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 SONELGAZ |
Interview with
Mr. A. Abdelkrim Benghanem,
General Manager
Algiers, February 13th, 2001
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Recently there has been talk of changes in Sonelgaz and its new structure. At what level are you in and how this can be improved ?
Presently the status of Sonelgaz has been finalized and there is a predicted package submitted to the government. Than, at this stage we are expecting the new law to reorganize the gas market inside the country and consequently the status of Sonelgaz
At the new structure level, what is the expected evolution for Sonelgaz ?
First of all, let us separate the functions: the production function and the distribution function, the electricity transport function and the distribution function, all these will be separated. This shapes the foundations of the law and since 1998 we have separated the accounts, then each activity has its own accounting for a better team transparency.
In terms of timing of all these activities, new structure, firm capital opening… could we have approximate dates ?
Being optimistic, we think that this new law will be adopted during the year 2001. We will have a 3 or 4 year transition period where all the predicted elements by the law will be placed since the most important factor: the independent regulation element, not only independent of Sonelgaz but also independent of all the operators. This element will be in charge of giving licenses, building authorization and will also guarantee procedure.
Inside the country 30 to 40 % of the electricity market will be open 3 years after the promulgation of the law.
With eligible clients and transport as a natural monopoly, we have to place a transport operator; we need more time about 3 to 5 years.
When you talk about liberalization of electricity in Algeria, you are talking at he same time of a market regulator and a stock market for electricity. Are they the same things or different ?
No, they are different, we will have a stock market for electricity that will be named market operator and will be set progressively. But, the regulator, the independent regulation element, independent of the politic power whose task is controlling strictly the application of preset rules meaning in this sense being open to new arguments, market rules control in their application, public service control and truly there is a mission of public service to be set: it is the regulation element in practice, for example in U.K. who has the regulator role ?
In terms of prices, what will be role of the regulator ?
In fact, it does not have a decisional role. The regulator's role will be to verify and respect the fair game of competition. The regulator will check the accounts of all operators and verify price practices with associated costs and profit margin. For big eligible clients, transactions will be perfectly free, meaning in this sense market price. Nevertheless, it's the captive clients that need public power protection.
For a captive market, the regulator verifies that prices paid reflect distribution costs.
For the year 2000, what are the results for Sonelgaz in comparison with 1999 ?
I think that 2000 was a good year for Sonelgaz - we posted positive results for the 4th year in the row and sales of 65 billion dinars.
Nevertheless, I need to comment on one thing, in fact, that our sales are between 180 and 185 billion dinars. Why ? Up to now price game of electricity and gas are state protected. We have produced for the consumer 24.000 gigawatts and sold 4 billion m3 of natural gas representing 65 billions dinars. In terms of absolute value, it doesn't mean anything; it would be better to compare them with comparable things and these comparable things. If I compare with our Moroccan neighbors for example: through price game, they realize 100 billion dinars for only 8.000 to 10.000 gigawatts without gas. Then, if I compute our output in this context, our sales will be closer to 65 billion dinars ($ 800.000 to $ 900.000).
You mentioned transport of electricity, and as you said it will remain a state monopoly, but isn't this against free market rules ?
It is actually a natural monopoly. The actual transport network belongs to Sonelgaz. We are an operator by historical facts and the network is ours. The regulator will force us to open this transport network; this will give to the network land access.
We have to open the network to all operators, either new producers on the electricity market or new clients able to consume. The only thing that changes is that we are not going to be paid as Sonelgaz but as a coming company managing the transport network, with a payment procedure as an access tax like a post stamp fixed by the regulator and not the company.
We know that Sonelgaz needs big investments for the next 15 years, and if my sources are exact, the need for investment is around $ 10 billion. How are you going to proceed to attract this investment ?
In fact it is not Sonelgaz that needs $ 10 billion, it is all the electricity and gas distribution sector. Sonelgaz will be an actor in the field like all other actors.
Among the $ 10 billion you announced, around $ 5 to $ 6 billion will be needed for electricity production. In this context, we need to attract non-public money, either local or foreign funds, with or without partnership with Sonelgaz.
We have published a public offer in last April. For a technical phase of a 2.000 megawatts project (800 megawatts for the local market we are able to buy and 1.200 megawatts to be exported).
Believe me, we had 5 new modules of Endesa (Spain) with a $ 200 million stock exchange value, A.E.S (USA). Electricité de France (France), SNC-Lavallin (Canada) and Penelpo (Italy), you see then that we were aright to launch this 2.000 megawatts project and that similar companies to ours came with all respect to the proportions between us.
I would like to talk now about your partnership with Sonatrach. What are the perspectives and projects, mainly directed to Maghreb and European countries in terms of electricity production from gas ?
Sonatrach operate with oil and gas producers, we provide them electricity for their installations and the relations have always been extremely close. Then Sonatrach sells us gas for the production of electricity.
| There is although something to underline: 95 % of electricity production in Algeria is produced from natural gas and the remaining 5 %, from diesel in the south and some hydraulic, we have some dams in Kabylie.
Then with Sonatrach, we have other fields that are not our proper crafts. We have created firms with common interest but not commonly managed.
But, in our new strategy, we think to give birth in the next few weeks to a common company for the opening of the electricity market as what exists in Europe.
In this sense, the Sonelgaz network is interconnected to the Moroccan and Tunisian networks, the Moroccan network is it self connected to the Spanish network, and we are trying to strengthen the ties with Morocco and Tunisia. Here the network frequency in exactly the same as in Madrid, Paris, Warsaw, etc. We are interconnected and it works in a synchronic way.
Furthermore in the 2.000 megawatts project, there is a submarine connection between Algeria and Spain and we are expecting to create an engineering firm with the 5 operators, in addition to Sonelgaz and Sonatrach to study the expanded submarine connection between Algeria and Sardagna and between Tunisia and Sicily.
Why ? Because we thing that the European network excepting Russia is a $ 200 billion market a year (maybe the biggest market in the world) greater than the American market (USA and Canada) with approximately $ 198 billion a year.
We are close to European ports, we have the primary energy and we have ideas, then it's all natural to have the European market in our hands.
Concerning new investment opportunities, you have already mentioned some of them, but in what other specific sectors of your activities are you interested to attract partners ?
There is a sector with high added value, it's the field of telecommunication. We have 15.000 kilometers of high tension network, 200.000 kilometers of electric network between low and medium tension, we manage 5 million electricity clients, a little bit less than 4.5 million gas clients, we have a craft to reach the small client, making small bills and I believe that all these services are an added value for the telecommunications. We think too eventually act as an Internet provider. These are projects not ripe yet, for which we are retaining young employees to develop them.
What are other perspectives and business opportunities ?
There is a petroleum law to be adopted soon, and as electricity producers we're interested. Of course there is Sonatrach, but Sonelgaz would be interested some day in gas prospecting for electricity production.
Other fields exist as the electric equipment production and accessories. This is not our craft but we are encouraging these fields and for some of them we think to participate in.
We will encourage also investment in a copper mine, as you know copper is extremely important for electricians. Our basic craft is to produce, transport and distribute energy, and we try to reinvest all the services, air conditioning through gas for example. We are very interested in this type of air conditioning and encouraging partnership. We have an extreme dense network of gas distribution through tubing, with actually 290 Algerian districts connected to a natural gas distribution network.
We are interested in developing gas for vehicles; it's also a way to added value service reducing pollution especially in Algiers. This represents another possible partnership operation.
Are alternative energy sources also being considered ?
Yes, of course. We have actually in service 18 small villages with solar energy in the far South. It is more a social aspect for these regions with low population. Our engineers are getting experience and are working and testing equipments in extreme conditions.
In Tamanrasset, we have big diesel unit, and diesel is the gasoil energy coming from Hassi Messaoud. But the price of energy is costly, so we're trying to measure costs and bring solar energy to Tamanrasset
What has been one of your biggest personal satisfactions since becoming General Manager of Sonelgaz ?
My biggest satisfaction was when the top management of Sonelgaz was united and gathered around the vision I came with to manage the firm towards a larger opening and to prepare to take ??? monopoly.
A second satisfaction was during the difficult years for my country; it had never energy failure and it was the main concern for thousand of Sonelgaz employees. Working to reestablish electric energy when terrorist acts destroyed high-tension network. And I can assure you that no part of this country was in a black out more than 24 hours after destruction of high-tension cables. And this, I think is one of my biggest satisfaction and I'm very proud of my employees.
What would be the final message you wish to give to our readers ?
The first message would be that, it has been given a wrong image of the country. Image, that it does not deserve. Despite what has been done or what is done, I believe, we have wrongly given this image. It is a heavy load we're carrying.
The second message, for those who think doing business in Algeria, you have an extraordinary potential. Of course we have slow bureaucratic procedures, we don't have always what we want, but there are huge possibilities here and the first come will be undoubtedly the best served. |
© World INvestment NEws, 2001.
This is the electronic edition of the special country report on Algeria published in Forbes Global Magazine. 12th November, 2001 Issue.
Developed by AgenciaE.Tv Communication |
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ALGERIA,
