPRESSION OF INTEREST (EOI)

This EOI supersedes the previous version dated of April 30, 2009. The amendments are:

                  ·   Section 1: Phasing of the two activities
                  ·   Section 5: Closing date for submission of Expressions of Interest
                  ·   Section 8: Time Schedule

The Southern African Power Pool (SAPP) was created in 1995 through a Southern African
Development Community (SADC) countries Treaty with the primary aim of providing reliable and
economical electricity to supply the consumers of each of the SAPP members, consistent with
reasonable utilization of natural resources and the effect on the environment. Regional energy trade,
particularly electric power, has been a high priority for the SADC-member countries. The disparities
in energy resources and consumption provide a strong rationale for the integration of the sector and
for the promotion of regional energy trade.

1.   The SAPP has received a grant from the Public Private Infrastructure Advisory Facility
     (PPIAF) of the Sub-National Technical Assistance (SNTA) (DFG File: 2031109-12), through
     the World Bank to do a study on Commercial and Operational Performance Assessment of
     Selected SAPP Power Utility Members that will include efforts to improve the financial
     viability and service delivery of the utilities which make up the SAPP. The first part of the
     work will be training on credit ratings with credit advisory services and technical
     benchmarking concepts and reviews to a number (4 to 6) of key power generation utilities who
     are members of SAPP. The SAPP anticipates issuing a separate expression of interest for the
     shadow credit rating work in 3 to 4 months.

2.   Now, therefore, the Southern African Power Pool, SAPP ( the Client ) seek expressions of
     interest from eligible consulting firms in participating in a tendering process for the said
     exercise. Based on the information provided the Client will invite selected Tenderers for a
     tendering process later this year. The Tenderers should have done a similar exercise elsewhere

3.   Tenderers are asked to provide the following information as part of this EOI:
     a.   Company description
     b.   Documentation of experience with similar exercise. This experience should include
          recent activities completed in the last five years.
     c.   Indicative price

4.   The EOI response is expected to be between 10     20 pages.

5.   The EOI response must be submitted electronically and in hardcopy to the address below by
     close of business 1st June 2009:

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      Hardcopy to:
            Southern African Power Pool
            Coordination Centre
            Attn: Dr. Lawrence Musaba
            17th Floor, ZB Life Towers
            77 Jason Moyo Avenue
            PO Box GT897
            Harare, Zimbabwe

      Electronic copy to:

     In case of any discrepancies between the hardcopy and the electronic copy, the hardcopy has

6.   The price indication in the EOI will be used for information purposes only, but not as a
     criterion in the evaluation process.

7.   Evaluation of the EOI
     In the evaluation of the EOI responses the following criteria will be used:
     o      Compliance with the activities stated in item 1 above and detailed in Appendix-1.
     o      The documented experience from other parts of the world
     Based on the evaluation of the EOI responses a maximum of 6 firms will be invited to
     participate in the Final Tender.

8.   The indicative time schedule for the Exercise is as follows:
     a.   Preparation of a short-list of consultants         5th June 2009
     b.   Send out Request for Proposals (RFP)               12th June 2009
     c.   Submission of Proposals                            10th July 2009
     d. Evaluation of Proposals                              24th July 2009
     e.   Contract award                                     10th August 2009
     f.   Start of the Exercise                              10th August 2009

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                                                  Scope of Work

The work plan for this activity includes five tasks, with a final option task to be carried out at the
request of the targeted utilities.

Task 1: Utility Credit Rating Criteria Workshop: In conjunction with the CEO of the utility and
other major executive staff, hold an introductory workshop/meeting to introduce the credit
worthiness exercise. Highlight the critical factors under the control of the utility that have the most
significant impact on its credit rating and the cost of obtaining credit in the capital markets for capex
improvements. The objective of the Task-1 activity is to identify and address credit related
problems. This activity is done in conjunction with the shadow credit rating process to improve
credit worthiness and increase the likelihood of securing private financing in the near to medium
term. Highlight the major factors that are considered when preparing credit ratings. Explain the
difference between formal and shadow credit ratings. Present specific financial instruments that
might be used in utility finance, and explain the different criteria used by rating agencies for each.
The detail in these presentations should be tailored to the experience and background of workshop

Task 2: Gather and Review Information on Utility Performance: In conjunction with the utilities
Chief Financial Officer and other related staff, visit and review all the relevant information to
identify the most significant credit problems facing the utility for each of the credit rating criteria
under its control (financial and debt management, utility operating performance, tariff setting and
adjustment, capex program for the service area, etc.). This includes, among other information, 1)
annual budgeting; (2) financial policy and medium term fiscal frameworks, (3) reporting and
disclosing; (4) revenue and expenditure management; (5) service pricing; (6) liquidity and cash
management; (7) debt management; (8) investment/capex plans; (9) governance and (10) operational

Where appropriate, limited field visits to collect information are also anticipated. The timing and
location of the field visits will be closely coordinated with SAPP and the individual utility. Only
visits with a high probability of collecting relevant data should be undertaken. It is anticipated that
local consultants will be most useful and resourceful in carrying out this research.

Task 3: Performance Benchmarking: To put the credit status of targeted utilities into clearer
perspective, and help them gain a better view of their relative strengths and weaknesses vis-à-vis
other, similar utilities, a performance benchmarking study will be carried out. The information to be
used in this benchmarking will be that gathered and reviewed as part of Task 2 above, as well as
information that is available from other sources, such as the African Infrastructure Country
Diagnostic (AICD) and RERA, the regional association of energy regulators.1 Specific indicators
covering commercial as well as operational performance should be identified. A sample of potential
indicators is highlighted below:

Commercial Performance Indicators

    1.     Cash collected per kwh received by the distribution systems

  The PPIAF-supported AICD study has gathered an extensive amount of electricity utility benchmarking information
that will populate a large power utility benchmarking database. The cooperation of RERA in this effort is ensured by the
2007 MOU between SAPP and RERA.

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   2.     Collection Efficiency = total monthly cash collected/monthly amount billed (overall and by
          customer category)
   3.     Measures of the level of receivables by customer category
   4.     Average annual operating expenses (excluding depreciation and debt service) per kwh
   5.     Cost recovery = percentage of total annual operating expenses covered by annual revenues
   6.     Collection period = year-end accounts receivable divided by total annual operating
          revenues multiplied by twelve
   7.     Total annual value of electricity billed by customer category
   8.     Average collected revenue per kwh billed by customer category
   9.     Average cost of per kwh received from by individual IPPs and from own generating plants
   10.    Debt service ratio=cash income divided by debt service ratio

Operational Performance Indicators

   1.     Metering Ratio = Total number of customers metered/ total number of customers
   2.     Total (full time equivalent) employees
   3.     Number of customers per full time equivalent employee
   4.     New connections made during the reporting period
   5.     Average number of applications pending for connections made during the reporting period
   6.     Distribution transformers installed
   7.     Faults reported and corrected on the distribution system during the reporting periods
   8.     Defective and other meters replaced
   9.     Transmission losses = transmission, transformation and grid station losses as a percentage
          of net generation (gross generation minus kwhs used in auxiliaries)
   10.    Distribution losses = units supplied for distribution minus units billed
   11.    Annual Frequency of Outages
   12.    Total Annual Duration of Outages
   13.    Fatal and non-fatal accidents

Task 4: Short-term Recommendations to Improve Creditworthiness: Based on a review the
information collected in Tasks 2 and 3, provide an assessment of the creditworthiness of the targeted
utilities, and recommend ways of addressing constraints and enhance strengths.

   ·     Where applicable, the advisor(s) should frame their diagnoses in a way that identifies
         relatively modest interventions that will have the greatest impact in terms of creditworthiness
         improvement. The recommendations should be directed toward achieving the highest credit
         rating for a near-term debt transaction that supports a capital improvement plan project. (A
         longer-term action plan will be recommended after the shadow credit ratings described in
         Task 6.)

   ·     For any of this analysis to have an impact in terms of improved creditworthiness, the utility
         must fully understand and be committed to the necessary changes in commercial and
         operational performance. To prepare for shadow ratings, the advisor(s) will conduct a
         workshop/meeting with key staff of the utility as well as key government shareholders, if
         appropriate. The meeting will highlight the overall findings of the review. Cite strengths and
         potential weaknesses. Identify short and longer term solutions. Where options exist, cite the
         pros and challenges of each.

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Task 5: Prepare a Creditworthiness Improvement Plan: After the shadow ratings are completed,
at the request of the utility, the advisor(s) will prepare a longer-term creditworthiness improvement
plan, designed to help the utility achieve a formal, public investment grade credit rating for a specific
transaction identified in the utility s capital improvement plan. This creditworthiness improvement
plan should draw on the advisor(s) own work in Tasks 1-5, as well as the results of the shadow credit

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