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Eskom’s Deep in the Red, Confirmed

By Sully Manope

Eskom has denied Sunday Times report that it was in severe financial difficulties and down to its “last R20Billion ($1.54Billion)”.

But Africa’s largest electricity company went ahead to confirm it was deep in the red.

“We are currently in a net borrowing position and our ability to continue as a going concern is premised on access to the debt capital markets”, Chief Financial Officer Anoj Singh told reporters. “If something had to happen catastrophic tomorrow that limits our access – and we are not aware of currently – then obviously we would need to approach the National Treasury. [But], at this point in time there is nothing that gives us cause for concern that we would need to approach the National Treasury under current circumstances.” 

Reporters wondered which was worse, the fact that you had a net credit of $1.5Billion as indicated by the Johannesburg based newspaper, or that you are in the negative, which Mr. Singh admitted.

The South African minister Finance, Malusi Gigaba had acknowledged, in late June 2017, two weeks before Mr Singh’s annual report commentary that the power utility was experiencing hardship and government was looking to support it further.

Mr. Singh said that the sharp drop in net profit from over R5Billion ($390Million) in the previous financial year to R888Million ($68Million) in 2017 was a consequence of a rise in its asset base, as it introduced generating units at Ingula, Medupi and Kusile. “Those assets have a much higher asset value and, therefore, there is an increase in depreciation.”

Interest costs could also no longer be capitalised as the plants were brought into operation, which had resulted in a rise in interest costs. For all its challenges, Eskom reported a 14.4% rise in earnings before interest, taxes, depreciation and amortisation (Ebitda) of R38Billion ($2.93Billion) and a 7.9% rise in revenue to R177Billion($13.64Billion).

In Cameroon, ENEO Agrees to Pay $7.4 per Mcf to V&G

ENEO Cameroon S.A. (ENEO), the Cameroon power utility, will pay an interim gas price of $7.4 per thousand cubic feet of gas to gas producer Victoria Oil &Gas until 31 December 2017.

This is part of the terms that the two companies inked in the deal to extend the current gas supply agreement until the end of 2017.

ENEO Cameroon is the energy joint venture between UK Group Actis and the Cameroon Government. The extension will enable ENEO and the VOG’s100% owned subsidiary, Gaz du Cameroun S.A. (GDC) to optimise all technical and financial elements of a long-term gas supply arrangement aimed at increasing the current contractual power supply of 50MW to beyond 100MW. The take-or-pay components will remain in place.

VOG says that it continues to prove its commitment to Cameroon and have been proud to help provide the Douala region with additional power to meet fast growing demands.
The drilling of the two new wells at Logbaba continues.

“VOG and ENEO are working to create long term solutions, using natural gas for power generation beyond 100MW”, says Ahmet Dick, VOG’sCEO. “We believe there is demand for more than 150MMscf/d in Douala and we are in discussions with third party IPP licensees to supply gas.”

TOTAL To Build a 146 MW Plant in Uganda’s ‘Oily’ District

French major TOTAL has applied for power generation licence from Uganda’s Electricity Regulatory Authority (ERA).
It wants to build a 146MW thermal power plant in Buliisa District, in the oil prospective region of Uganda.

Buliisa is bordered by Hoima District to the south and the Democratic Republic of Congo, across the Lake Albert to the west.

TOTAL is leading the $20Billion Uganda Albert Basin oil development project, which will include draining over a billion barrels of waxy crude and transporting them through a 1,444Km pipeline from Hoima to Tanga, the Indian Ocean port town in Tanzania.

The tentative cost of the power project is $117.4Million or 416BillionShs (Ugandan Shillings)
TOTAL is hoping to start the plant’s construction in 2019 if it receives ERA’s approval to generate power. “The project would be financed by 100 per cent shareholder equity”, the company says.

Although the project is, in part, to boost electricity supply in one of TOTAL’s most important African hydrocarbon portfolios, the power generated will be sold to Uganda Electricity Transmission Company Limited (UETCL), the country’s licensed sole buyer of electricity from power generation plants.

UETCL then sells the power it buys to electricity distribution companies such as Umeme and the Uganda Electricity Distribution Company Limited.


Siemens gets “Paper” To Deliver Power Components in the Sudan

Siemens has been awarded the contract to supply key components for five power plant units
in Republic of the Sudan
The agreement was signed in Berlin December 1, 2016, with the country’s state-power utility Sudanese Thermal Power Generating Company (STPGC) to supply five SGT5-2000E gas turbines.
These machines will deliver a combined electrical generating capacity of some 850 megawatts for the Sudanese national grid.
All five power plant units are scheduled to already commence commercial operation at the end of 2017
In addition to the five E-class gas turbines, Siemens’ scope of supply also comprises five associated SGen5-100A generators as well as Siemens’ SPPA-T3000 control systems. Three of the machines are destined for Garri Power Station in the North of the Sudanese Capital Khartoum, while the remaining two units will generate electric power further east in Port Sudan on the country’s Red Sea coast. All five of these turbine-generator sets will be initially commissioned as simple-cycle gas-turbine power plant units. However, later add-on of steam turbines is planned to expand the units to combined cycle configurations.

TOTAL Contest Who to Deliver Gas To Alaoji Power Plant

Nicolas Terraz, TOTAL’s managing Director in Nigeria, says that his company will later in July 2016, commence delivery of gas, through its Northern Option Pipeline (NOPL) to Alaoji power plant in the east of Nigeria and improve electricity supply in the country.

But his comments were coming a full month after Dada Thomas, Managing Director of Frontier Oil, an indigenous gas development firm, told journalists he wished Frontier was allowed to continue supplying gas to the same power plant. TOTAL has a domestic supply obligation to supply gas to Alaoji, but had been unable to do so, which is why the Frontier/Seven Energy partnership was given a one year emergency contract to supply the gas to Alaoji Power Plant.

That contract ends in July, 2016. Last month, at a briefing with journalists, Dada Thomas told Africa Oil+Gas Report’s Foluso Ogunsan that his company had made representation to government that they be allowed to continue the supply. Terraz, on the contrary, told a group of parliamentarians in Lagos in early July 2016 that the delivery of gas to Alaoji, in Aba (Abia State) was among TOTAL’s huge bouquet of projects that are aimed at contributing to the socio-economic development of the country. The 504MW combined cycle Alaoji Gas Power Station was inaugurated in March 2015, but it doesn’t supply more than 200MW of electricity.

TOTAL Will Not Build the Planned Obite Gasfired Power Plant

The 400MW Gasfired Plant in Obite in TOTAL operated Oil Mining Lease (OML) 58 is not likely to be built. It is official. “What the government is asking us to do is not necessarily to build a Power Plant but to supply the gas”, Nicolas Terraz, Managing Director TOTAL E&P Nigeria Limited, told the Africa Oil+Gas Report.

The Obite Gasfired power plant project has been on the drawing board for about a decade and was part of a queue of Power Plants that were meant to be constructed by Oil Majors in Nigeria between 2003 and 2007 to (1) Put out the Flare and (2) help boost electricity supply in the country.

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Why First Bank is Absent from the Azura Financing Deal

By Sully Manope

Nigeria’s leading lender, First Bank, curiously did not participate in the $816Million financing deal for the Azura Independent Power Project, the first, internationally structured power plant deal in Nigeria’s newly privatized electricity supply industry.

Would that be because the bank is ‘extremely’ exposed to the energy sector and is a little wary of further investment?

“No, the elephant is not tired”, says a source at the headquarters of the Bank (which uses the elephant as its symbol), an imposing edifice overseeing what used to be the promenade of the old Marina in Lagos, West Africa’s financial hub. “We just were not invited to participate”. The financing close for the 459MW  project, to be sited in Nigeria’s mid-western state of Edo, on the northern fringe of the Niger Delta basin, took place in late December 2015.

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Azura Gets Financial Go Ahead, With Close to A Billion Dollars in Hand

The widely publicized Azura-Edo Gasfired Power Plant Project in Midwestern Nigeria has reached Financial Close, after regulatory and environmental hurdles, with approximately $900MM provided by a set of 20 international banks and equity funders.

The landmark date for final financial sanction was December 28, 2015. Fieldstone, the American group which acted as the project’s financial adviser, describes itas Nigeria’s first true project-financed independent power plant.  “Much of the resulting financial structure can be used as a template for further investment in the power sector in Nigeria”, Fieldstone remarks. The project consists of the construction, operation and maintenance of a 450MW gas-fired open-cycle power plant located in Edo State, on the northwestern flank of the Niger Delta.

Lenders include the International Finance Corporation (IFC), Standard Chartered Bank, Rand Merchant Bank, Standard Bank, First City Monument Bank, Siemens Bank, FMO, KfW, DEG, Proparco, Emerging Africa Infrastructure Fund, ICF Debt Pool, Swed fund, CDC and OPIC. The debt facilities were split across a commercial tranche of $234MM (backed by a mixture of MIGA PRI and IBRD PRG products), a $267MM DFI tranche, a Naira 24bn ($120MM) local bank tranche with a natural hedge and a $65MM mezzanine facility from the DFIs.

The Azura-Edo Power Plant will be constructed by a Consortium of Siemens AG, Siemens Nigeria Limited and Julius Berger Nigeria. Gas will Azura Power is owned by Amaya Capital, the project’s founder and lead sponsor and American Capital Energy & Infrastructure (ACEI).  Gas will be supplied by Seplat Petroleum, whose gas processing facility is in Oben, also in Edo State.

The other sponsors contributing equity were the Africa Infrastructure Investment Fund 2, Aldwych International and the Asset & Resource Management (ARM) Company. Fieldstone also acted as financial adviser to Amaya Capital on its equity fundraising process which brought in ACEI; this transaction included a commitment from ACEI to invest up to $130MM in Azura Power Holdings Ltd., the company responsible for developing the Azura-Edo IPP.

Ghana Has More Power, So Why So Much “Dumsor”?

By Toyin Akinosho

The pervasive darkness in the homes of residents of Accra, Ghana’s business hub, is out of sync with data from the country’s Energy Commission.

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In Cameroon, a Bend In The River

By Toyin Akinosho, Publisher

An “insignificant minnow” has made a huge impact

Victoria Oil&Gas reached a fork in its African journey when it completed the tie-in of gas supply to electricity generators at the Logbagba and Bassa Power Stations (combined capacity: 50MW) in Douala, Cameroon.

The average daily gas production to fuel these two power plants is about 10Million standard cubic feet of gas a day (10MMscf/d).

The commencement of gas supply triggered take or pay conditions in the contract with ENEO(a company partly owned and operated by UK based Actis and the state power utility in Cameroon). “The project was delivered in four months”, VOG declared in a statement.

The AIM listed company may just be ready for the bigger league. When VOG showed up in Cameroon over five years ago, talking up its capacity to supply gas to industries, it came across to many in West Africa as an insignificant minnow hoping to be noticed.

The company made announcement after screaming announcement about its incremental supply of gas and the value addition it was making to the industrial landscape in Douala, a ranking financial hub in Cameroon, which shares a border with eastern Nigeria.

But if you were sitting in Luanda, Lagos, Accra or even Abidjan, looking at VOG’s figures, you could be forgiven for wondering why such a little player was sounding so big.

“In less than four years, our company, backed only by its shareholders, has succeeded in drilling two complex wells, installing gas processing facilities for 20MMsc/d, laying 22km of pipeline and is selling gas and collecting revenue”, reported Kevin Foo, VOG’s chairman, in a 2013 address.

Well, 20MMscf/d of gas facilities? 22km of pipeline?


This, at a time when a 150MMscf/d gas processing plant was being constructed in Ghana; a ‘junior’

Nigerian company was installing a 200MMscf/d plant in the country’s south east and Angola’s 5MMMTPA LNG plant was about to come on stream.

It certainly required more than sheer empathy to pay attention to the details in Mr. Foo’s report, which was, in part, a complaint that the market was treating VOG unfairly. “I am concerned about the low share price, which I believe grossly undervalues our business and does not reflect the company’s achievements to date,” he declared.

But a few facts in Foo’s statement would make a lot of sense to a keen observer of the energy trade in Africa. VOG may be producing a minuscule volume of gas compared with producers in Angola, Ghana, and Nigeria, but it is receiving over $16 per thousand cubic feet (Mscf) from each of the 23 factories to which its gas line is connected in Douala. And for the two power plants, the contract is for $9 per Mscf.

Most of VOG’s customers were previously using Heavy Fuel Oil (“HFO”) for boilers driving mechanical plant and processes. The marketing and engineering teams of Gaz du Cameroon, VOG’s wholly owned subsidiary in Cameroon, “worked with the senior management of these businesses to demonstrate the cost savings expected to occur following conversion to gas from HFO and then implemented individual engineering solutions that ensured an efficient conversion”.

This payment of between $9 per Mscf for gas delivered to power plants and $16 per Mscf for gas delivered to industries is quite competitive compared with the rest of the continent. In Egypt, gas producers are wrangling with government to get anything higher than $5 per Mscf for processed gas supplied to the grid.

In Ghana, the cost is about $1 per Mscf for the separation, metering and pipeline costs to deliver the wet gas at the in-let of the processing plant, which is owned by government. In Tanzania, the government buys the raw, wet gas for $3 per Mscf and then goes to process and transport it.

In Nigeria, like Cameroon and Egypt, the gas is produced and processed by private companies, but Nigeria’s gas producers receive nothing higher than $2.5 per Mscf for supply to power plants;for industries, they get paid between $3 and $8 per Mscf on a negotiated basis.

VOG’s commencement of gas supply to Logbagba and Bassa Power Plants has taken the company’s overall gas production on average to 14.5MMscf/d. True, it’s not the huge volume associated with many projects in Cameroon’s neighbourhood. But the country’s 1,400MW power generation capacity, largely produced by hydrothermal plants, is inadequate for the population of 23Million and the economic activity they drive.

This has provided a space for VOG, which has increasingly gone from a supplier of gas for boilers to a supplier of gas to boilers as well as generating sets located in the customer’s premises and now supplies gas to a power utility. It’s an incredible journey. In most parts of Africa, the impact of a project is never directly related to size.This has been a small company with a huge impact.

This piece was first published in the April/May 2015 edition of Africa Oil+Gas Report