Monrovia – A controversial power proposal which drew strong condemnation on the George Weah-led government, from international stakeholders investing millions in the quest for stable electricity for Liberia, appears to have been brought back to the table with the Turkish Karpowership group submitting a proposal and prevailing on the Boakai administration to have the ship brought to Liberia in hopes of easing the power needs for millions of Liberians craving electricity.
By Rodney D. Sieh, [email protected]
In recent months, Karpower has been in talks with six other countries including Liberia to expand across the continent. But critics argue it only provides a short-term solution to chronic underinvestment.
Turkish Company Pitch
In a letter dated February 15, 2024, obtained by FrontPageAfrica, and signed by Mr. Emre Durmusoglu, Africa Regional Director, Karpowership Global, part of the Karadeniz Energy Group, writes:
Our fleet of Powerships, composed of 36 assets with an installed capacity exceeding 6,000 MW, offers a wide range of capacities from 30 to 500 MW. On 5th February 2024, we had the privilege to introduce our company and Powership solution to His Excellency Joseph Nyumah Boakai.
With His Excellency’s instructions, we had subsequent meetings with Liberia Electricity Corporation and the National Port Authority of Liberia to develop our potential Liberia Powership Project further.
Based upon our meetings with the authorities and technical site visits that we had during our Liberia visit within the 1st week of February 2024, we have agreed on the potential location and further technical details of our project. We hereby present the Term Sheet, which sets out the basic terms and conditions of the project in Attachment 1 to this letter.
Following the signature of the Term Sheet by Liberia Electricity Corporation and Karpowership Global DMCC, we will take immediate actions to realize the project as directed by His Excellency Joseph Nyumah Boakai. Yours Sincerely, I will be in Monrovia for the entire of next week and I will be at your disposal for any further information you may require. We would like to complete the term sheet signature while I am in Monrovia.
Your Excellency, 15 February 2024 Ref. No: 0033 Karpowership is the owner, operator, and builder of the world’s only Powership (floating power plant) fleet and plays an active role in a medium to long-term investments, providing access to fast-track, affordable and reliable electricity.
Several of the President’s key advisors are copied on the letter. They include Ministry of Presidential Affairs, Sylvester Grisby, Samuel Kofi Woods, National Security Advisor and Mr. Monie Captan, Chief Executive Officer of Liberia Electricity Corporation.
A similar attempt to introduce the powership to Liberia by the Weah administration was strongly condemned by the donor community. Donors at the time issued a caveat, urging the Weah government, that if conducted could plunge the country’s emerging energy sector into jeopardy.
Karpower, a private Turkish company, operates a floating power plant, which it plans to sell to the Liberia Electricity Corporation (LEC) for onward distribution to customers.
When the Weah administration sought to go ahead with the plan, a number of stakeholders were concerned about the repercussions the project could have on agreements with the Millennium Challenge Corporation (MCC), the Norwegian government, European Union, World Bank, and the German Development Bank.
FrontPageAfrica has learned that the plan is already receiving resentment in the Boakai administration with some ministers not so sure about whether the powership would work in Liberia.
A key concern raised at the time, and which would also resonate for the current government, is 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 percent current theft rate, the actual cost will be doubled if 16 cents are only a base cost, one source told FrontPage Africa. At the moment, the cost of power at Mt. Coffee is set at 6 cents. The 35 cents tariff is necessary to cover operational costs, 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.
Poor Results in Guinea Bissau, Sierra Leone
Karpowership, which operates floating power plants, supplies electricity to eight African countries including Ghana, Senegal, Mozambique, and Côte d’Ivoire. The company has in recent months cut off electricity in Freetown and Bissau, the capitals of Sierra Leone and Guinea Bissau, after authorities failed to pay bills reportedly totaling $40 million and $15 million respectively.
The company is in talks with several African countries as part of its expansion plans. Countries including Tanzania, Kenya, Gabon, Democratic Republic of Congo, Cameroon, Liberia. Karpower company’s ships use natural gas to generate electricity. The floating power plant ship has a psychological barrier around this, being a permanent solution because it is not on land.
A key reason the plan is raising eyebrows in Liberia is the fine prints hidden beneath its lofty promises.
For example, in Liberia’s next-door neighbor, Sierra Leone as well as in Guinea Bissau, the Turkish ship has run into problems posing heartaches to consumers.
Last September, the Sierra Leonean capital Freetown was hit by power cuts after Turkey’s Karpowership switched off the electricity supply due to an unpaid debt of around $40 million.
The outstanding amount was accrued over time because the Sierra Leonean government subsidizes more than half the cost the ship charges per kilowatt hour.
Sierra Leone spent more on the subsidy because it charges consumers in the weak local Leone currency, one of worst performing against the dollar in which it pays the power provider. The company signed with Sierra Leone in 2018 and 2020 to provide electricity to Sierra Leone’s state power utility.
In Guinea, the capital was also plunged into darkness in October last year after the Karpowership cut off electricity supplies due to an unpaid debt of $17 million, the economy minister said.
President Boakai has come under fire with many expressing disappointments over his lack of response to the energy sector issues. The President was reportedly given a scathing report calling for engagement with Ivory Coast for a diplomatic leeway to arrears owed the transformational Cote d’Ivoire-Liberia-Sierra Leone and Guinea interconnection project.
Sub-Saharan Africa has the lowest access to electricity in the world. Around half a billion people lack access to electricity. The failure to develop and maintain the infrastructure needed to provide reliable power has stymied the economic development of countries across the continent, including its biggest economies — Nigeria and South Africa.
Karpowership was not put off by the failure of Sierra Leone and Guinea Bissau to pay their bills promptly and had restored power in both countries. Karpower had to renegotiate its contracts with the two countries as part of an agreement under which it would supply them with less electricity, therefore incurring a lower cost.
CLSG Links 4 Countries
Liberia, Sierra Leone, and Guinea Bissau have some of the lowest electricity access rates in the world, due to high fuel costs, insufficient generation capacity, and system unreliability, among other factors. The CLSG project enables them to import electricity from Cote d’Ivoire, which has a higher electrification rate and lower-cost production than its neighbors.
CLSG is a partnership with the participating countries’ utilities: the Liberia Electricity Corporation (LEC), the Electricity Distribution and Supply Authority (EDSA) of Sierra Leone, Electricité de Guinée (EDG), and CI-Energies of Côte d’Ivoire. In 2012, the four nations signed a treaty to establish Transco CLSG, an international company to finance, construct, operate, and maintain transmission infrastructure for CLSG.
Transco CLSG has managed the construction of a 1,303 km transmission line stretching between the four countries. The CLSG transmission network now integrates one existing and 11 new substations. It has a maximum capacity of 243 MW, with the potential to be doubled by building a second circuit. Power Africa supported the signing of power purchase agreements and transmission services agreements between Transco CLSG and the four national utilities.
The President is expected to travel to Abidjan Thursday along with Mr. Monie Captan, Acting CEO and Board Chair of the Liberia Electricity Corporation. The top priority on JNB’s agenda during his discussion with President Ouattara is electricity, sources on the delegation have confirmed.
FrontPageAfrica has learned that Karpower is already asking for a mobilization fee of 7 million dollars but although there is resistance in the government against Karpower, the LEC management appears to be focused on the CLSG arrangement.
CLSG remains key in easing the energy demand in Liberia once the government settles arrears owed Cote d’Ivoire. Gol owes 16m. LEC has paid 7m out of that.
Cote d’Ivoire has some supply constraints but if GoL can settle the debt, CI will increase Liberia’s allocation on the transmission line to give LEC the ability to deliver adequate electricity to the public.
Environmental Concerns Raised
Additionally, the Environmental Protection Agency (EPA) is said to be seriously concerned about environmental pollution from the Karpowership.
Similar concerns were raised in Ghana where in July 2016 when the residents of Tema on threatened to hit the streets if the Karpowership was not relocated from the area due to the high levels of air pollution being caused by its operations.
The management claimed the fumes emanating from the powership were not harmful to the flora, fauna and humans in and around Tema, and well within the stipulations of the Environmental Protection Agency. However, residents were never convinced.
Insiders at TRANSCO CLSG say the multi-funded company firmly believes in the CLSG project as key to ensuring Liberians receive reliable and sustainable energy. Unarguably, the GoL’s move to join the regional electricity grid was a significant investment that is surely going to not only have great returns in economic growth but also improve the standard of life of ordinary Liberians in a significant way. We believe this is important if Liberians should benefit from the CLSG project which is to put the country on par with its neighbors in terms of reliable electricity. Lest we forget, power is not only for social-economic activities but a key security instrument as well.
What is unclear is whether President Boakai has endorsed the negotiation of a 5-year agreement with a Turkish company to bring in a ship to supply electricity to LEC at a higher cost than the cross-border CLSG power. The Turkish company is offering 16.39 cents per kilowatt hour. Currently, Liberia is getting power through CLSG for about 13.5cents.
The impact of a private company being able to shut down the power in an African city should not be underestimated. In Guinea Bissau’s capital, the BBC reported that some public hospitals used generators to carry out surgery but lacked running water because there wasn’t enough electricity. The country’s reliance on power ships is emblematic of a broader failure in many African countries to develop or maintain power facilities.
It’s clear that some African governments have for years indulged in short term thinking, rather than the long-term capital investment that is vital for developing a country. Several energy industry insiders said power ships were only appropriate for temporary use in disasters. Reliable power is a key ingredient for economic growth.
Karpowership – A Necessary Evil
Observers say, Karpowerships and other “emergency suppliers” are a necessary evil because of chronic underinvestment in energy infrastructure, says Bright Simmons, research lead at Imani Centre for Policy in Ghana.
The business model behind floating power ships depends on the short-term planning of poor countries including Liberia. Karpowership typically doesn’t provide long term infrastructure development or a cleaner energy solution than solar, wind and hydroelectric power. It’s also easy for ships to turn off the electricity and sail away if a country struggles to pay.
Governments pay a premium for the convenience of a quick solution that’s unencumbered by the time lag of several years involved in building a power plant on land. When a country pays emergency prices the cost is always higher and it’s never the best long-term version of what you need.
Africa clearly plays a key role in Karpowerhip’s long term strategy. The African growth opportunity is immense. Karpower company sees a huge market on the continent, where young populations look set to drive an increased demand for power in the coming decade at a pace not seen elsewhere in the world. That, combined with the failure of many countries to develop sustainable solutions for energy generation, transmission and distribution, explains why the company is in talks to expand its client list.
In the short term, cash-strapped African countries will struggle to pay their power ship bills. That’s because weakening currencies and relatively high wholesale gas prices will make it tough to pay for an approach that treats supplying electricity like a constant emergency. It makes more sense in the long run for governments to invest heavily in renewable energy sources such as hydroelectricity and solar energy.