Liberia: Stakeholders Reportedly Fuming Over Controversial Electricity Deal
Monrovia – A controversial plan by the CDC-led government to hire a power barge that would sell electricity to the Liberia Electricity Corporation for distribution to the Liberian consumers is drawing angry response from key donors and stakeholders already funding the Mount Coffee Hydro operation and ongoing electricity projects in Liberia.
Report by Rodney D. Sieh, [email protected]
FrontPageAfrica has learned that the administration is currently in negotiations with a Turkish company, Karpowership, a private electricity exporter, owner, operator and builder of the first floating power plant fleet in the world.
Under the proposed controversial plan with a ten-year contract stipulation, Liberia would be buying power from Karpowership even though it already has an absorptive capacity of only 24 % of current installed capacity at Bushrod Island and Mt. Coffee.
Representatives from a number of stakeholders, who spoke to FrontPageAfrica on condition of anonymity in the past few days fear that the signing of the agreement could lead to serious repercussions with the Millennium Challenge Corporation(MCC), the Norwegian government, the European Union, the World Bank and the German Development Bank.
FrontPageAfrica has learned that most of the ministers in the government are against the agreement which is in the possession of FPA but sources say the deal is being pushed by Mr. Nathaniel McGill, Minister of State for Presidential Affairs with some suggesting that minister McGill has already received the backing of the President to sign off on the deal which some key international stakeholders say, would tie assets and revenue for Liberia.
Six Cents vs. 16 Cents for Current? Minister McGill Explains
McGill, when contacted, said the agreement is not a secret and that a formal request has been made to the National Investment Commission(NIC) and discussions are ongoing. “They( Karpower) want to provide current for 16 cents. Besides Karpower there are others who have expressed interest so it’s no secret. Go to the NIC the documents are there. The president has given no go ahead and the matter is with the NIC.”
While the actual cost is unknown, multiple sources confirmed to FrontPageAfrica that there are many hidden costs attached and the LEC will, under the contract terms, have to pay for all power produced whether consumed or not. At 50% current theft rate, the actual cost will be doubled if 16 cents is only a base cost, one source told FrontPageAfrica.
Currently, the cost of power at Mt. Coffee is set at 6 cents. The 35 cents tariff is necessary to cover operational cost, especially with 500+ employees and maintenance costs. The tariff would come down once the customer base increases. So, even if LEC buys at 16 cents, it would be unlikely that it would sell for that amount.
The deal is also said to have the weight of Mr. Ibrahim Mahama, brother of the former president of Ghana, who reportedly provided a fleet of vehicles as gifts and the use of his aircraft when needed. Mahama is also said to be good friends with Mr. Emmanuel Shaw, one of President George Manneh Weah’s principal advisors.
Under the terms of the power purchase agreement between the Ministry of Lands, Mines and Energy, the National Investment Commission(NIC), the Liberia Electricity Corporation(LEC) and KARPOWER INTERNATIONAL DMCC, KPS will provide electricity supply through a Powership to be located at Free Port of Monrovia, Liberia including the provision of operation, maintenance and technical services and construction of Electricity Connection Facilities, as well as the provision of fuel for the operation of Powership.
The agreement states that Karpower will provide an accurate and secured Electricity Metering System on board the Powership reasonably acceptable to the BUYER. “The Electricity Metering System shall measure electrical output during testing, commissioning and thereafter and shall have an hourly energy recording capability of at least fourteen (14) Days. The Electricity Metering System shall operate within an acceptable tolerance of + [0.005] %. KPS will arrange for testing of the Electricity Metering System where the acceptable tolerance has been breached.”
Suggested Tax Immunity for Company
Under the agreement, the Liberia Electricity Corporation will be responsible for all custom duties, import duties, export duties, (including for any delays and fees associated with customs clearance), and all types of taxes, levies and duties that KPS may be subjected to in Liberia (including but not limited to, withholding taxes, VAT (general sales tax), income tax, stamp tax and any other type of taxes and/or duties relating to the charges and/or fees, permits from local authorities, any other permits relating to this Contract including but not limited to the supply of the Fuel).
The Equipment of KPS, according to the agreement subject to import shall be released from customs in Liberia without the requirement to post, including but not limited to, any bonds, guarantees, charges, fees and levies etc. “The BUYER shall be responsible for any delays and fees associated with customs clearance. Following the completion of all importation procedures by the BUYER, the BUYER shall provide KPS with a copy of all importation and exportation paperwork. At the end of the ESS Term, or termination of the Contract (for whatever reason), the KPS shall be entitled to effect the exportation of the Equipment from Liberia. The BUYER hereby agrees and warrants that it will not take any action to hinder, delay and/or suspend the dismantling and removal of the Equipment and any other property of KPS from the Site, notwithstanding any Dispute between the Parties. The BUYER warrants and undertakes to give to KPS all assistance KPS may request from BUYER to complete the exportation of the Equipment from Liberia.”
In the event that KPS is required to pay any Tax of any kind KPS shall invoice, the agreement states that the BUYER shall pay the duly invoiced amount in respect of Tax to KPS within seven (7) Days after the issuance of the invoice. “The BUYER shall immediately reimburse KPS for any additional taxes, charges and/or duties, other than those mentioned in this Contract, should they be imposed on KPS by any Governmental Entity as a result of this Contract and/or any actions of KPS in accordance with this Contract.”
Consumers Bear Responsibility for Losses
The buyer, according to the agreement, will also be liable for any claims of KPS and shall indemnify KPS, within five Days of demand, against any cost, claim or liability (including direct or indirect costs and or consequential damages) incurred by KPS (or asserted against KPS) and arising under or related to the breach by the BUYER and/or any Governmental Entity of its obligations under (f), (g) and (h) above. “KPS shall have the right to reclaim and demobilize the Equipment (at the cost of the BUYER) if the BUYER and/or any Governmental Entity fails to meet its obligations.”
KPS shall properly operate and maintain the Equipment in accordance with the standards of care and prudence and in accordance with the instructions of the manufacturer. KPS will be responsible for all scheduled overhauls of the Equipment recommended by the manufacturer to operate the Equipment.
The transfer of ownership and risk in the Electricity from KPS to the BUYER shall take place upon delivery by KPS of the Electricity to the BUYER at the Electricity Delivery Point. KPS shall not be responsible for any cost or losses that arise to any person once the Electricity is delivered to the Electricity Delivery Point. The BUYER shall indemnify and hold harmless KPS from any claims that are commenced against KPS for any such costs or losses.
No amount is stipulated in the draft agreement but one source put the amount in the range of US$30 million.
Liberia would be required to pay Karpower a monthly ESS fee for the electrification service as providing the financial security set out in this Contract.
Issues in Ghana, Sierra Leone
Karpower is currently operating in neighboring Sierra Leone, Ghana and The Gambia but its operations in those countries have been rocky over issues relating to its ability to deliver.
In Sierra Leone for example, the current ruling SLPP government while in opposition slammed the previous APC government which had entered into a five-year contract with the power company.
When the current government headed by Julius Bio took office recently, it immediately reduced the contract and the terms with the Turkish Contractors to three from five years.
Bio’s decision to use the very ship they had condemned has been described by many people as licking their vomit.
In Ghana, Energy think tank Africa Centre for Energy Policy (ACEP) described the power purchase deal between KARPOWER and the government as worse than the controversial $510 million separate power purchase deal between AMERI Energy and the Government of Ghana.
ACEP added: “This is especially so because our analyses of the KARPOWER deal with ECG reveals another case of poor diligence. Further review of the deal shows that it is worse than a Build Own Operate and Transfer (BOOT) arrangement under which AMERI was procured. A typical PPA should have been over 20 years to spread the cost and thereby reduce the burden on consumers, unlike the 10-year deal negotiated for the Karpowership.
The Karpowership was brought into Ghana to address crippling power crisis but struggled to keep its pledge of providing jobs for Ghanaians as part of its agreement.
In less than a year of operation, the company sent more than 60 workers on the ship packing after promising that the deal would be an economical solution to Ghana’s existing electricity supply which relies on expensive crude oil, while providing employment and attracting badly needed foreign direct Investment in Ghana. With the use of low-cost fuel, the power ships will deliver a total cost of electricity into the grid that will enable a competitively priced tariff to deliver savings for the government.
But unlike Ghana and Sierra Leone, Liberia has enjoyed massive international support for its electricity renewal.
In 2016, Liberia received a grant of US$257 million from the United States through the Millennium Challenge Corporation(MCC) to enhance its electricity and road projects.
MCC risks; Economic Fears
During a visit to Monrovia recently, Mr. Jonathan Nash, Chief Operating Officer of the MCC stressed that in order for Liberia to be certified for another compact, the country must pass the indicators to a certain extent. Mr. Nash said that the Liberian government must also remain committed to the implementation of the current compact, on which progress has already been made at the Mt. Coffee Hydro-power Plant. The Corporation provided US$147 million; a single largest donor to the rehabilitation of the war-ravaged water dam.
The controversy comes just days after US Ambassador Christine Elder, addressing programs marking the 242nd Independence anniversary of the US, trumpeted the electrification of Liberia a key US initiative. “Currently, our largest projects help build Liberia’s infrastructure by improving roads and access to electricity and the internet – three sectors that have the potential to transform this nation.”
The ambassador went on to challenge the Weah-led government to tackle broad reforms and bold steps to inhibit corruption are needed to transform the business climate to attract domestic, regional, and foreign investment, to grow the economy and to seek further fiscal and monetary stability. “Successful economies in Africa have mastered a balancing act that creates a combination of laws and incentives that deepen the relationship with companies that are cornerstones of their economies and attracts new business while providing governments much needed revenues and creating domestic jobs – especially for youth. Liberia will attract investment and jobs by opening its economy, not by narrowing it.”