The Republic of the Congo, often called Congo-Brazzaville, is a country located in Central Africa. The Republic of the Congo straddles the Equator line and covers a surface of 342,000 km2 with a population of approximately four (4) million. The Central African Republic and the Republic of Cameroon border the north of the Republic of the Congo, the Democratic Republic of the Congo borders the south and east, the Republic of Angola (Cabinda) borders the south, and the Republic of Gabon borders the west. The Republic of the Congo has a 170 km sea coastline along the Atlantic Ocean.
The Republic of the Congo has considerable energy resources whose exploitation is essential for the country's economic development. The country has a considerable hydrographic network and its water resources are estimated at 842 billion of m3. The capacity of already identified sites for power production is estimated at 14 000 MW.
Besides, Congo-Brazzaville is an oil-producing country whose reserves are estimated at 1.6 billion barrels. Between 2000 and 2007, the annual average exploitation was estimated at 88 million barrels. The country also has natural gas resources, which while not fully exploited, are estimated at 73 billion of Sm3 (standard cube-meter). The Republic of the Congo’s associated gas reserves are estimated at 57.15 billion of Sm3.
Additionally, the country offers opportunities to exploit other types of energy for electric power generation: solar energy (because of 12h of sunshine/day), or the biomass, aided by forest estate covering more than 20 million of hectares, or more than 60 % of national territory.
The potential offer of electric power is higher than the national demand estimated at 355 MW. But, the available overall capacity remains poor due to deficient transmission and distribution facilities. Power generation should be increased because of the population growth and the implementation of industrial and mining projects, which will increase the national demand of electric power. The electricity access rate is 45 % in urban area and 5.6 % in rural area. The Government plans to bring this rate up to 90 % in urban areas and to 50 % in rural areas by 2015.
I. Legal framework
The electric power sector in the Republic of the Congo is chiefly governed by Law No 14-2003 of April 10, 2003 on the Electricity Code, and by:
- Law No 17-2003 of April 10, 2003 creating the development funds for electricity sector (FDSEL);
- Law No 16-2003 of April 10, 2003 creating the regulatory agency for electricity sector (ARSEL);
- Law No 15-2003 of April 10, 2003 creating the national agency for rural electrification (ANER);
- Law No 10-2003 of February 6, 2003 on the transfer of powers to local communities;
- Law No 067-84 of September 11, 1984 on the change of name of the national company of electricity.
Several regulations supplement this legislation, among others: Decree No 2013-416 of August 9, 2013 on the approval of articles of association of national company of electricity (Société Nationale d’Electricité, SNE); Decree No 2010-822 of December 31, 2010 on the approval of the development strategy in sectors of electric power, water and sanitation; Decree No 2010-808 of December 31, 2010 setting the terms and conditions to carry out works and services activities in the sector of electric power; Decree No 2010-241 of March 16, 2010 on the organization of the Ministry of Energy and Hydraulics; Decree No 2010-123 of February 19, 2010 on the responsibilities of the Minister of Energy and Hydraulics; Decree No 2008-560 of November 28, 2008 on the approval of articles of association of the development funds for electric power sector (FDSEL); Decree No 2007-291 of May 31, 2007 on the approval of articles of association of the national agency for rural electrification (ANER); Decree No 2007-290 of May 31, 2007 on the approval of articles of association of the regulatory agency for electric power sector (ARSEL); and Decree No 2003-156 of August 4, 2003 on the responsibilities and organization of the general directorate of energy.
II. Government role
In the Republic of the Congo, natural resources form the State-owned property in pursuance of the Constitution of January 20, 2002. The State specifies and implements the electricity national policy on the entire territory. Through the Ministry of Energy and Hydraulics, the State supervises the development funds for the electricity sector (FDSEL) in charge of financing, as well as national agency for rural electrification (ANER), concerned authority to carry out, through tenders, rural electrification works.
With respect to Government transfer of power to local authorities, we have to note that Departments have received the authority to promote the generation and servicing of electric power, and Communes, in order to promote the servicing of electricity. However, absence of implication of local authorities in the management of works still exists.
The Congolese electricity market is marked by the presence of a historic operator, the Electricity State-owned Company (SNE), which is the public company managing the public service of electricity, created in 1967. SNE now has new articles of association stating that SNE shall « directly or indirectly manage generation, transmission, distribution and commercialization of the electric power; exploit, maintain and service electrical facilities; undertake any administrative, industrial, technical, commercial, movable, immovable operation or services reporting directly and indirectly to its object ». SNE carries out its assignments either directly, or in line with service contracts entered into with public or private companies.
Besides, the State has also opted for a second public company in the electricity company, the Congolese Company of Generation of Electricity (SCPE), established in 2001 in order to value Congolese gas for energy purposes. The Congolese Government has finally decided to dissolve SCPE at the Council of Ministers of June 28, 2013.
In 2003, due to the coming into force of the new Electricity Code, the Congolese electric power sector has been liberalized. The management of electricity by private companies, through public service delegation granted by the State, is now possible.
This openness to competition results in the establishment of the regulatory agency for the electricity sector (ARSEL), specifically in charge of promoting the competition and participation of the private sector in generation, transmission, distribution, import, export and sale of electric power as per objective, transparent and non-discrimination conditions; to control, regulate and monitor activities of operators in this sector; and to arbitrate disputes among operators in this sector by referral to the parties. ARSEL shall also build its technical expertise to fully carry out its assignments.
III. Organization of activities in electric power sector
The Congolese Electricity Code governs the generation, transmission, distribution, supply, import, export and sale of electricity, produced by public or private corporate.
All these activities, which may be summed up in four segments of electricity chain, viz.: generation, transmission, distribution and commercialization – constitute a public service under the control of State. Under article 1 of the Electricity Code, the generation of electricity is the « transformation of primary energy into electric power », the transmission of electricity is « the transmission of electricity through high and very high voltage electric lines », and the distribution of electricity is « the transmission of electricity by means of medium and low voltage lines ». The Electricity Code specifies that the public service of electricity shall be done in order to promote the private sponsorship, by one or many operators acting on State's delegation.
- Liberalized activities marked by the Government intervention
a) Generation of electricity
In accordance with Decree No 2010-822 of December 31, 2010 on the approval of the development strategy in sectors of electric power, water and sanitation, the Government means to generate electricity through public operators, particularly SNE, without re-establishing a monopole on this market segment of electricity. In accordance with the Electricity Code, Congolese authorities urge the continuation of liberalization of generation of electricity activities through independent generation of electricity.
b) Transmission of electricity
Under Congolese legislation, the transmission of electricity is also a segment in electricity sector opened to private sponsorship and competition. But, as part of development’s strategy of electric sector approved by Decree of December 31, 2010 above, the Government plans to keep the transmission of electricity within de facto public monopole. The transmission of electricity shall be solely carried out by SNE.
In France, as a comparison, the transmission of electricity is exclusively carried out by Réseau de Transport d’Electricité or RTE (Transmission Network of Electricity). Public network manager responsible for transmission facilities, RTE is a public enterprise (a public company limited by shares).
In order to make competition and transparency effective when carrying out activities depending from other segments in electricity sector (excluding transmission), ARSEL shall notably deal with the access to transmission networks of electricity by the third parties within available capacities.
- Other liberalized activities
a) Independent generation of electricity and self-production
Independent producers of electricity are natural or legal persons governed by private or public law who generate electricity for commercial purposes. Private operators may conduct independent generation activities of electricity in Congo, subject to obtaining a license. This license enables the company to generate not only the electricity, but also to sell, import or export it. To that end, the Electricity Code authorizes independent producers to enter into sales contracts with carriers (transmission operators) and distributors of electric power.
Also, to sell the electric power, independent producers enjoy some rights, as right to access to transmission and distribution networks exclusively carried out by one or several operators. To this end, they shall apply to the operator of transmission and distribution networks, which establishes an estimate for connection, transmission or distribution. The price for connection, transmission or distribution is determined based on costs sustained by the concerned operator and on a reasonable profit margin. Further, we should note that facilities of independent generation of electricity are not part of the State public domain. Therefore, private investors may be owners of these facilities.
Regarding self-producers, they are public or private operators who generate electricity for personal purposes. So do for some industrial and forest operators. Depending on the installed power, self-producing enterprises enjoy free arrangements or are subject to a system of administrative declaration or authorization.
b) Distribution and commercialization
Although carried out by SNE, the distribution and commercialization of electricity theoretically constitute fully liberalized activities. The Electricity Code stipulates that the distribution, supply, import, export and sale of electricity may be carried out by private companies.
The strategy adopted by the Congolese State is to be focused on generation and transmission, and to grant the distribution and commercialization to international private sector. These two last concepts are different. If distribution is defined as a transmission of electricity by means of medium and low-voltage up to circuit-breaker, commercialization is commonly defined as the sale of electricity to final consumers.
Private companies must have a license to sell electricity. The same is valid for import and export of electricity for sale and use purposes for which the license shall be issued by the Minister in charge of electricity after consulting ARSEL.
ARSEL also acts to express reservations, even to oppose the entry into force of contracts between producers and buyers (carriers and distributors) of electricity. In their commercial relations, these actors freely negotiate the prices. Saisissez du texte, l'adresse d'un site Web ou importez un document à traduire.
c) Works and services activities
Works and services activities in the electric power sector are opened to private Congolese or foreign companies. These activities may be carried out by these companies jointly or separately, permanently or temporally, i.e., within 6 months.
Works activities notably encompass maintenance, servicing, rehabilitation or construction of generation, transmission and distribution facilities of electricity, as well as installations of electricity inside buildings. Services activities particularly encompass intangible services in electricity sector such as studies, advice, technical assistance, use of facilities and partial or full performance of commercialization activity of electricity.
According to our understanding, works and services activities in electric power sector may be carried out by enterprises not public service concession holders, i.e., not involved in the actual exploitation of public service. Indeed, a public service concession holder may certainly subcontract a portion of its obligations to works or services companies not responsible for the exploitation of public service. Also, the public operator may carry out its assignments in line with contracts entered into with the above-mentioned companies.
The performance of works and services activities is subject to an approval by the Minister of Energy and Hydraulics, after the opinion of the commission for accreditation of electric power sector. Without this accreditation, no enterprise may be authorized to tender for bids on these activities. Enterprises, which apply for the accreditation shall provide with administrative, financial, bank and tax documents required by the national regulation. In addition, they shall pay tax levied by FDSEL.
The accreditation is individual, non-transferrable and cannot be assigned or leased. It is issued by Order from the Minister of Energy and Hydraulics for a renewable three-year period. This Order specifies areas of activity covered by the accreditation, operational terms and conditions of the enterprise and cooperation terms and conditions with the electricity administration.
IV. Contractual arrangements for public service of electricity: public service delegation
- Overall aspects of public service delegation
Apart from activities performed by the historic operator (SNE), the Government may enter into public service delegations with public or private enterprises. Under the Electricity Code, a public service delegation is a contract whereby the Government entrust the management of all or part of public service of electricity to one or several public or private companies for a period not exceeding 30 years. Therefore, the Government may entrust to the delegatee or concession holder exclusive operations of all or part of generation, transmission or distribution activity of electricity.
This definition in the Code is not quite clear and should include the remuneration requirement of a concession holder. Indeed, the public service delegation is specifically featured when the concession holder remuneration is considerably related to results of service operation. The Electricity Code mentions different forms of public service delegation without defining them: concession, leasing (“affermage”), public ownership with private management ("régie intéressée”), license, and any other form of delegation applicable to the electricity sector.
Generally, the concession may be defined as a contract whereby the Government entrusts to a private (or public) company the management of a public service. This enterprise shall be responsible for all investments (achievement and operation of electrical infrastructures) at its own expenses and risks. The concession holder is remunerated from public service users.
Leasing is generally defined as a contract whereby the Government makes electrical infrastructures available to a private (or public) enterprise in order for this enterprise to operate the public service on its own behalf, by means of paying a royalty to the Government. The lessee is remunerated from public service users.
Public ownership with private management may be defined as contract whereby a private (or public) enterprise has been granted the management of public service of electricity by and on behalf of the Government. This company thus acts as an « agent » of the State and is directly remunerated by the Government. This remuneration includes a fixed portion and a variable portion related to its results in operating the public service.
Further, the public service concession holder of electricity is selected by the Government after the competitive bidding of enterprises through invitations to tender, on the basis of transparent and non-discrimination requirements. We have to note that public service delegations may be granted only to private corporations incorporated under laws of Congo. Thus, foreign companies shall establish local subsidiaries to apply for tenders. Once the public service delegation contract is signed, it shall be approved through Decree from the Council of Ministers.
A contract specification defining varied aspects shall be appended to the public service delegation contract, as well as administrative regulation on the principles applicable to relations between the concession holder and electricity users, especially regarding the price and access to network. We have to note that pricing principles in electricity sector are determined through regulation.
Public service delegation contracts may not be renewed. Entering into a new contract is possible only after a new process of invitation to tenders. These contracts may, in turn, be extended based on the following two cases: the interest of service or the essential change in financial balance of the contract.
- Duties and obligations of public service concession holders
Public service concession holders of electricity may subcontract the partial performance of their obligations, but they remain responsible for the smooth execution of service towards the Government. They may transfer their contracts to the third parties subject to obtaining an express authorization from the Government through regulation. In addition, if, in the interest of service, the Government makes substantial amendments to the contract, which cause a change in the financial balance, the Government shall indemnify the concession holder with the amount due to the shortfall.
As part of its contractual obligations, the concession holder operating the public service of electricity is authorized to carry out works necessary to the construction and maintenance of electrical facilities on soil and subsoil of Government and local authorities’ land.
Regarding the private sector, in the absence of consent of occupier, the concession holder may be authorized to enter in a land to carry out studies related to the proposed layout of transmission and distribution lines of electricity. These easements for studies would not imply a compensation of the land owner or occupier and thus, may not exceed 6 months. But, the indemnity is compulsory for easements intended to generation facilities and to right of way of transmission and distribution lines.
Furthermore, the assets of the public domain required to operate the public service of electricity may be made available to the concession holder within the term of contract (particularly the case of leasing and public ownership with private management).
As for structures required for operation of public service erected by the concession holder, they are designed for passing to the State when the contract expires (the case of concession). In principle, this property, generally defined as “returnable assets”, shall return to the Government, free of charge. The “returnable assets” are different from “assets to be recovered”, which may be acquired by the State when the contract expires. It is in this way that contract specifications of public service delegation shall specify facilities to pass to or that may be passed to the State at the end of the contract, including assumptions of payment by the State of an indemnity to recover.
As part of obligations of the concession holder, the public service shall be governed according to principles of equality, continuation, adaptability, security, quality, price and economic efficiency. Service rendered to users shall specifically comply with quality objectives defined in the contract specifications and administrative regulation, under the supervision of ARSEL. Also, difference of treatment between users is only possible in the case of objective difference of situation of these users with regard to the service, particularly the cost of electric power supply on the concerned portion of the national territory.
V. Electricity tariffs
In the Republic of the Congo, prices of electric power are in principle governed by an Order of March 19, 1994 determining the scale of rates. Aforementioned Order particularly determines the prices of electric power on a flat rate basis.
If the electricity is a vital service and requires, in this regard, the consideration of social situation of populations (notably disadvantaged sections of the same) in the pricing. But, the system of flat rate reveals a disadvantage to not reflect the generation costs of electricity and real consumption by customers. Therefore, a tariff policy reconciling social objectives and the necessity to recover the cost of production is needed.
The Congolese Government contemplates to adopt new electricity sales and consumption tariffs, based on real costs and capacity of varied categories of consumers (large-scale consumers, administrative structures, households, semi-industrials, residential customers...).
VI. Rural electrification
In the Republic of the Congo, the access rate to electricity is only 5.6 % in rural area. The positive impact of rural electrification in terms of economic development, social equity or land planning led to the adoption of specific legal and regulatory provisions.
The promotion of rural electrification is done by the national agency for rural electrification (ANER), in accordance with aforesaid Law No 15-2003 of April 10, 2003. This agency is responsible for the planning of electrification in rural areas; technical and economic studies required to supply electricity in these areas; electrification works in rural areas through invitations to tender, and management of tender documents. The ANER is also in charge of promoting rural electrification new technologies, and seeking finance for related programs.
Further, in compliance with the government strategy approved through Decree No 2010-822 of December 31, 2010, the management of generation and distribution infrastructures of electricity in rural areas, now undertaken by SNE, shall be temporarily entrusted to ANER. This management will ultimately be transferred to local authorities as part of decentralization process.
Besides, the Electricity Code institutes flexibility regarding invitations to tender in the sub-sector of rural electrification. Indeed, article 51 of the Code provides that the generation, particularly from power stations with poor capacity, the transmission, the distribution and the sale of electricity in rural areas may be undertaken through simple authorization from the Minister of Energy, without any prior organization of invitations to tender.
VII. Environmental obligations
Private operators responsible for public service of electricity shall supply it in accordance with rules governing environmental protection. Enterprises carrying out works and services activities in the sector of electric power shall particularly comply with the regulation on classified installations.
Law No 003/91 of April 23, 1991 on the protection of the environment provides for provisions applicable to the protection of human settlements, fauna and flora, atmosphere, water and soils. This Law defines rules applicable to classified installations and settles amounts of single tax when these facilities are operational, of annual surface royalty and annual royalty for the first class installations, which imply major pollution risks to the environment. Under this Law, the operation of classified installations requires the authorization from the Minister of the Environment or the declaration to this Minister. In addition, this Law subjects any economic development project to an environmental impact assessment.
Also, as part of the development strategy of electric power sector, the Government deems that if the national potential production of biomass is very high due to tropical forests of the country, it would be advisable to carefully use this source of energy in order to avoid the extinction of some vegetation covers or accelerated depletion of delicate soils. The goal is to make alternative energies available to rural and out-of-town communities to reduce using fuel-wood and stop deforestation.
VIII. Tax, customs and exchange rate regimes
Activities of electricity public service concession holders are subject to the ordinary tax regime, which is defined by the General Tax Code. For example, the rate of corporation tax in the Republic of the Congo is 34 %.
In addition, the Electricity Code provides for special provisions. Thus, this Code provides that the public service concession holder may recover value added tax (VAT) on works done on some assets. The Code allows depreciation for the assets created by the concession holder and mentioned in the public service delegation contract. Also, the Code allows the provision for replacement for the assets mentioned in the public service delegation contract that may be replaced during the concession.
Regarding customs, the Electricity Code provides that any import of facilities and production equipment for generation, transmission and distribution of electricity is free of charge.
Furthermore, qualified private companies may enjoy tax and customs benefits granted in line with the Charter of Investments, as exemption or reduction in 50 % of corporation tax, or tax relief for enterprises making social-based investments.
To conclude, foreign companies are subject to exchange control regulations and benefit from the free convertibility between the domestic currency and foreign currencies. Congo is a member of the Economic and Monetary Community of Central African States (CEMAC). Within the CEMAC, foreign exchange regulation states that the purchase and selling of currencies other than the euro shall be set based on the fixed exchange rate of the CFA franc against the euro. The rates of these currencies against the euro are based on foreign exchange markets.