The World Bank Board of Executive Directors has
approved a US$7.2 million International Development Association (IDA) credit to
support efforts by the government of Guinea to improve the commercial and
operational efficiency of the country's power sector.

The project will also contribute to reduction of carbon dioxide emissions
through the reduction of energy losses. The Government of Guinea has also
approached the GEF for additional resources (US $4.5 million) for the
activities planned under this project.

The Guinea Electricity Sector Efficiency Improvement Project will strengthen
ongoing efforts at the national power company C Electricit de Guine (EDG) C
to improve managerial performance, curb theft of electricity, implement a
robust tariff policy that addresses inflation and efficiency improvements along
with demand side measures and pave the way for private sector partnerships.

The electricity sectors performance is intrinsically linked to improvements
Guinea seeks through its economic reforms but, currently, the power sector is a
major burden on the Guinean economy given that it not only fails to deliver
reliable energy but it also accumulates huge annual losses estimated at 107
billion Guinean francs or about US$25 million at 2005 exchange rate, said
Prasad Tallapragada, the World Bank Task Team Leader of the project.

The low access to and inadequate supply of electricity, coupled with poor
service reliability is hampering improvements in the quality of life of the
people of Guinea, and making industry and business uncompetitive, thus
hindering economic growth, Tallapragada added.

Efforts to improve the financial health, performance and service delivery of
Guineas power sector have, since early 2005, culminated in a change of
management at EDG; significant reductions in EDG staff numbers; resolution of
some of the contentious issues with former private concessionaires; and in the
implementation of a 77 per cent tariff adjustment effective since September
2004.

However electricity access remains limited to the area around the capital city,
Conakry, and a few other major towns (such as Kindia, Labe) and some of Guinea'
s most important industries, such as the mining sector, remain fully reliant on
self-generation.

Although tariff levels were raised in 2004 to an average 240 Guinean francs
(about US cents 5.95/KWh), the high incidence of technical and non-technical
losses has pushed the sector into a vicious cycle where non-performance of the
distribution sector adversely affects generation leading to ever increasing
load shedding, Tallapragada explained, adding that improvement of commercial,
managerial and technical efficiencies of the distribution sub-sector are
critical if any significant additional investments to power generation are to
be meaningful.

In 2005, load shedding further worsened to 700-800 MWhs per day, resulting in
widespread consumer dissatisfaction.

Some of the commercial shortcomings of EDG that this project sets out to
correct are reflected in the low rates of customer billing of 41 per cent of
electricity generated, of which only 76 per cent is collected.