Archive for avril, 2012

30 avril 2012

Interview of Miheret Debebe, Chief Executive officer, Ethiopian Electrical Power Corporation: Energy can be Ethiopia’s biggest export (The Africa Report n°39 – April 2012)

In the process of building a series of huge hydroelectric dams and wind farms, Ethiopia’s state-run electricity company is gearing up to begin exporting to its neighbors.

The Africa Report: What is the current electric power generating capacity of Ethiopia?

Mihere Debebe: The capacity is defined in two aspects. One is the megawatt capacity, which is about 2,100MW of installed capacity. The other is the energy potential, which is currently 7,300 MWH, depending on the availability of water.

TAR: The country is working on mega electric-power projects. How are they progressing?

MD: In terms of hydro, the Great Renaissance Hydro Power Project will generate 5,238MW of power. The second is Gibe III, which will generate 1,900MW. The third is the Genale Daw project, which will generate 270MW. We also have wind power projects in Ashegoda and Adama of 120MW and 50MW, respectively.

TAR: How much do you need to fully accomplish these projects? Is it a challenge?

MD: The programme demands more than $2bn per year. Financial resources [come] from government equity, the power sector’s self-financing, multilateral banks, our development partners and local banks. Reducing imports by enhancing the role of local construction, manufacturing and engineering industries is essential. Local industries are now taking a greater market share and making more contributions. But Europeans still have the major share. It is growing from our development partners in Asia. [Finance] from the power sector itself will hopefully grow with the start of power exporting.

TAR: Did the African Development Bank reject your loan request for the construction of Gibe III dam owing to concerns over its environmental and social impact?

MD: The fact is we withdraw from the bank. The bank is our big development partner. What matters is our time objective for our faster development target. We have said it repeatedly: all our projects are designed taking into consideration environmental and social impacts, national and trans-boundary. We are open to any dialogue raised within the process.

TAR: How are Ethiopians benefiting in terms of access to electricity?

MD: Ethiopia’s access to electricity is approaching 50%. Per capita energy consumption is growing fast. The service and industry sectors have 70% energy consumption; the remaining 30% go to the domestic sector and others. We have arrived at 32%o growth in annual energy demand. This has occurred not only due to expansions of towns or rural electrification, but also because of the people’s changing living standards.

TAR: How are you expanding the transmission network?

MD: The grid expansion includes up to 500KV. It is the first [of its] type regionally. The plan is to expand the transmission line up to 18,000km from the current 10,000km. These dominant projects will consume 35% of the $2bn we require per year.

TAR: You have recently started exporting power to Djibouti. What are your plans for regional interconnection?

MD: Djibouti has started taking 70-80% of its energy demand from Ethiopia. Now, because of our capacity to deliver, it is worth $20m-$30m a year. This sector will be one [Ethiopia’s] leading exporting sectors in a few years.

On a bigger scale, the Ethio-Sudan interconnection has some technical and contractual challenges to resolve, but the job is already done. In the north, [transmission] between the Ethiopian town of Metemma to Shehedi, then Galabat and Gedaref in Sudan should start soon.

The interconnection to Kenya is a mega African project. Financing is near completion. What remains is the tender preparation and selection of contractors. Hopefully it will be commissioned before 2016 and, at 1200km, will be one of the largest African regional electric highways. It is designed to carry a minimum of 400MW and a maximum of 2,000MW.

TAR: What is your long-term power plan?

MD: Generating 10,000MW by 2015 is our five-year strategic plan. There is preparation going on for the 10-year development programme.

Interview by Yohannes Anberbir, in Addis Ababa

30 avril 2012

Uganda: Strength in the silos (The Africa Report n°39 – April 2012)

Better storage facilities and packaging lead to higher prices and more negotiating leverage for maize growers.

Farmers in Uganda used to be so desperate to sell their produce before it spoiled that they would seize the first buyer as if it were their last opportunity to make money. Back then, the middlemen would drive a hard bargain and dismiss farmers’ price quotations with a take-it-or- leave-it arrogance. Today, the balance of power is shifting into farmers’ hands.

In 2006, Agroways Uganda, a medium-sized company founded in 1995 in Jinja, about 80km east of Kampala, was buying grain, cleaning it, storing it and selling it as a packaged product. The firm dried the grain under the sun, a method that cost it about 6tn of spoilt grain every season. « Considering the small profit on every kilo of maize, this was too much spoilage, » remembers Herbert Kyeyamwa, an Agroways director and one of its founders.

Farmers find their voice. The Ugandan government passed the Warehouse Receipt System Act of 2006, which allows private companies to store food on behalf of third parties. Soon after, the Uganda Commodity Exchange (UCE), a private-sector body formed under the Act, began licensing companies that wanted to engage in public grain warehousing.

Agroways applied in 2007, and Kyeyamwa says it spent much of the year organizing the company to meet UCE requirements, such as creating proper storage structures, insuring the produce and hiring the staff to fumigate.

In 2008, Agroways became the first company in Uganda to obtain a warehouse receipt license.

The company went looking for grain right away. « We undertook a deliberate effort to call on farmers to form groups and bring their produce for storage. We carried out training to sensitive them about the need for storage, » Kyeyamwa says.

Agroways moved from processing 500tn of maize per season to handling between 2,000 and 3,000tn. Today, the company handles 7,000tn per season. In April, it will commission new silos with capacity to process another 1,400tn. The silos will be automated and need only three workers per shift, compared with the current eleven.

At the core of Agroways’ message to farmers is the ability to get a higher price when the produce is well-packaged. There is now a shift in power when it comes to bargaining. Many farmers are no longer timid; they make their voice heard when they feel cheated, says Kyeyamwa. The number of farmers’ groups that work with the company has increased to 120 from about 80 three years ago, says Richard Ibengo, a manager at Agroways. Each group has about 60 members.

Unto the breach. The World Food Programme (WFP), the biggest purchaser of stored grain in Uganda, has confirmed the evolving influence of farmers. In 2010, according to Kyeyamwa, the WFP started the procedure to purchase more than 1,000tn of grain, but got nothing because the farmers sold their maize to other buyers after delays in the WFP payment process. That sounds like breach of contract, but to Kyeyamwa, the WFP left them no choice. « When you have farmers who are receiving a better price, and they can see their produce is in the store, what do you expect us to do when they all come here demanding money? » he asks. Kyeyamwa says he does not think Agroways has played a huge role in improving Uganda’s food security. Nevertheless, he says the farmers sell produce worth US$2bn ($855,000) a month, and that this money filters through the economy.

With their produce at the warehouse, farmers can now access loans using their receipts as security. Housing Finance Bank was the first to lend to farmers who presented their warehouse receipts as collateral. Stanbic, Centenary Bank and Equity Bank have also joined in.

Jeff Mbanga in Jinja

30 avril 2012

Uganda: New solutions sought in the wake of outages (The Africa Report n°39 – April 2012)

Much remains uncertain about when new hydro projects will come fully online and with how many megawatts. The government is looking at new energy sources, possibly even nuclear.

Numbers dominate any discussion about Uganda’s power sector. Government figures show that an estimated 18% of the country’s 30 million people have access to the national grid.

The ruling party’s strategy is to make Uganda a mid-level industrial country by 2020. A reliable, multi-sourced energy sector is seen as central to this goal. Energy Minister Irene Muloni has put the sector output target at 3800MW, through a strategy of attracting large-scale investment for the development and operation of energy facilities leased from the state.

Uganda s power supply is dominated by hydro. The country generates 180MW from the original pre-independence Nalubaale Dam (previously « Owen Falls »), plus 20OMW from the dam’s 2003 turbine extension, known as Kiira. Three diesel generator firms also feed 50MW each into the grid, while an estimated 20MW comes from an assortment of privately owned biomass sites and micro dams. In the pipeline is another 250MW from the delayed Bujagali Dam. In early March, even a first 50MW from one of its five turbines had not begun. Excluding Bujagali, this should provide a total of over 500MW. In practice, the grid receives about 350MW, against an estimated demand of 445MW. This gap has led to rationing and, more recently, price hikes of 40% to 70% after the annual $300m subsidy to diesel generator firms – to which the government was in arrears by $73m – was whisked away in January.

In the past, electricity transmission and distribution used to be one operation run by a state behemoth known as the Uganda Electricity Board (UEB). Its transformation into four separate entities was a World Bank-backed policy aimed at overcoming the UEB’s shortcomings.

Public outcry. Did anything go wrong? Uganda’s parliament seems to think so, after 2011 saw the country wracked by civil disturbances over the rising cost of living. It set up an ad hoc Committee lnvestigating Misconduct in the Energy Sector. Trapped between rising interest rates, expensive generator fuel and high import taxes, the country’s ubiquitous small trader class cited the new outages – which sometimes lasted for days in a row – as the last straw.

Meanwhile, former energy minister Hillary Onek accused energy technocrats of « duping » President Yoweri Museveni into believing the new Bujagali Dam would produce 250MW. A trained engineer, Onek analyzed problems with the water flow and pressure needed to drive the turbines, and said whatever output capacity the new dam could muster would not bring down tariffs.

Finger-pointing. Another government minister Aggrey Awori insists whatever the technical problems, it is the sector-reform plans that were flawed at conception: no investor will have pockets deep enough to keep the retail end afloat. An expensive yet poor- quality power supply was the only possible outcome, and is the reason Ugandans now pay the highest prices in the region for the least-reliable service offering the smallest consumer reach.

The government insists that the high prices are a problem of volume, and has long blamed the country’s tiny environmentalist lobby for teaming up with its global counterparts and snarling up international financing deals for the still incomplete Bujugali Dam.

President Museveni remains upbeat that with the impending oil revenues, the kinks in energy supply will be ironed out. Construction is due to begin in July on a 600MW hydroelectric dam – to be fully financed by oil revenue – at a site hundreds of kilometers downriver at Karuma. The president also created a frisson in January by announcing to parliament his intention to develop nuclear energy using Uganda s uranium deposits.

Kalundi Serumaga in Kampala

27 avril 2012

Gas-to-power: Turbine take-off (The Africa Report n°39 – April 2012)

Natural gas finds off the East African coast have raised the prospect of cheaper, cleaner fuel, but transport infrastructure and administrative delays are slowing its conversion to power.

Even as a push for renewable energy surges across Africa, new natural-gas finds have the potential to bring about a golden age of gas-to-power generation for the continent. Although it is classed as a fossil fuel, gas is viewed as a cleaner and cheaper alternative to coal-or diesel-fuelled power generation and is often called a ‘transition’ fuel on the way to a renewable future.

In East Africa, huge gas finds estimated at over 50 trillion cubic feet off the coast of Mozambique, alongside further exploitation of Tanzania’s Songa Songa field, could open up a big opportunity to address chronic energy short-ages. The energy utility Tanzania Electric Supply Company (TANESCO) upped electricity prices by 40% in January 2012, citing low levels of water at hydroelectric dams.

South African energy and chemicals firm Sasol has been quick off the mark. « Sasol New Energy is looking at developing gas-fired electricity generation in Mozambique in partnership with the country’s state- owned power utility,” said Jacqui O’Sullivan, Sasol’s group communications manager. It is looking at financing options for a proposed 140MW plant with the Mozambican government.

Italian oil giant ENI has also expressed interest in building and managing gas-fired power plants in Mozambique (see TAR 38, March 2012). In Uganda, Irish firm Tullow Oil says the government is reviewing the company’s plans to build a 50MW gas-to-power plant at Nzizi, near Lake Albert, by 2013.

Others have decided to sell facilities to state-owned utilities. In Tanzania, Oslo and AIM-listed Wentworth Resources – formerly known as Artumas – sold its 18MW Mtwara gas power plant to TANESCO in February for $13.5m.

Pipeline delays. But Rob Smith, research analyst at the Frost & Sullivan consultancy in South Africa, says transforming new gas finds into power will be a slow process. Frost & Sullivan says there is potential for 20% annual growth in gas-fired power generation capacity in sub -Saharan Africa, but it predicts growth will be just 5%.

While a coal-fired power plant can take eight years to build, gas fired turbines are « relatively quick and simple » pieces of infrastructure, according to Smith, taking between 20 and 30 month to construct. But the pipelines to transport the gas and the processing capacity to clean it need to be in place beforehand. « What has typically happened is that there’s been corruption or mismanagement from the political side that has resulted in the failure to deliver in terms of electrical infrastructure, » he says.

Global shale gas exploitation – though controversial – could also slow the speed of development of Africa’s gas finds. If large new fields start flooding the market with gas, the demand and price could slump, impacting the viability of extraction, processing and power plants.

In Ghana, delays by the government on releasing guidelines for the gas industry left the consortium managing the offshore Jubilee field no choice but to re-inject the gas because there was no way of transporting it. The government now plans to transform existing thermal power plants – which use steam to turn a turbine – to be run by gas, as well as to install combined cycle gas turbine (CCGT) plants that use both steam and gas turbines (see TAR 37, Feb. 2012).

In North Africa, a 10-year gas contract was signed in November 2011 between Morocco’s electricity producer ONE and Algerian gas giant Sonatrach. Each year 640m cubic meters of gas will be exported via the Maghreb-Europe Gas Pipeline, to feed ONE’s Ain Beni Mathar hybrid solar-gas power station and gas and steam turbine plant at Tahaddart.

Shale gas exploitation. Even as it steps up plans to export solar energy to the EU through the Desertec project, Algeria’s state-owned gas and electricity utility Sonelgaz is currently building two new gas turbine plants at Labrag and Ain Djasser. But analysts from UK-based African Energy suggest that the prospect of depleting production from veteran Algerian fields such as Hassi R’Mel has injected an urgency into the need to develop new fields. In February, Sonatrach’s chief executive Abdelhamid Zerguine said the state-owned energy company would invest $68bn by 2016 in the energy sector. It is now pursuing shale gas exploration, and says a first well will be drilled in May followed by a second in October.

In South Africa, the energy industry is waiting to find out whether the government will lift or extend a moratorium on exploration for shale gas in the Karoo Basin. The moratorium was due to expire in February 2012, pending a government review. In early March, the Department of Mineral Resources said it would not comment on whether the moratorium would be lifted or not. Shell still has an application for a license pending. A spokesman for Shell in The Hague said the company was « keen to see the moratorium lifted so we can see what’s there”. Environmental groups, however, have raised strong opposition to the plans.

27 avril 2012

Shillings begin to look shinier (The Africa Report n°39 – April 2012)

October 2011 was a terrible month for East African central bankers as local currencies dropped to record lows against the US dollar. Between January and October the Kenyan shilling plummeted 32% against the US dollar while the Tanzanian and Ugandan shillings were down 20% and 25V%, respectively. This prompted central bank bosses to intervene in the currency market despite long-held positions that market forces should determine exchange rates. They supported the dollar supply by selling them directly to commercial banks. They also tightened monetary policy, with Ugandan and Kenyan authorities raising the benchmark rate to tame inflation. The results were good. By 24 February the Kenyan shilling had risen 23% from its low of KSh107 to $1 in October; while the Tanzanian and Ugandan currencies were up 13% and 20%, respectively. « These actions brought in dollars as local securities became attractive to offshore investors, » says Duncan Kinuthia, a senior dealer at the Bank of Africa. He added that the high lending interest rates cut demand for imports, with reduced demand for dollars.


Analyst’s view Razia Khan, head of Africa research, Standard Chartered Bank

For much of last year, east African currencies were amongst the worst-performing frontier African currencies. In an environment of robust demand, sevens drought caused higher food and fuel imports, putting pressure on currencies and creating an additional feedback loop into inflation. Concern over the debt crisis in the euro area also weighed heavily. East African currencies have nonetheless experienced a dramatic turnaround. Central banks tightened monetary policy significantly in response, making it expensive to short East African currencies, which no doubt helped.

In Uganda, the central bank raised policy rates to a peak of 23% from July 2011, making yields on Ugandan debt instruments more attractive. Foreign portfolio inflows poured in, with the Ugandan local currency market attracting the highest level of foreign investor involvement since the 2008 crisis. The Bank of Uganda has already resumed an easing cycle, creating a significant bond market rally.

With inflation showing signs of peaking in Kenya, local bankers hope the shilling will see a similar surge. Kenyan and Tanzanian central banks reacted to the pressures by successfully reducing banks’ net open positions. Judging when to lift these restrictions will be hard, given concerns in Europe and potential oil-price volatility.