Societe Tchadienne d'Eau et d'Electricite (STEE)

cancelled

In September 2000, the Government of Chad (GOC) signed a thirty-year contract with Vivendi-Dietsman, a subsidiary of Vivendi (Veolia Environnement as of May 2003), to progressively transfer the provision of electricity and water services from Societe Tchadienne d'Eau et d'Electricite (STEE), the state-owned concession holder. The concession perimeter included the capital city of N'Djamena (which represented 80% of the country's electricity consumption) and eight small urban centers. Chad's electricity sector was characterized by very high tariffs, high UFW and low bill collection, as well as by unreliable and poor quality service. Government interference had been constant and investment had been sorely lacking. The very limited facilities were old and inefficient and had not been adequately maintained due to financial problems and poor management. Peak electricity production in Chad was less than 25 MW, of which about 20 MW was generated in N'Djamena, Chad's capital, and the remainder in five smaller urban centers -Moundou, Sahr, Abeche, Bongor, and Faya-Largeau. There were about 16,400 electricity customers in a country of 7 million persons, so STEE provided services to only 1% to 1.5% of Chad's population. In the water supply and sanitation sector, only about 30% of the urban population and 26% of the rural population had access to safe water. STEE was producing about 25,000 cubic meters (m3) of water per day through 15,000 connections, while actual demand was over 35,000 m3/day. The contract for private participation in STEE was to be divided into three phases. The first phase was a management contract in which the private operator (Vivendi-Dietsmann) was to assume full technical and financial management of the company and be paid a fixed fee and a variable amount tied to performance of the utility. The private operator was expected to optimize operating costs, improve billing and collection ratios, and reduce commercial losses. This first phase was expected to last two years, but no more than five years and possibly be split into two sub-phases, in which a lease contract would follow. This second phase, if necessary, was expected to last three years, and was an "affermage" phase under which Vivendi-Dietsmann was to become financially responsible for the operations of the electricity and water sectors and for the results of the utility. Responsibility for financing investment, however, was to remain with the Republic of Chad while Vivendi-Dietsmann was to be remunerated from the utility revenues. This second phase of the investment program for the electricity and water supply sectors of Chad was to be implemented once the sectors were financially able to support a lease contract. During this phase, the Sedigi refinery was expected to supply the utility with relatively cheap heavy fuel oil and access to services was expected to expand rapidly. The third phase, which was expected to last up to 25 years, was to be a full concession, under which Vivendi-Dietsmann, the original management contractor, would become the majority holder of the utility and assume full responsibility for the investment, financing, and management and operation of the electricity and water supply facilities. In 2002, the project received support from the World Bank through the Critical Electricity and Water Services Rehabilitation Project, consisting of IDA credit financing of US$54.8 million for the overall development of the sectors. The project also received US$4.5 million worth of support from the bilateral Agence Francaise de Developpement and US$.9 million from the GOC. Veolia’s management reforms were contingent upon subsidized investments in generating capacity and the implementation of the Sedigui oil project to reduce fuel costs. However, the Sedigui project was delayed after a Sudanese company, Concorp International, was unable to complete the job of developing the small fields and building a pipeline to carry Sedigu