Bjorn Hamso

1
Europe and Central Asia The World Bank in the
Energy Sector

• Bjorn Hamso
• Sr. Energy Economist
• Europe and Central Asia Region
• The World Bank

Royal Norwegian Embassy The Norwegian Research
Technology Forum in the U.S. Collaboration
between Norway and the World Bank Group A
Workshop Dialogue Washington D.C., May 12-13, 2003
2
Transition The First Ten Years

• CSE and CIS
• World Bank Transition Report (2002)
• Available for download at http//lnweb18.worldbank
  .org/ECA/eca.nsf

3
The First Ten Years Changes in Real
Output 1990-2002
East Germany
CSE
E. Europe and Central Asia
Index 1990 100
CIS
Serbia Montenegro, Bosnia Herzegovina not
included. Sources OECD, World Bank,
Datenservice, Statistisches Bundesamt
4
Energys Impact on Overall Economy

• Energy availability
• Energy sector subsidies
• Explicit subsidies
• Implicit subsidies

5
Energy and Economic Transition
Achieving financial viability in a countrys
energy sector will not, of itself, enable a
country to complete the transition process but
without addressing this component of energy
sector reform, a country will have difficulty
completing its economic transition.
6
Electricity Subsidies in 2001/2002
7
CSE/CIS Electricity Prices c/kWh (mid-2002)
Red CSE
Blue CIS
Croatia
Slovenia
Albania
Slovak R.
Poland
Azerbaijan
Bosnia
Lithuania
Czech R.
Moldova
Hungary
Bulgaria
Romania
Latvia
Estonia
Armenia
Belarus
Ukraine
Macedonia
Kazakhstan
Kyrgyz
Georgia
Russia
Yugoslavia
Tajik.
Uzbekistan
Turkmenistan
Sources ERRA, WB
8
Energy Sector Structure

• Vertically integrated public monopolies

• Break up monolitic structures
• Separate monopoly and potentially competitive
  functions
• Adequate regulation
• Investments/ownership/ management

9
Why Energy Sector Restructuring?

• In the West
• Increase efficiency and reduce inequality
• Get rid of overinvestments
• In ECA (Europe and Central Asia)
• Stop life support from the energy sector to
  value-deducting industries
• Attract investments
• Increase efficiency

10
Energy Investor Expectations and Requirements

• Best practice sector structure and regulation
• Known end game
• Reliable government reform performance and reform
  plans
• Enforcable contracts and guarantees

11
Successes Aside, What specific Problems Do We
Face?

• Corruption and governance
• Sector important for other industries
• Large state involvement
• Size and complexity of sector
• Political inertia
• Cost recovery (increased tariffs) isnt popular
• Social protection systems not in place

12
Does reform work?

• Well implemented yes, but
• Competition or collusion?
• Regional trade part of the solution?
• EUs internal energy market
• Real impact for accession countries?
• Incompetitive gas supply market?
• Has a cookie-cutter approach been used?

13
The Banks Energy Program
4500
70
4000
60
3500
50
3000
Commitment Amount -- IBRD/IDA
40
2500
and GEF (USD millions)
Number of Projects
2000
30
1500
20
1000
10
500
0
0
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
Fiscal Year
Commitment Amount
Number of Projects
Estimated
14
Energy Projects with Privatization Component
4000
60
3500
50
3000
40
2500
Commitment Amount (USD
Number of Projects
millions)
2000
30
1500
20
1000
10
500
0
0
FY90-FY92
FY93-FY95
FY96-FY98
FY99-FY01
FY02-FY04
Commitment Amount
Number of Projects
15
Large Hydropower Portfolio
1200
8
7
1000
6
800
5
600
IBRD/IDA Grant Comm Amt
4
(USD millions)
Number of Projects
3
400
2
200
1
0
0
90-92
93-95
96-98
99-01
02-04
Fiscal Year
Commitment Amount
Number of Projects
16
Energy and Mining Projects with an Environmental
Objective

FY
Source Fuel for Thought Implementation Report
17
Renewable Energy Portfolio
700
40
35
600
30
500
25
400
Commitment Amount (USD millions)
20
Number of Projects
300
15
200
10
100
5
0
0
FY90-FY92
FY93-FY95
FY96-FY98
FY99-FY01
FY02-FY04
Commitment Amount
Number of Projects
18
Bank Instruments in the Energy Sector

• Technical assistance
• Sector restructuring
• design and implementation
• Regulation
• Legal and regulatory framework
• Independent regulator institution
• Investment loans

19
Bank Instruments in the Energy Sector

• Structural Adjustment Loans and Credits
• Guarantees
• Partial Risk Guarantees
• Partial Credit Guarantees
• Policy dialogue

20
What Do We Need from Norway?

• Norwegian investors
• Management contractors
• Gas and power market regulatory experts
• Suppliers, mostly to the power industry
• Continued generous funding (through ESMAP and
  other)