The Ethiopian Electric Power (EEP), a huge state-owned enterprise, stated that it is undergoing significant changes in connection with the most recent macroeconomic reform spearheaded by the government. The new reform would allow it to maintain its current financial and asset positions.

The enterprise declared that during the current fiscal year, their foreign exchange earnings from energy exports will jump by 88%.

In addition to the liability that was moved to the Liability and Asset Management Corporation (LAMC), which was established in 2021 under the Ministry of Finance (MoF), the power producer received new debt relief of 263 billion birr, which was held in the Commercial Bank of Ethiopia (CBE), from the government under the recently announced economic reform.

According to the economic reform, EEP and CBE are two significant public institutions that are anticipated to reorganize their positions. The government decided to implement significant changes in addition to taking on EEP’s debt and recapitalizing CBE.

Ashebir Balcha, CEO of EEP, said that the proposed reform will significantly strengthen the position of the enormous public company.

Executive Officer of the Finance Division at EEP, Demere Assefa, noted that the enterprise has been receiving funding from both domestic and foreign sources, with 191.7 billion birr transferred to LAMC during the past budgetary year.

“In connection with the macroeconomic reform, MoF has taken on an additional 263 billion birr in debt, which has a significant positive impact on EEP’s financial position in addition to a significant shift in its asset position,” he clarified.

With an enterprise asset of 907 billion birr in 2023/24, it is among the largest in the nation. “We use loans to carry out projects in both local and foreign currencies, so the new exchange market reform will allow us to work with multiple banks, including the central bank, to obtain foreign currency to pay off our foreign debts,” the Finance Executive Officer stated.

In the past, EEP has used foreign exchange from the central bank to pay down its external debt, while the primary source of domestic financing through corporate bonds comes from CBE, the publicly controlled financial behemoth.

Demere asserts that the new reform would enable the enterprise to increase revenue creation as well, saying that “our resource generation will be expanded by improving collection and sales base.”

“To improve the balance sheet, we have created a three-year financial plan and a five-year cash flow strategy,” he continued.

Energy tariff revisions will also be implemented as part of the macroeconomic reform, with effect from the upcoming month, with the goal of strengthening EEP’s financial standing.

For the supply, transmission, and distribution of electricity, a new tariff was adopted and approved by the regulatory body, Petroleum and Energy Authority. According to the four-year tariff adjustment plan, it seeks to achieve cost recovery and will expire in 2028.

In order to progress toward cost recovery for the energy industry, end-user power tariffs would see bigger price rises initially. This plan was adopted by the Council of Ministers (CoM) in June 2024. The increment will occur, on average, every quarter at a rate of around 10 percent.

By the end of September 2024, the first quarterly tariff rise will go into effect in accordance with the CoM’s decision on the multi-year electricity pricing revision.

“Through public-private partnerships (PPP) with independent power producers (IPP), we have attempted to grow the energy sector; nevertheless, one of the obstacles has been investors’ expressed concerns about convertibility and transferability,” Ashebir said.

The present macroeconomic reform, which implements the convertibility guarantee act, has now structurally remedied the issue.

“We expect we will work with several IPP companies, who have high demand to invest in the sector, since the forex reform becomes applicable,” stated the CEO, recalling the agreement that was reached last week between AMEA Power and Ethiopian Electric Power to develop and operate a 300MW wind energy project at Aysha.

2023/24 Budget Year Performance

Grand Ethiopian Renaissance Dam (GERD), Koysha hydropower, Aysha and Assela wind farms, and Aluto Langano geothermal energy projects are the five energy projects that EEP currently has underway.

These projects have a combined capacity of 7,242 MW; partial generation has begun at Aysha and GERD, which have completed 84 and 98 percent of their projects, respectively.

Ashebir reports that in the last budget year, the company fulfilled 86 percent of its transmission and distribution goals and 76 percent of its generating objective.

The public enterprise’s operational goal was to create 20,974 GWH; however, it actually generated 20,522 GWH, or 98 percent of the target.

Out of the entire output, 84 percent was provided to the local market, with the remaining 9 percent going to export and the balance for its own consumption.

The CEO states that 96 percent of the power supply comes from hydroelectric power, with Gibe III being the largest contributor at 34 percent, followed by GERD at 17 percent, and Tana Beles at 10 percent to fill the third seat.

The average growth in electric output over the last six years has been 8 percent.

The budget year saw a 16 percent increase in overall energy consumption increment and a 6 percent increase in exports, mostly due to Kenya’s daily access to 200 WM of energy exports.

In relation to the local supply, consumption has increased by 17 percent.

The enterprise was expected to bring in 19 billion birr during the budget year, but it amassed 20 billion birr in revenue.

Over the last half-decade, the enterprise revenue has increased by 34 percent every year on average.

The CEO claims that although EEP was expected to make 181 million dollars in export revenue during the budget year, it only managed to reach 140 million dollars, or 77 percent of the objective. “One of the reasons for the reduction was the supply to Sudan is declined,” the CEO says.

Although the income objective was not reached, it had grown by 16 percent over the previous year.

The energy supply for data mining enterprises based in Ethiopia is one of the sources of foreign exchange earnings for the energy producer, and it has generated 27 million dollars, or 97 percent of the target.

EEP’s goal for export revenue in the current budget year is USD 263 million, an 88 percent increase over the previous year’s results.

It is anticipated that electricity generation would increase by at least 61 percent in the current fiscal year.

According to Corporate Planning Executive Officer Andualem Siae, seven more units at GERD will begin producing, increasing the existing 5,200 MW of electricity production to 8,400 MW.

He also mentioned that the generation capacity for the 2024/25 budget year will be 22,000 GWH.

In the upcoming month, Tanzania will begin purchasing power from Ethiopia as an additional export destination.

One of the main obstacles to the sector’s development has been identified as security and infrastructure theft.