(Business in Cameroon) - In less than ten months at the helm of Energy of Cameroon (Eneo), the Moroccan polytechnician has faced a number of crises against a backdrop of serious cash constraints: Social tensions, the shutdown of Globeleq's power stations following non-payment, supply-demand imbalances in the south interconnected grid due to low water levels, cyber-attacks... Events that have compounded the already precarious quality of the electricity service in Cameroon, fuelling criticism of the company. Why is Eneo finding it difficult to provide Cameroonians with an uninterrupted supply of electricity? What is the company's current financial situation? Is the Actis subsidiary manipulating its accounts to the detriment of the State? What stage have negotiations reached between the State and the British investment fund, which has decided to withdraw from the company, notably because of the financial imbalance in the sector? In this interview, the GM of Eneo answers these and other questions with candour.

Business in Cameroon: At the extraordinary session of the Board of Directors held on 26 June 2023, you were appointed General Manager of Eneo. What was your reaction? Did you see this appointment as a crowning achievement?

Amine Homman Ludiye: Having been with the company for two years as Deputy General Manager in charge of Generation, I had already had a good understanding of the company, its challenges and priorities. For me, the issue was not whether this appointment was the crowning achievement, but rather how I could best contribute to fulfilling the public service missions entrusted to Eneo. So, I see this appointment as an opportunity to contribute my two cents by implementing measures to improve the service quality, which is a major concern both for us and for Cameroonians.

BC: You became General Manager of Eneo at a time of social crisis in the company... What is the situation today?

AHL: The social climate is calmer, and employees are more confident because their concerns are effectively being addressed. To get this result, we prioritised dialogue, listening, empathy and transparency. I meet regularly with the social partners (trade union leaders and staff representatives) to work out solutions to issues such as training, career management, health insurance and management of the GIC-P-Eneo, the corporate vehicle for the 5% of Eneo shares held by employees.

But, like I said when I took office, there will be no redundancy plan. There are various ways of rationalising the workforce, such as retirement or voluntary resignation.

At the same time, we are committed to improving working conditions. It is unthinkable to expect an employee to go to work every morning without providing a suitable working environment. Today, some of our branches are not worthy of the conditions in which we have to welcome our employees and our customers.

BC: As far as staffing is concerned, there appears to be overstaffing. Comparatively speaking, the Compagnie ivoirienne d'électricité has about 1,500 employees, while Eneo has more than twice that number. Shouldn't this issue also be addressed to increase the company's efficiency?

AHL: I doubt that comparing one country to another, based solely on figures, is relevant. That said, there are at least two phenomena that can be observed with regard to staff. Firstly, the head office in Douala is becoming too large, with an excessive concentration of staff and skills, to the detriment of operational efficiency in the field. Secondly, the process of digitalising the company is encouraging a streamlining of the workforce.

As soon as I was appointed, we began the process of streamlining our organisation. This process involves decentralising budgetary, human and logistical resources to regions, where Eneo's main activities are carried out, to enable them to meet the tasks entrusted to them as quickly as possible. Staff need to be reallocated and offered new career prospects in line with current and future challenges. The 2024 budget reflects this approach.

But, like I said when I took office, there will be no redundancy plan. There are various ways of rationalising the workforce, such as retirement or voluntary resignation. This approach is not only painless, but also effective, because it forces us to think about how we can do better with less.

BC: In the first quarter of 2024, you also had to deal with a cyber-attack that has weakened your electronic payment systems to this day. When will things be back to normal?

AHL: When we detected the attack, our first move was to completely isolate our IT system in order to protect it. We then assessed the damage and the services affected either by the attack or by the fact that the system had been isolated from the attack. We decided to restore the prepaid platforms first, because we were at the end of January, a period of high demand in terms of the purchase of tokens that enable prepaid meters to be refilled (between 70,000 and 100,000 transactions at this time of year). This was done within 48 hours.

I have commissioned a multi-year plan mapping out the future configuration and necessary improvements to our IT infrastructure. The objective is two-fold: to adapt to technological advancements and to ensure the robustness of our equipment, with backups.

For remote bill payments, the EneoPay platform (an application for managing remote payments of electricity bills in post-paid mode, via various partners) became operational again this morning (4 April 2024), after several weeks of redeployment and testing. Customers can already pay using MTN Mobile Money, Express Union, Express Exchange and SmobilPay. Orange Money is expected to follow soon.  

BC: How much do you estimate the cost of this cyber-attack to be, and what measures have been taken to strengthen the security of your IT systems? 

AHL: We are working on this issue. However, it is difficult to give a figure at this stage, as the bills paid in February as a result of the cyber-attack were cleared in March. We won't have a precise idea of the loss of revenue until after this month's assessment, which is currently underway. Nonetheless, it is clear that we have suffered financial losses, especially as users of prepaid meters, unable to consume during this period, will no longer be making these purchases. What's more, we've given up charging late penalties to customers who didn't pay their bills on time during the same period.

But most important of all are the lessons we have learned and continue to learn. One of the things we realised was that, despite the previous measures we had taken, we were still vulnerable. In response, we invested a lot of money in strengthening our security system. Today, we have relatively robust protection that has prevented further attacks. This investment in securing our IT systems is all the more important given that Eneo is moving more and more towards digitalization. This is why I have commissioned a multi-year plan to be drawn up mapping out the future configuration and necessary improvements to our IT infrastructure. The objective is twofold: to adapt to technological advancements and to guarantee the robustness of our equipment, with backups.

In addition, it is important to review the procedures for access to our network by our external partners. These actions are underway to prevent any recurrence and, more importantly, to strengthen our system.

BC: You have not mentioned investment in human capital. We've been told that, despite the digitalisation process undertaken by Eneo, the company has seen key employees in the IT department leave, with some choosing to move to Canada...

AHL: It's impossible to forbid anyone from moving to Canada or any other country. But these choices have to be voluntary and made in a positive way, rather than because of a lack of opportunities for personal growth and development here. That's what we're working on. Our aim is to attract and retain talent.

BC: You've probably noticed. Cameroonians are struggling to understand why it is still a challenge to provide a steady supply of electricity, despite the substantial investments made in recent years, particularly in generation infrastructure such as the Lom Pangar, Memve'ele and Mekin dams. What can you tell them?

AHL: Customers cannot be blamed for feeling frustrated, because the problem is real. To grasp its full complexity, one must remember that the electricity sector is based on an integrated chain of interdependent players. To supply electricity to consumers, it has to be generated, transmitted and distributed. Eneo is responsible for distribution, and generates around 65% of the energy consumed in Cameroon. The remainder comes from independent producers such as Globeleq, Aggreko, Scatec and EDC, while Sonatrel is responsible for transmission.

For the most part, Eneo currently exceeds the targets set by the regulator in terms of availability of major power stations, reliability of major lines, and reduction in the duration and frequency of power cuts.

Electricity supply disruptions can result from problems with generation, transmission or distribution. This may be due to technical faults, an imbalance between supply and demand, which is common during periods of drought (which means that some customers have to be disconnected to maintain the balance and prevent the network from collapsing), or congestion in the transmission network, when the equipment cannot cope with the load demanded (a situation that can also lead to disconnection, even when there is sufficient generation capacity).

To minimise these inconveniences, we need to continually improve the quality of our infrastructure. With the investments you have listed, the limiting factor is no longer generation, but transmission and distribution, sectors that require substantial investment. This is the objective of the sector recovery plan launched by the government, with the support of international financial partners such as the World Bank. Nevertheless, it should be emphasised that Eneo currently exceeds, for the most part, the targets set by the regulator in terms of availability of major power plants, reliability of major lines, and reduction in the duration and frequency of power cuts.

BC: Like your predecessors, you are also faced with the financial imbalance in the sector, reflected in Eneo's precarious financial position. By the end of 2022, Eneo's cash deficit had reached FCFA 113 billion, its equity-to-total assets ratio had fallen to 7.4%, and its debt stood at FCFA 700 billion, half of which was owed to suppliers. What is the current situation?

AHL: The situation has worsened. The debt owed by public institutions to Eneo has almost doubled, rising from CFAF 167 billion as at 31 December 2022 to CFAF 266 billion as at 31 December 2023. So, the problem is not Eneo's skills. The company knows how to generate, distribute and sell electricity. It has some of the best technicians in the country, and even beyond. 

What's more, Eneo is not facing a decline in its market. Every year, we generate, distribute and sell more electricity than the previous year. The growth prospects are significant. According to the latest World Bank figures, the electrification rate in Cameroon is 67%, leaving 33% of the market still to be explored. It is rare for a company to know that it has an assured 33% development opportunity, which it could capture if it had the resources. Moreover, Eneo is not structurally loss-making. Its balance sheets indicate that it is making profit.

We supply energy worth approximately CFAF 7 billion in bills per month to public entities (administration, public companies, hospitals, universities…), but since the beginning of the year, we have been able to collect not more than CFAF 1.5 billion in January, and 1.8 billion in February.

However, Eneo has been facing cash-flow difficulties that are untenable for any company. Our major customers, mainly public entities, do not pay their bills promptly for the services provided. Thus, late payments oblige the company to resort to bank loans on a regular basis to support its operations. The cost of money increases the cash deficit. As a result, we are unable to pay our suppliers, as we should. This situation can no longer be tolerated, and it is imperative that measures be taken to restore financial stability in the electricity sector, so that it can function properly and develop. Ultimately, what is at stake is the quality of the electricity service in Cameroon.

BC: We learned that when the 2024 budget was adopted, the Board of Directors took a cautious stance. What was the reason?

AHL: In the current economic climate, caution is the order of the day. I have submitted three outlooks to the Board of Directors: a pessimistic scenario, a baseline scenario and an optimistic scenario, all based on Eneo's cash collection capabilities. As at now, our situation is closer to the pessimistic scenario than to the base case, due to the further deterioration of our financial situation.

We issue around CFAF 7 billion in monthly bills to public entities (government departments, public companies, hospitals, universities, etc.), but since the start of this year our collections have not exceeded CFAF 1.5 billion in January and CFAF 1.8 billion in February. The weekly payment of one billion CFA francs by way of partial payment of central government bills, which the parties had agreed to lighten the bill, was made only once in January and February 2024. And no payment has been made for the outstanding transfer orders, which amount to CFAF 2.9 billion...

These cash-flow difficulties mean, for example, that the necessary replacement or maintenance of certain underground cables is not being carried out as should. So there you have it. The measures taken by the State remain insufficient.

BC: This situation is exacerbated by the CFAF 266 billion debt that you are claiming from the State as at 31 December 2023. Some of this debt has been pending validation since 2020. Why is this validation taking too long?

AHL: We provide each other with the necessary information and supporting documents. After that, the regulator is required to carry out the validation. Incidentally, we have read a few things here and there on this subject (Eneo is often accused of swelling its accounts to fleece the State, editor's note). What we want to underscore is our commitment to orthodox management. Eneo is a regulated company with solid governance, and its accounts are audited by two auditors: one appointed by Actis, the other by the State. And the accounts for 2022 have been certified without the slightest reserve.

It is also important to note that even validated amounts are not necessarily paid immediately. For 2024, as part of tariff compensation, the regulator approved a payment of CFAF 44 billion to Eneo. It's already April, and we still have not received any payment.

BC: In order to free up cash for the payment of suppliers and subcontractors, you are currently working with Société Générale Cameroun to reconfigure Eneo's financial debt. How far have you gone with this operation, which aims to postpone repayment of a debt of around CFAF 150 billion by 18 or even 24 months?

AHL: Discussions between Eneo and its financial partners are ongoing. I hope that we will be able to reach a conclusion in the coming weeks, given the urgency of the situation. Indeed, this operation is one of the palliative solutions. We would not be obliged to resort to loan reconfiguration or debt if we had the necessary cash flow to finance our operating cycle.

BC: And why are you applying for a moratorium of not more than 24 months? Does this mean that your financial situation could improve in the short term?

AHL: Earlier, I mentioned that the government had initiated the implementation of a number of measures, including the activation of the sector recovery plan. This plan provides for investment in the transmission and distribution network, the installation of smart and prepaid meters, and an analysis of electricity tariffs in a bid to reflect the actual prices as accurately as possible and reduce the significant financial burden on the State, which has to bear the tariff compensation.

Eneo currently sells a kilowatt-hour of electricity at an average price of CFAF 80.6, while the average cost of generation, transmission, distribution and marketing is slightly over CFAF 106.

We believe that within the next two years, the beneficial effects of these measures will begin to be felt. Having a grace period of 18 to 24 months allows us to wait for these beneficial effects to manifest themselves.  

BC: By how much should prices increase to bring them closer to real costs?

AHL: In general, electricity tariffs in Cameroon have remained stable since 2012, with the exception of industrial customers, whose prices began to be adjusted last year. To put things into perspective, Eneo currently markets a kilowatt-hour of electricity at an average price of CFAF 80.6, while the average cost of generation, transmission, distribution and marketing is a little over CFAF 106. This difference is covered by the tariff compensation the State pays. This is a significant part of the debt owed to Eneo.

The issue of electricity tariffs therefore raises two fundamental questions: In a context of generally rising prices, is it logical for electricity tariffs to remain unchanged for 12 years? Is it reasonable for the State to bear such a financial burden, when its resources are also required for other budgetary priorities? This is particularly important when you consider that the current quality of service is below expectation, mainly due to the lack of financial resources in the electricity sector.

Now, how should this tariff readjustment take place? This is not Eneo's responsibility. As you know, it is the Cameroonian government, through the regulator, that sets the selling price per kilowatt-hour. Eneo is obliged to apply the set tariffs.

BC: In order to finance investments, the Board of Directors has recommended that you give preference to multilateral financial institutions, which offer better loan conditions. That notwithstanding, we know that your predecessors failed, for example, to obtain a loan from the International Finance Corporation (IFC). What is the problem? And what is your strategy for restoring confidence?

AHL: The confidence that Eneo inspires in financial institutions depends not only on Eneo, but also on the confidence that these institutions place in the electricity sector as a whole. The initiatives underway, the outlook and the awareness of the various issues strengthen this confidence, thereby facilitating access to funding. Current discussions with our financial partners focus on this dynamic.

Now, did the chronic cash shortage, in the sector influence Actis' decision? I think it did. If everything had been perfect, would the fund have taken the decision to leave? I do not know.

The situation is not easy; as various indicators need to be meticulously analysed to confirm this confidence. However, what has been valid in the past will not necessarily be so in the future. While it is undeniable that the situation remains complex.

BC: The buying and selling of shares is known to be an essential part of the Actis business model. However, our sources suggest that the growing financial imbalance in the electricity sector may have accelerated Actis' withdrawal from Eneo's capital. Having represented Actis on the Board of Directors before taking on the role of Chief Executive Officer, could you shed some light on the reasons that led Actis to withdraw before the end of its concession, which runs until 2031?

AHL: What I can say is that Actis decided it was time to finalise the investment it made ten years ago. It's important to remember that an investment fund's vocation is not to stay with a company for life. When an investment fund acquires a stake in a company, its objective is to support its development and then to sell its shares in the hope of realising a capital gain.

Now, did the chronic cash shortage in the sector influence Actis' decision? I think it did. If everything had been perfect, would the fund have taken the decision to exit? I can't say. However, it is not out-of-place for Actis to decide to withdraw from Eneo after a decade. For an investment fund, ten years is already a long time.

BC: However, some believe that Actis had begun to increase the value of its investment by selling off its stakes in the Dibamba and Kribi power plants.…

AHL: As you can imagine, I don't have the information to answer that question. I was not present at the time of the events. Furthermore, Actis does not share this type of information with Eneo's CEO. It is important to emphasize that the role of Eneo's CEO, who is appointed by the Board of Directors, is to defend and promote the interests of the company, its customers and its shareholders. In this respect, I serve the two main shareholders, the State of Cameroon and Actis.

BC: According to our information, Actis plans to withdraw by mid-2024. Given the current pace of negotiations, is this realistic?

AHL: Actis has expressed a desire to sell its shares, the State of Cameroon has agreed to buy them and discussions are underway. It should be noted that the State and Actis have each requested the services of a consultancy firm to evaluate the company. This work has now been completed. The parties are now discussing the financial valuation of the company's shares. Meetings were held a few weeks ago, and others are planned. But I can't tell you how long the process will take. The common desire of the parties is nevertheless to move forward quickly.   

Interview by Aboudi Ottou