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AfDB Sanctions Danish Contractor for Fraudulent Practices in a Power Project

By Foluso Ogunsan

The African Development Bank Group has debarred Burmeister & Wain Scandinavian Contractor, for a period of 21 months, “for engaging in sanctionable practices in a power generation project financed by the Bank in Mauritius.”, the Bank said earlier today.

In 2014 and 2015, Burmeister & Wain participated in tenders for the redevelopment of the Saint Louis power plant in Mauritius, a project financed by the Bank.

”An investigation conducted by the Bank’s Office of Integrity and Anti-Corruption has concluded that it is more likely than not that the company engaged in fraudulent and corrupt practices in the context of this project”, the AfDB explained in a release.

”Evidence supports a finding that Burmeister & Wain, on a balance of probabilities, financially rewarded members of the Mauritian administration and others, through the intermediary of third parties, for providing access to confidential tender-related information which allowed them to tailor the technical specifications of the tenders to its offering, thus gaining an undue competitive advantage over other tenderers. Burmeister & Wain further concealed the arrangements it had entered into with the third parties, in breach of the rules governing the tenders”.

The debarment imposed by the Bank renders Burmeister & Wain ineligible to participate in Bank-financed projects and thus to benefit from its financing during the debarment period. The 21 months debarment qualifies for cross-debarment by other multilateral development banks pursuant to the Agreement for Mutual Enforcement of Debarment Decisions. According to this agreement, debarments longer than 12 months pronounced by any of its signatories, including the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank and the World Bank Group, are recognized and imposed in the same way by its other signatories.

By imposing a debarment of 21 months, AfDB says, “the Office of Integrity and Anti-Corruption recognizes Burmeister and Wain’s extensive cooperation with the investigation, the company’s transparency in dealing with the sanctionable conduct and the efforts that it has made to enhance its integrity compliance program since uncovering the sanctionable practices.

“The Bank will release Burmeister & Wain from debarment at the expiry of the debarment period, subject to a successful review and clearance of the company’s enhanced integrity compliance program by the Bank”.


Cameroon’s Power Utility Pushes its Gas Supplier into the Red

ENEO was once a key reason for Gaz du Cameroun (GDC) to dream big.

Seven years ago, the Cameroonian power utility promised an offtake of double the size of gas that the factories and other firms in Douala could readily demand from GDC, as the latter constructed pipelines and other infrastructure to incentivize consumption of gas in the country’s main commercial city.

But now ENEO (short for Energy of Cameroon), has fallen far behind in payment. The gross amount outstanding from the utility as at 31 December 2019 was $10.5Million, a significant debit in the balance sheet of a small player with production hardly exceeding six million standard cubic feet of gas per day 6MMscf/d.

The Logbagba gas field near Douala is GDC’s source of gas.

 As far back as 14 September 2019, Altaaqa, the generator supplier to ENEO, suspended operations at ENEO’s Logbaba site due to non-payment of invoices by ENEO.

GDC had continued to invoice ENEO based on take-or-pay provisions agreed to in the binding term sheet.

In April 2020, GDC announced that ENEO had arranged “payment of Four Invoices amounting to a net total of $2.9Million to GDC via “promissory notes” in the quarter”. That comes to no more than $4.2Million gross, but there is still a significant value of unpaid invoice to go.

ENEO’s default in paying a hydrocarbon producer is contrary to the new normal in Africa, where monopoly utilities and state hydrocarbon companies have general turned the corner in their attitude to paying debts owed to hydrocarbon producers in their countries.

Tanzania’s state hydrocarbon company TPDC and state power monopoly TANESCO pay gas producers more promptly. Egypt’s EGAS has improved terms of gas tariffs and annulled its debts significantly. Nigeria’s NNPC, though not exactly comparable as its case is joint venture agreements, has almost extinguished cash call arrears.

What makes the ENEO example particularly odd is that it is not an entirely state-owned company. It is majorly owned (51%) by Actis, the British investor and 44% owned by the Government of Cameroon. ENEO employees own a 5% stake. It is indeed an outlier of an example.

Cameroon Calls for Expression of Interest for Limbe Gas to Power Plant

Cameroon has launched a call for expression of interest to pre-qualify partners for the study, construction, and operation (Build, Operate and Transfer mode) of a gas-fired thermal power plant in Limbé, in the country’s Southwest.

Bidders have until July 10, 2020, to submit bids for this project, which must be completed by 2024, according to the government’s timeline.

With a production capacity of 350 MW, the Limbe gas-fired power station is expected to improve the supply of electricity in the Littoral, West, and South-West regions, a statement by the Ministry of Energy noted.

The Limbé power project is expected to include the conversion to natural gas of an existing 85 MW heavy- fuel-oil-fired reciprocating power plant and the addition, at the same site, of 265 MW of new-plant capacity. The new construction will be a combined-cycle, gas-fired plant.

Over the past 12 years, several actors have been involved in one iteration or the other of this project. With this expression of interest, it does seem as if the Cameroonian government has severed relationship with these players.


Finance Flows into Cote D’Ivoire For New 400MW Gas fired Plant

By Fred Akanni, in Lagos

The International Finance Corporation has signed a $339Million (or EUR 303Million) financing package for a proposed gas fired power project in Côte d’Ivoire.

The total cost of the project is $452Million (EUR 404Million), so the IFC intervention is financing 75% of the cost.

Which means that the Financial close and, Final Investment Decision are imminent.

The Atinkou Power Plant, to be located in scenic Jacqueville, a coastal resort town in the south of the country, consists of a 20-year concession to develop and operate a 390MW natural gas-fired power plant. The location is about 40 kilometers west of Abidjan, Cote d’Ivoire’s throbbing first city.

With combined-cycle turbine technology, the plant is expected to substantially reduce Côte d’Ivoire’s generation costs and GHG emissions, in part, through the displacement of older generation units. The sponsor of the project is the Eranove Group, an industrial group which also owns and operates the 544 MW CIPREL project, the largest power plant in the country.

As Lead Arranger and Global Coordinator, IFC arranged the full debt financing package of $339Million, which, beyond IFC, was provided by the African Development Bank (AfDB), Netherlands Development Finance Company (FMO), Germany’s Deutsche Investitions- und Entwicklungsgesellschaft (DEG), the Emerging Africa Infrastructure Fund, which is part of the Private Infrastructure Development Group, and the OPEC Fund for International Development (OPEC Fund). In addition to mobilizing the debt, IFC is providing, as part of the debt package, a $102Million (EUR 91Million) loan for its own account, as well as interest rate swaps to hedge the project’s interest rate risk.

Chinese Firm Wins Kenya’s Prepaid Meter Supply

Shenzhen Star Instruments, the Chinese firm which won the tender to supply phase prepayment meters to Kenya Power, had pledged it would set up a manufacturing factory in late 2019.

The commissioning of the facility has not exactly happened, but it is not unlikely that the company had won on the strength of that pledge.

Kenya Power a listed company, has also called for bids for supply of nearly 200,000 post-paid meters, an indication that the company is keen on both post paid and prepaid schemes.

The single-phase prepaid meter supply contract awarded to Shenzhen is worth $7.4Million (or Sh746.2Million). The scheme is part of Kenya Power’s Last Mile Connectivity Project (LMCP), which links homes to the national grid under a subsidised programme. The LMCP was launched in 2015 to absorb more of the population in rural and peri-urban areas by providing subsidy for grid extension to enable customers get electricity supply at affordable cost.

Shenzhen Star had in 2017 bid for another tender worth Sh1.25 billion to design, supply and install an advanced metering system to Kenyan Power but lost to rival Chinese firm ZTE Corporation.


S. A. Inches Closer to the Energy Plan

By Sully Manope

South African authorities are close to finalising one of the several energy plans on the table.

The country’s minister of energy says that the Integrated Resource Plan IRP, essentially a roadmap to what type of technology investors should bring into the country’s energy mix over the next 30 years, will be finalised in a week.

This iteration of the IRP has been in the making for over five years.

“By Wednesday (October 16, 2019), I am very hopeful that the IRP would be concluded, and we will gazette it”, Gwede Mantashe, an influential figure in President Cyril Ramaphosa’s government, told the Africa Oil and Power Conference meeting in Cape Town, a scenic resort town on the southernmost tip of the continent.

“The plan will lay the foundation for investment in power generation. Such an investment should have the impact of lowering the cost of doing business in our country.”

Minister Mantashe invited the delegates at the conference to enter the South African market.
“Come to the fore, we are ready for you. Talk to us,” he said.

Although South Africa doesn’t use natural gas for power generation ((te country’s gas thermal plants actually run on diesel) Mantashe declared at the confernce  that natural gas would be a key part of South Africa’s energy mix, citing projects like the Coega development in the Eastern Cape province as being at the core of this strategy.
“This ambitious project for us will be a game changer, those who are waking up to take the opportunity will actually benefit from that development. It is quite a test for us because we need to get into gas in a big way.”

Read a fuller story on natural gas incentives in South Africa: ‘S.A. Fiddles While Gas Burns’, in the October 2019 edition of the Africa Oil+Gas Report.

Egypt Trounces South Africa as the Continent’s Top Electricity Producer

Egypt has reached installed capacity of 55,000 Megawatts of electricity per day, the country’s supervisory minister for energy says.

That is some 3,000MW higher than produced by South Africa, to go by that’s country’s own official figures.But capacity, especially of African infrastructure, doesn’t always translate to actual delivery.

“Starting from 2014 up till the end of 2018, the total capacity added to the network was 25,426 Megawatts”, declares Mohammed Shaker, Egypt’s Minister of Electricity and Renewable Energy.

85% of the power is fuelled by natural gas.

“The 25,426MW was approximately the maximum load we could supply during 2014, which means we already doubled what we have at that time”, Shaker explains.

South Africa doesn’t have that kind of story to tell, as the state power utility grapples with a debt load of about $30Billion, borrowing money on short-term contracts to help it meet its commitments to its long-term loans.

But whereas Eskom is a clear corporate entity, it is difficult to differentiate the Egyptian Electricity Holding company from the Egyptian state itself.

“The installed capacity in Egypt is almost exceeding 55 Gigawatts although our consumption is less than that but we are trying to depend on the operations of high efficiency generators, combined cycle and because of these we could manage the to reduce the consumption of fuel to a great extent and this will be reflected on the cost of tariff”, says the minister, a former Professor of Electrical Power Engineering at the Cairo University.

“Almost 60-65% of the cost of tariff is as a result of the fuel, if we have savings in the fuel consumption, it makes a difference for the costing of electricity”.


Diesel Supply Now a National Emergency in South Africa

By Toyin Akinosho, in Lagos

South Africa’s power utility, Eskom, has burned between 20-Million to 25-Million litres of diesel in recent months by running two open cycle gas turbine (OCGT) power plants as a last resort.

Phakamani Hadebe, CEO of Africa’s largest power producer, says the utility has so rapidly burnt up the fuel in a short amount of time that there are no diesel stocks available in South Africa, except for cars and small utilities.

Eskom resorted to the use of OCGT plants which use diesel (because there’s no natural gas supply logistics), as the country’s large “fleet” of coal fired plants are in suboptimal performance.

The Gwourikwa and Ankerlig thermal plants in the Western Cape, commissioned between 2007 and 2009, have a combined name plate capacity of around 2,000MW. They were intended to supply electricity into the National Grid during peak hours and emergency situations. They should originally be fuelled by natural gas, but South Africa’s cluelessness around natural gas utilisation has forced the country to use far more expensive diesel to fire these turbines.

Diesel availability is such a national emergency that Parvin Gordhan, South Africa’s charismatic Minister of Public Enterprises, told a media briefing that Eskom was in discussion with National Treasury and the Auditor-General for guidelines which will allow emergency procurement processes
for maintenance and the purchase of diesel.

Hadebe says that Eskom is expecting a shipment of diesel to be offloaded in the next couple of days and relieve the pressure on the grid by March 22.

South Africans to Pay More for Fuel and Electricity

South Africa’s Department of Energy released the figures for pump prices for Petroeum Products for March 2019 in the same week that the country’s energy regulator announced the response to a plea by the Electricity Utility.

Both announcements mean higher energy costs for the average South African.

Jeff Radebe, Minister of Energy, said that South African motorists would be paying 5% more for a litre of petrol and 4% more for litre of diesel from midnight of March 5 until the fourth of April 2019.

South African pump prices are deregulated, so the calculations are based on the movement of international oil prices as well as the strength of the currency against the US dollar.

If the prices of crude oil fall sharply in the international market, for example and the currency strengthens, motorists would be asked to pay less for diesel and gasoline in the following month.

Contrary to the swing in pump prices however, the tariff on electricity will continue on an upward trajectory.

On March 8, three days after pump prices were announced, the National Energy Regulator of South Africa (Nersa) granted Eskom a 9.41% tariff increase in the 2019/20 financial year. The grant was in response to applications received from the utility in September 2018, praying the regulator for increase in tariff over the 2019/20 year, 2020/21 and 2021/22.

Nersa evaluated this application using the MYPD4 methodology, which is forward looking in nature. Making the announcement at its offices in the capital, the regulator approved allowable revenue percentage price increases of 9.41%, 8.10% and 5.22% respectively over the three-year period.




South Africa To Release Long Overdue Energy Plan

Natural volumes expected to be lowest in the mix


By Sully Manope, Southern African correspondent, in Windhoek

The South African Government says it will release the Integrated Resource Plan IRP latest by Friday, August 24, 2018.

The document determines the country’s long-term electricity demand and details how the demand should be met in terms of generating capacity, type, timing and cost. 

The extant edition of the IRP, finalised in 2010, was promulgated in March 2011. Although it sets out the blueprint for likely demand and supply of energy and the type to be delivered between 2010-30, there has been expectations of its revision since 2014. The government itself has fuelled the expectation by repeatedly stating that the electricity demand outlook has changed from that expected in 2010.

That expectation, that the IRP would be significantly revised, has been part of the cause of uncertainty in the country’s energy sector.

That said, the new IRP will show how much gas is expected to be introduced for electricity in South Africa and that itself is a pointer for any investor seeking to play in the proposed South African gas market.

Early revisions of the 2010 plan bumped up the target set for gas from 2,370MW to 3,550MW. Compared with renewables (+9,0000MW) and Nuclear, (being under heavy debate, but expected to be higher than 5,000MW), this is still a minuscule contribution in the proposed total generation of 60,000MW by 2030.

Evidence that the South African government isn’t keen on pumping natural gas into Africa’s largest economy is it lackadaisical attitude to developing the Gas Utilisation Master Plan (GUMP), which has been under development for over five years. GUMP is meant to establish a framework for the investment in gas infrastructure, provide clarity about the role of gas in the South African market, set out the regulatory environment, government commitments and economic prediction for the use of gas and outline  demand, supply, market structure, industry organisation, environmental risks, financing and social impacts.

The country’s Gas to Power IPP Programme, which was announced with aplomb in 2016, has also faced headwinds.

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