"The Cameroonian electricity industry is projected to generate revenues of about US$494.2 million by 2013," notes Frost and Sullivan Industry Analyst Jeannot Boussougouth. "This growth will be driven by the convergence of factors such as new additional generation capacities in Yassa and Kribi, and the continued robustness of the demand for electricity in the country."

Current participants and potential new entrants have to overcome a number of challenges -- including corruption, revenue collection and the lack of adequate infrastructure -- if they are to fully benefit from the expected boom in the demand for electricity in the country.

Market participants are also faced with an environment in which power sector reforms have produced mixed results. AES Sonel still maintains a monopolistic position and is the main provider of funds to the regulatory body. This does not offer an entirely independent or fair regulatory environment.

If Cameroon is to meet its goal of adding at least 10,000 MW of electricity by 2030, it would need to ensure that issues such as the cost reflectivity of electric tariffs are fully considered and the opening-up of the transmission and distribution segments to private companies is achieved.

"There are several challenges that have restricted the entry of private investors into the Cameroonian electricity sector," remarks Boussougouth. "The scale of investments required suggests that public private partnerships (PPP) are likely to be the most viable option due to their mechanism of risk sharing."

The fact that AES's concession agreement with the Cameroonian government is to a maximum power production capacity of 1,000 MW indicates that there are massive opportunities in the generation function for private companies. The recent announcement of the creation of a new electric power production company known as Kribi Power Development Company (KPDC) is indicative of this trend.

"In addition, Cameroon should explore the possibility of gradually shifting from the single-buyer model, which should be seen as a transition operational model, to a completely deregulated electricity market based on a direct sale of electricity to end users," advises Boussougouth. "This would limit government interventions, strengthen a market-driven decision-making process and improve productivity and efficiency."

Finally, a further diversification of the country's energy mix must be pursued. A fast-track development of Cameroon's natural gas resources, which are estimated at approximately 105.9 billion cubic meters, provides a viable feedstock alternative.

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