Mohamed Arkab, CEO Sonelgaz Group : ‘‘For a homogeneous and balanced consumption profile’’

 

Mohammed Arkab was appointed last August as the new CEO of Sonelgaz by the Minister of Energy, Mustapha uitouni. Previously head of the company of electrical engineering and gas(subsidiary of Sonelgaz) , Mr Arkab comes back in this interview with all the imperatives that Sonelgaz has to respond to.

 

 

 

OGB: Could you give us an overview of the current consumption of electricity?

 

Mohamed Arkab : In the past year, as opposed to the year 2016, we achieved a double digit growth of around 10.5% for 1 4183 MW as recorded in the summer.  You need to know that the national coverage is on average 98% and 58% respectively for electricity and gas consumption. These figures were due to the achievement of a number of realizations, some already functional and others about to start, and all part of the 2012-2022 program. Indeed every year we engage in a 10-year program concerning means of production of electrical energy, which is then reviewed every year to take into account the demand.

 

 

Concerning the capacity of production of electrical energy, essentially based on natural gas, we reached 18,000 MW. It should also be noted that we have

 

developed 28000 km of high voltage network, on top of 400 electrical stations of high and very high voltage (60, 220KVA and 400KVA which are being exploited)

 

In terms of the distribution network, we have more than 150,000 of transformer and distribution substations for medium and low voltage, and nearly 400, 000 km of distribution network. All this, has contributed in satisfying the increasing demand of energy including at the peak of the summer period.

 

We also have a network of more than 20, 000 km of gas pipeline to supply all of the public distributions currently in service. We aim at satisfying the national demand with a better quality service.

 

 

 

How is this distribute between business and household?

 

 

 

The domestic customer always prevails. We have 9 million domestic customers subscribers in low voltage shared between the domestic and the tertiary clients.

 

We have noted with pleasure the arrival of high and very high voltage consumer customers. The domestic consumption shows a curb where the peaks are recorded for few hours in the evening and/ or in the beginning of the afternoon, which calls upon huge investments for few hours a day only during the summer period.

 

What we want for Sonelgaz is to have a stable and almost constant consumption. There should not be much difference between summer and winter. Currently, we are barely 9 thousand MW of applications on a capacity of 18, 000 MW; this is due to the drop in the demand, which would allow us to better manage our resources and our capabilities and especially to make them profitable.

 

 

 

There are big consumers...

 

 

 

The Algerian government has launched the creation of fifty (50) industrial zones and we are preparing to feed these areas with electricity and gas. Our mission and interest is to avoid peaks in our consumption and increase our turnover.

 

 

 

Could these peaks be avoided?

 

 

 

We cannot avoid peaks because our consumption model is based on the summer when all the air conditioners are turned on. The search for convenience and the 58% gas penetration rate have rocked the peak of winter towards the summer, so we do not have the peak of winter for electricity consumption because the majority is heated by gas. Currently, we are experiencing the bulk of demand in summer and we have almost 4 months of summer with heat waves and peak consumption.

 

Last year, we had record peaks of consumption three times. We went from 12,800 MW in 2016 to 1 4183 in 2017. This is huge in terms of progress. This brings us each time to prepare important programs in the field of the production of the electrical energy, up to 2000 MW. Currently we have 8000 MW in project. According to the schedule, we should have 2000 MW each year until 2024 and an associated network of more than 3000 km, as well as a hundred electrical plants to cope with production, processing, transportation and distribution.

 

 

 

Where does the surplus production go?

 

 

 

There is no surplus production. There are stocks of production, which account for 20% of the high demand. This margin would respond to any hazards related to the consumption demand or the unavailability of the means of production.

 

The stock increases outside the peak period. When I told you that there is 18, 000 MW on the grid and that the demand is 14, 000, the 18, 000 that are developed are in the area of energy development. In fact we have arrived at 15, 000 MW. Why? There are ageing plants which are therefore limited in terms of production. There is also a temperature-related effect that decreases production, including new plants. As the temperature increases, productions decreases.

 

 

 

Do we export our electricity?

 

 

 

We do have exchanges with our neighbouring countries within the framework of the functioning networks but we also have commercial contracts subject to availabilities and possibilities. These are contracts that we renew each year. We are still exporting energy to Tunisia and Morocco in very small quantities, 150 to 300 MW, for very specific periods.We are equally external agents for the Iberian market for which exports have been undertaken.

 

 

 

For more clarification between figures related to production and consumption…

 

 

 

All over the world, in developed countries, they have stocks. These are around 15 to 20%. So we have sought to obtain this stock via our achievements. Indeed,we are not immune to a defection, a breakdown. it is a rotating machine, hence the importance of stockage. Last year, we had nearly 1000 MW of power cut during the summer, and it was the stock that responded to the need. To respond to all these demands it is necessary to think of technical hazards. All of our investments are well studied in the context of the evolution of the estimated demand around 7% except for the previous years where it reached 12%. Several plants are being finalized in the South and the North of the country such as Cap-Djinat / Boumerdes and Ain Arnat /

 

Setif in the North, with more than 1, 200 MW each. And others are expected each year such as that of Naâma, Jijel, Kais to Khenchela, Mostaganem and Biskra. These are 1400 MW power stations each and they will be activate each year until

 

2024.

 

Production is an industrial activity and equipment are subject to mechanical deterioration and therefore breakdowns are unavoidable. This is the reason why we have to account for a reserve rate in the development to face both technical problems and issues related to the demand.

 

 

 

What solutions do you suggest to reduce the domestic consumption?

 

 

 

A number of actions are under way. They are multiple and involve awareness, information, and advice with a participation to programs on energy efficiency, saving energy with APRUE alongside with some training in how to reduce and rationalize energy consumption. We have set up an advice desk within each agency and distribution management office where the client can obtain

 

information on consumption and a

 

detailed explanation for a bill. We have started working on the rationalization of energy use. The second part is done with Aprue with whom we have completed all the programs and we have assisted with logistics and infrastructure. We have means to arrange seminars in all the 48 wilayas and with Aprue we distribute bulbs adapted to this objective. Inciting the citizen to rationalize his consumption is paramount to act on the rate of growth of the demand without which the level of investment, that requires many efforts for a search of finance, will not be sustainable.

 

We must work towards a better management of the demand without being led into irrational developments. There is little margin for us but the main thing is an awareness taking and a practical advice on how to reduce its electricity bill, avoid waste and use energy efficiently.

 

The second axis is to work on technics and modernization. We have introduced the electronic meter. It has several advantages with the new systems for customer’s management, which we are deploying. It will enable

 

Communication with our customer who will be inform of any timed ‘unusual ‘consumption. We have reached 80% of its installation and we know of the history of the customer’s consumption.

 

Moreover, the 4 price segments put in place will be helpful. The first segment concerns the majority of our clients. We want to discourage that group of customers from moving to other segments where their bill could be double up. We want to keep the two segments who represent two to three millions of customers.Compared with the price range used by our neighbors in dinars, they are superior by 6 and

 

7 dinars the kWh while ours is 3 dinars the kWh. Hence our bad habit of leaving the light on unnecessarily will cost us 2000 dinars more on our bill, based on our experience of an extinguished lamp.

 

 

 

Would Sonelgaz, based on the prices used, have a capacity for investing?

 

 

 

The yearly level of investment has been of 200 billion dinars for 10 years. We work on long term lines of credit with BNA (National Bank of Algeria). In contrary to the general belief the price rate is not subsided but rather administered. The state allows Sonelgaz an enhanced credit.

 

 

 

So you are in debt?

 

 

 

Of course.

 

 

 

How is the debt dealt with?

 

 

 

Through Sonelgaz resources. So far, we have benefitted from the deferring of payment to claims administrators. They enable Sonelgaz to carry out its investment program. However, the State has never failed Sonelgaz. Notice the price cost has not much increased in relation to the level of demand and investment. We had only one increase, in 2016.

 

 

 

So you don’t feel affected by the finances?

 

 

 

The costing of electricity does not depend on Sonelgaz since it is the regulation authority and the Ministry of Energy that fix it. Sonelgaz can only make propositions. If we let the situation as it is it will not entice the consumer to avoid waste. That will lead us to investments, at higher cost and more important, we would like to control and rationalize.

 

 

 

Where does Sonelgaz stand in terms of claims recovery?

 

 

 

We have reached 80 billion dinars of credits recovery, it’s enormous. We have managed to recover 20% over a term, so we are now down to 64 billion dinars of debt to collect. We have made a plan for recovery and it works.

 

The recovery plan concerns the citizen, administrations and firms that find it hard to pay. We have prioritized the bills, i.e, when the customer has two or three bills; he asked to pay for the first one with a commitment to pay for the other bills so that his connection is not disrupt. We do find ways of recovering the debts. Instead of three bills unpaid, there is at least one, which is paid. So we make ourselves available to accompany the administrations. They need energy to service the public sector and we are also a public service.

 

We at Sonelgaz have an objective for the Distributor to always search for a solution with the customers to bring them to pay.

 

 

 

Is there a fixed date for the objective goal?

 

 

 

Each year, we fix an objective goal and performances for managers and we are still improving ourselves.

 

We have planned 50% reduction in 2018. Before, we didn’t discuss this at Sonelgaz. It was either you pay or else we cut, but to cut off a customer it has to lose him and lose the payment. We could go to tribunals and win but that would be wasting time. The Prime Minister has given written instructions and the last one is an ultimatum to all administrations to pay their debts, including Sonelgaz and this, in a limited timescale.

 

 

 

What is new about the electronic payment?

 

 

 

E-payment is operational since 2017 but still not within the habits of the Algerian citizen. We are doing our best to generalize it. The fraud phenomena adds to the claims. If Sonelgaz has 80 billion dinars of debts to recover, it is enormous. We have set up a program and it has been rewarding. From 2016 to 2017, we had 13% of losses; we were at 15% before. In 2014, it was 20%.We are in a dynamics, which allows us a reduction of loss rates, which would stand by international norms and does not go beyond 4.5 and 5%. There are always technical losses due to electrical phenomena. That is normal.

 

 

 

Sonelgaz is historically involved in the renewable energy programme. Where are we with the 4000 MW project? There was a question of calling for tenders and it stopped. Is Sonelgaz still involved in this program and if so what is its share?

 

 

 

Sonelgaz is still involved. We are also interested in the energy mix; it’s important for us. Since the first program has initiated by the State, by the President of the Republic, the State program of 22 GW, Sonelgaz has done the feasibility study. Sonelgaz has assigned to carry out the first phase, which is a learning phase, a pilot one of experimentation. We realized an experimental photovoltaic power plant in Ghardaia using the four photovoltaic (PV) technologies in this plant. We also realized the first wind farm of 10 MW in Kabertene (ADRAR). These achievements were the first experimental phases where we had to familiarise ourselves with this technology, and also looking for the right equipment for a hostile environment like the Sahara or the North. We chose Ghardaia because it is inter-connected nationally. The experiments feedback showed that the polycrystalline gives a better solution with inclinations of the panels at 15 degrees. It is from this that we have followed what is done around the world and we have prepared our first specifications to realize the second phase, which is that of the production of the 400 MW distributed in 22 electric power stations. Currently all plants are connected whether it is the North or the network of the Great south.

 

We have 22 plants currently in operation totaling exactly 354 MW plus 10 MW of the wind farm. This allowed us to have the largest photovoltaic power plant in Djelfa of 60 MW which is also on the network. And of course there was above all the Algerian experience when we executed in a joint venture with Sonatrach a hybrid power plant in Hassi R’mel, in 2011. We realized the first power plant CSP (solar concentrator) in partnership with Abengoa for 120 MW gas and 30 MW solar from semi-parabolic solar concentrators with peddler fluid that drives a steam turbine. It was a first experience in the CSP that we wanted to familiarize ourselves with this type of technology. The third phase is to continue the State program for 22 GW. The Ministry of Energy has prepared specifications. The 4000 MW program has been

 

Initiated by the Ministry of Energy and Sonelgaz Engineering has carried out the specifications. The idea behind the third phase is not to import the equipment to carry out a program. We have an important program, there is no blocking. It is good not to rush to a solution that may be costing us a lot and not bringing anything in value added. It was very wise to see how to ‘integrate national’.

 

 

 

By the way, it was a question of requiring the manufacturing of the elements at the local level, to launch the industrial sector of the renewable...

 

 

 

The renewable is possible in the manufacture of equipment. These are processes that can now be mastered and they are. So we can imagine a lot of local factories making panels from the cell. We do not have to revert to the silica to make these panels, we can cut the chain in half and import a part and realise the other part and have a panel. There are three or four private firms, which have started to do the encapsulation in Algeria. It is indeed a good thing. So import a part and it is smart assembly. To schematize the chain, there are five blocks in it. We master better now the last block, it is an important encapsulation. It is a technology that must be mastered. So we can go to the chain that comes just before. It is also necessary to produce all the equipment that is around a power station. We have identified more than 300 pieces of equipment for a photovoltaic power plant. So we can manufacture, for example, switches and boxes that are under the panels; we can also make the frame of the panel. We have to integrate the whole chain. We have an important program.  So we must attract the interest in the national industrial fabric, private or public to be able to manufacture. There are many initiatives in this direction even at Sonelgaz. We have organized open doors; we created cards for each equipment to encourage the investor to get started.

 

 

 

Sonelgaz was to launch a manufacturing plant with a German company...

 

 

 

We launched the operation with the signing of a contract with the world number one. We have advanced in its construction but unfortunately, our partner went bankrupt. The project is still there. We have prepared the site and we are always interested to continue in partnership this project with the private or the public sectors. Now with the

 

Encouragement of the Public-Private Partnership, the realization of the project of photovoltaic panels at the level of our site of Rouiba Lighting is in the pipeline.

 

 

 

Are there any private individuals who have shown their willingness to invest?

 

 

 

The private is there. When you give him a project, he gets involved quickly. We are beginning to develop local genius. We have to give visibility and I think that’s what the State is doing. The CREG (Electricity and Gas Regulation Commission) has put in place several legal devices to stimulate investors. The environment is getting ready for a better support of the ENR. We have the organization with Sonatrach and the FCE of a forum on energy transition on January 17, 18 and 19. We will expose, we will explain and allow all investors to have a visibility on this sector that must be created in Algeria.

 

 

 

What role does Sonelgaz play?

 

 

 

Sonelgaz is here to develop. For example, for the High Voltage and Very High voltage network, five years ago the foreigners realized the totality of this network.  With the strategy of Sonelgaz, we have integrated more than 70% of national. The pylon is manufacture locally, so is the cable. There are public companies ENICAB Biskra and CABEL and even private firms have settled down and invest in accessories, cables, junction boxes, insulators. There is a dynamics.

 

The engineering is 100% Sonelgaz. Our engineers at Sonelgaz can on a piece of paper make you a network, calculate it and realise it. For the renewable sector we have developed a strategy and we have succeeded. We are a force of proposal and accompaniment.

 

The development of engineering will allow this sector to develop. We must stay on the essential; our basic business is the securing of electrical energy. We must always satisfy a demand that is growing.

 

 

 

There is also the African market and there is talk of exporting electricity to Libya?

 

 

 

We are pushing our service subsidiaries to invest. With the African market, we want to go with the national private to succeed a joint venture. We are also thinking of exporting electricity. We have become leaders now on the African Platform. The time has come to think about exporting. We have already discussed with a Libyan company. Their CEO has already come to Algeria and he visited our facilities.  They are interested but there is a bottleneck at the level of Tunisia. At our level, we realized our part of 400 kV from Maghnia to the Tunisian border. We even realised inside of Tunisia as far as Djendouba. Tunisians were to continue to the Libyan border. It is not done yet so we stayed on the 220kV. We can only export 150 MW to Libya with of course the Tunisian agreement. We are negotiating for Libyans to invest in the network.  If the 400KW is made between Tunisia and Libya , we can export the 1700 MW in winter. What is sure is that Sonelgaz is aware that we must go for export to increase Sonelgaz’s resources and not stay on the long-term credits of the

 

State and still be a burden. We have companies of realization works and services, which have the know-how and engineering. We have a systems operator who can design a network for a country and the African market is there. Some African countries are interested in our services.

 

 

 

 

 

 

 

 

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