Ethiopian Electric Power signed an agreement with China Electric Power Equipment and Technology for the construction of the Ethio-Kenya transmission line, expected to cost USD 120 million. The agreement was signed on Friday June 19, 2015 at the Sheraton Addis Hotel.
The African Development Bank is funding the 430 km long transmission line fully.
“We have signed an agreement to export 400 megawatts for Kenya. In the future, we will work on increasing the supply,” said Azeb Asnake, CEO of Ethiopian Electric Power.
According to the CEO, the transmission line features a large capacity in order to accommodate future projects and to supply electricity to other countries through Kenya. Ethiopia will also be able to earn a significant amount of hard currency after the completion of this project.
“According to the power purchase agreement, we will be selling electricity at USD 0.07 per kilowatt. 400 megawatts of transmission will be a significant source of hard currency,” Azeb said.
She also underlined that certain misunderstandings in power export needs to be clarified.
“The electricity we are exporting is surplus; it is the amount we are left with after meeting local demand, and considering future development plans,” Azeb explained. She added that the transmission and distribution lines used for local supply are currently working beyond capacity and are unable to carry all the energy that the country produces.
“Unlike resources such as water, we cannot reserve energy that has already been generated. As such, we will continue to export excess power. We do not export while neglecting local demand; that needs to be very clear,” Azeb said. In the long term, there are plans to export electricity to Europe and other regions.
The construction of the transmission line is set to take 26 months. The entire project, including the construction of sub-stations, will take 36 months.
A draft study on the Addis Ababa and Surrounding Area Electric Power Distribution Master Plan that was released last week showed that USD 1.067 billion is needed to revamp the whole power distribution system.
According to a financial analysis of the study, which is based on the current average consumer tariff of 0.49 birr/kwh, an average tariff of 2.93 birr/kWh would be required to fully cover the costs of supply.
As such, a tariff adjustment is necessary in order to improve financial viability of Ethiopian Electric Power and Ethiopian Electric Utility.
“We always receive recommendations to adjust tariffs and that is what the recent draft study also suggests. Right now, compared to many countries, the local tariff is too low. Combined with affordable labor, low tariffs attract foreign direct investment. However, if the current tariff is not revised, we will not be able to carry out the development projects we have planned,” Azeb said. She also added that carrying out projects through loans is not always the best option.