The Energy Sector in Cuba: Financial and Economic Considerations
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Transcript of The Energy Sector in Cuba: Financial and Economic Considerations
The Energy Sector in Cuba:
Financial and Economic Considerations
Juan A. B. BeltDirector
Office of Infrastructure and EngineeringUSAID
Presented at the Annual Meetings of the Association for the Study of the Cuban Economy (ASCE), Miami, Florida
August 2008The opinions expressed in this presentation are those of the author and
do not represent the views of the US Government
2
Disclaimer
• The opinions expressed in this presentation are those of the author & do not necessarily represent the views of the US Government
• All information comes from public sources available in the Internet
• Special thanks & appreciation to my friend & colleague Luis Velazquez for his crucial support in the preparation of this paper
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Outline
1. Methodology
2. Comparisons with selected countries in Latin America
3. Electricity trends in Cuba
4. Financial & economic aspects of the electricity sector
5. Sector reform during a transition
6. Conclusions
“Communism is Soviet power plus the electrification of the whole
country”
Cuba has continued to ignore financial
and economic aspects
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LNG Plants (Sherritt)
Thermal Plants
Diesel Plants
Gensets
Domestic production
PDVSA Imports 102.0
Refineries
35.0 CO
68.0 CO
51.1 RP
24.5 LNG
15.9 Diesel
53.4 FO
16.4 Diesel
Oil and Gas Flows 2007 ('000 bpd, MM cfd)
Power Generation
(17,621 GWh)
Transportation, Industrial,
Residential, and Other Fuels
33.2 RP
2,797 GWh
404 GWh
11,099 GWh
3,321 GWh
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Liquid Fuels: Supply & Uses 2007
Liquid Fuel Supply bbl/day % of TotalDomestic production 68,000 40%Imports 102,000 60%
Total supply 170,000 100%
Liquid Fuel UsesPower generation 85,700 50%Transport 84,300 50%
Total uses 170,000 100%
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Comparisons with Selected Countries
Cuba
Chile
Costa Rica
Dominican Republic
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GDP/Capita & Electricity 2007
• Chile & Costa Rica have increased GDP/capita much faster than Cuba in 1959-2007; social indicators are similar in the 3 countries (Carmelo Mesa-Lago book)
• DR has caught up and its GDP/capita is similar to Cuba’s
• All countries essentially have universal coverage• Electricity consumption/capita is similar in Cuba & DR
GDP/capita Electricity Country PPP
(US$) Nominal
(US$) Coverage
(%) Consumption (kWh/capita)
Chile 14,400 9,874 99 3,062 Costa Rica 13,500 5,525 99 1,730 Cuba 4,500 3,958 95 1,300 Dominican Rep 5,865 3,789 92 1,067
Source: CIA – The World Factbook – https://www.cia.gov/library/publications/the-world-factbook/
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Electricity Consumption(kWh/capita)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1970 1990 2007
Chile Costa Rica Cuba Dominican Rep
Since 1990 energy consumption in Cuba
stagnatedChile
Dominican Rep
Costa Rica
Chile, Costa Rica, and Cuba had similar
consumption in 1990
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Cuba: Trends & Present Financial Issues
*** ** **
**
*** * *
**
Pinar del Río
Cienfuegos
Santa Clara
Vicente
Camagüey
CTE 10 de Oct
Holguín
Cueto
CTE Felton
CTE Renté
Punta Gorda
Matanzas
CTE GuiterasCTE Habana
CTE Mariel
Habana
Cotorro
*
Bayamo*
*CTE CMC
Next Topics:
1. Electricity trends in Cuba
2. Financial & economic aspects of the electricity sector
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Unión Eléctrica – Nominal Installed Capacity (MW)
886
4,2754,078
4,287 4,411
3,960
3,965
3,764
5,176
5,389
397
2,731
0
1,000
2,000
3,000
4,000
5,000
6,000
1958 1970 1980 1990 2000 2001 2002 2003 2004 2005 2006 2007
Increase:
GENSETS 1,200 MW
GAS 400 MW
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Electricity Consumption 1958-2007 (GWh)
0.0
2,000.0
4,000.0
6,000.0
8,000.0
10,000.0
12,000.0
1958 1975 1985 1987 1989 1992 1995 1997 1999 2001 2003 2005 2007
Total Industry and Construction Residential Others Ag / Trans / Comm
“Período especial”
Industry & construction 28% lower in 2007 than
1990
Blackout period
Gensets & gas-fired plants
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Union Electrica: Economic Profit
Description Units Results
Crude Oil Price $/bbl 87 100 120 140
Fuel price (80% fuel oil, 20% diesel)
$/bbl 112 125 145 165
Economic Profit M $ (1,503) (1,867) (2,427) (2,987)
EBITDA M $ (709) (1,073)
(1,633)
(2,193)
EBITDA (fuel discount 40%)
M $ 547 329 (7) (343)
EBITDA (fuel discount 100%)
M $ 2,432 2,432 2,432 2,432
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Union Electrica: Labor Efficiency Comparisons
IndicatorCosta Rica
DR Cuba
Residential connections per employee
260 200 111
Electricity sold per employee (MWh/year)
2,837 881 409
Employees per '000 residential connections
3.8 5.0 9.0
Chile has only 0.7 employees per 1,000 connections
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Union Electrica: Total Unit Costs (G, T & D)
Crude Oil Price $/bbl 87 100 120 140
Fuel price (80% fuel oil, 20% diesel)
$/bbl 112 125 145 165
Cost per kWh sold $/kWh 0.310 0.336 0.376 0.417
Cost per kWh generated $/kWh 0.244 0.265 0.297 0.328
• Oil & diesel accounts for 70-80% of generation costs; Cuba 5th in the World in 2003 after Yemen, Iraq, Benin & Jamaica in use of liquid fuels for generation
• Labor efficiency very low
• Technical losses high (16%)
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Reform Takes Time & Requires Planning
Activity Description Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Transition begins
Infrastructure Strategy & Legal Framework
Draft strategy
Develop consensus
Draft laws (power, telecom & water)
Enact laws
Establish regulatory agency
Power sector
Emergency Rehabilitation Program
Operation contracts
Unbundle / corporatize
Adjust rates
Sell DISTCOS
Sell GENCOS
Could be reduced to 3
years
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Generation
• Cuba needs to diversify energy sources to reduce reliance on liquid fuels
• For new generation capacity Cuba should promote greater use of1. Gas (will depend on domestic availability)2. Coal (will require bulk import handling facilities)3. Biofuels including bagazze (would depend largely on
revitalization of sugar industry)4. Wind (becoming more competitive today)5. Mini-hydro (fairly limited)6. Solar (costs are still high)
• Tariff free imports of machinery & equipment for renewable generation & reasonable tax breaks could reduce over reliance on liquid fuels
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Conclusions
• Lack of reliable data makes analysis very difficult• Power sector suffered since the collapse of USSR
but now blackouts not as common as in 2004-06• UE rates do not cover economic costs• UE: expensive fuel, low labor productivity & high
losses• UEs economic loss almost $3 billion or around 6%
of GDP (oil price $140/bbl)• Reform to promote private participation would be
necessary during a transition• Well-designed system of incentives to decrease
reliance on liquid fuels should be implemented
Any questions?
Juan A. B. BeltDirector
Office of Infrastructure and Engineering (I&E)Bureau for Economic Growth, Agriculture, &
Trade (EGAT)US Agency for International Development
(USAID)E-mail: [email protected]