EEP, RG conclude negotiations to buy 1,000MW

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Reykjavik Geothermal Ltd (RG), the Icelandic power developer, is to supply geothermal electric power to Ethiopian Electric Power (EEP) with two separate tariff systems.
After long negotiations, the two parties signed on Monday, July 7, the power purchase agreement (PPA) for the first 500MW of power from the total 1,000MW that the company will develop in coming years.
The construction of the first phase of the plant, which will generate 500MW of power, is expected to be completed in the next five years.
Sources at EEP, the state-owned sole electric provider, told Capital that for nearly two years, RG and EEP have been negotiating on the terms of the PPA.
In the Head of Terms Power Purchase Agreement (HoT-PPA), signed in October 2013, the enterprise had stated that the PPA would be finalized within three months, although they were unable to agree on a final rate for the past 21 months.
Meanwhile, negotiations on the HoT-PPA had begun in early 2012 between the company and the former Ethiopian Electric Power Corporation, which has since split into two institutions.
The company will reportedly supply power at USD 0.0753 per kilowatt hour for the first 500MW, while the EPP will pay USD 0.0685 for the remaining 500MW.
On Tuesday, July 28, the two parties also signed a HoT-PPA for the remaining 500MW that will be developed in the second phase.
During initial negotiations, the state enterprise had proposed to pay USD 0.065 per kilowatt hour, while RG demanded that it pay USD 0.085 per kilowatt hour for the total 1,000MW.
RG’s power plant, Corbetti Geothermal Power Project, will be based near the town of Shashamane, 250km south of Addis Ababa.
The company is expected to generate the first 20MW in the coming year while it hopes to develop its full capacity of 1,000 MW by 2023.
The accord signed on Monday during President Barack Obama’s visit to Ethiopia is the first PPA for the state monopoly.
The project comes with the Power Africa Initiative launched by president Obama to support renewable power projects on the continent.
RG will benefit from financial sources in the US, which are included in the initiative. The company is also expected to accumulate finance from different global sources to realize this huge investment that will consume USD 4 billion for the total 1,000MW.
Developing the first 20 megawatts of power at Corbetti will cost USD 100 million, all of which will come from Reykjavik, Icelandic Drilling Co. and the African Renewable Energy Fund managed by Berkeley Energy, according to Edward Njoroge, chairman of the Corbetti Geothermal Power project.
A total of USD 2 billion is required to generate the full 1,000MW, which is expected to be completed by 2023, he added.
Azeb Asnake (Eng), CEO of EEP, said that the country has implemented a 25-year plan in its green growth strategy, which includes active involvement from the private sector.
She said that the long term goal is to reach a total national power generation capacity of 37,000MW by 2037.
Geothermal energy has been generated since the early 1980s when exploration wells were first dug at Aluto Langano. In the 1990s, exploration wells were drilled and a pilot power plant with an output of around 7.3MW was installed.