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Azeb Asnake the CEO of Ethiopian Electric Power (EEP) works tirelessly to direct a company tasked with keeping up with the rapidly increasing power demand, overseeing at least 10 major new power generation projects, more than 15 Transmission & Substation Projects, rehabilitation of existing network and other infrastructure needed to keep the lights on. Ethiopia may not yet have lived up to its goal of “candles only on birthdays” but it has made great strides.
In her exclusive interview with Capital she explains that it’s a lot more complicated than it seems trying to manage all that is needed to get power to the right places and finish the projects needed to generate more power. For example compensation costs for land use have skyrocketed. With abundance renewable energy capacity and generation, the energy sector in Ethiopia plays a very strategic role in the nation’s development. As one of the major drivers of the manufacturing sector and the agro-industry, Ethiopia continues to invest heavily in producing energy, utilizing different clean resources such as hydro, wind, solar and geothermal, among others.
Capital’s Teguest Yilma sat down with EEP CEO Eng. Azeb Asnake to discuss the overall status of the electric sector in Ethiopia, newly planned projects, concluding ventures as well as the CEO’s personal experience heading EEP. Excerpts:
Capital: Can you clarify the recent unbundling of EEPCo? Tell us how the energy sector is organized; we have EEP and EEU, how are the responsibilities divided among these two companies?
Eng. Azeb Asnake: The former Ethiopian Electric Power Corporation was divided into two and became the Ethiopian Electric Utility (EEU) and Ethiopian Electric power (EEP), which I am currently leading. This occurred in December 2013 via a proclamation. This was done because the sector was growing rapidly and it was becoming more and more difficult to lead. There were many projects and activities that had to be handled simultaneously. So it was split to make it more efficient and more focused. The responsibilities were then divided: EEP was tasked with construction of generation plants, transmission lines, sub-stations and operation of same. Bulk power sales to the EEU and exporting the surplus generation through 132 KV and above transmission lines is EEP’s responsibility. While 66 KV lines and substations are the responsibility of EEU. We are responsible for high voltage transmission lines and generation at any level. EEP is also responsible for exporting power to neighboring countries and the utility as well, we sell bulk power to the utility because the utility is the retailer, and that’s how the division is made.
Capital: Who is responsible for customer issues?
Eng. Azeb: As a retailer the utility, ie. EEU is responsible for customer and billing issues as well as supplying all household electricity. For example if you want to have an electrical connection to your house you don’t come to EEP you should go to EEU because the entire day to day activities of electricity and distribution lines are the responsibilities of EEU. We are tasked with the bulk supply of power. For example we generate power from Gibe III, we transmit it via transmission lines having capacity of 132KV and above to the utility. Power is then distributed through tertiary lines which can handle 66KV and below and then it goes to customers via 33KV or 15KV depending on the consumption required.
Capital: Power interruption has occurred often lately. The general public is blaming your enterprise for failing to provide electricity without interruption. Who handles power interruption issues; EEP or EEU?
Eng. Azeb: Actually it is the responsibility of the entire sector; because if EEP does not perform it will impact EEU’s activities and vice-versa. Power interruptions occur due to several reasons. In rainy, stormy or windy days the lines, which sometimes are not insulated, touch each other and when that happens the system cuts off in order to save itself. Otherwise the lines would be damaged. Another natural, but unplanned reason is when wooden poles fall down.
I don’t mean that the transmission lines and substations are never responsible for interruptions; they may be specially when they are saturated and could not carry any additional loads. But more frequent occurrence is exhibited on the distribution system; because like I said most of the distribution lines are very old and some are not insulated. There are also planned interruptions which occur when we have to conduct maintenance or new connections/tapping to the system. To perform such activities, we must interrupt power to avoid any danger to our workers. When we do such planned interruptions, we announce it 72 hours ahead of time via media including TV and radio.
Capital: How much have the distribution lines, the electric poles, and high voltage transmission lines been improved so far and at what cost?
Eng. Azeb: Distribution lines, wooden/concrete poles are all the responsibilities of EEU. In order to improve power interruption frequencies currently, EEU conducts rehabilitation works in eight major cities including Addis Ababa. They are replacing the wooden poles with concreted ones and changing the bare wires with insulated wires. Currently, these activities are progressing intensively and frequent power interruptions occur in Addis Ababa and the other seven cities.
On the other hand, EEP is also conducting rehabilitation of transmission lines and substations around Addis Ababa and other congested load centers to improve their carrying capacity thereby reducing power interruptions due to limited capacities. Over 6 billion birr is allocated by EEP, from different sources, for these rehabilitation activities. We are especially doing this around Addis Ababa and its vicinities since it consumes 60% of what we generate because, as you know, most of the industries and big consumers are located around Addis. So we are working to improve the substations in Addis and their transformation lines. We are doing the same capacity improvement projects in areas where our substations and transmission lines are congested such as Debre Birhan, Mekele, Adama, Hawassa , and Gonder. Some substations have been there for a long time and need intensive rehabilitation in order to cope up with demand that grows, on average, 25-30 percent a year.
Capital: What budget year are you allocating six billion birr for? And can you tell us EEP’s overall achievement in terms of power generation, rehabilitation and new projects?
Eng. Azeb: Actually we started the rehabilitation project in 2017 and most of the projects are completed except few that will continue until the end of 2018. But this is the first batch of upgrading works and based on our financial capacity; we have to continue the rehabilitation activities in addition to the new ones because, as I said earlier, the system gets congested through time as the investments require a lot of energy. At the moment, we have about 10 new ongoing projects under construction with a capacity of more than 10,000 MW including the Grand Ethiopian Renaissance Dam (GERD).
Of course there is GERD then there is Genale Dawa III which has a capacity of 254 MW, Koysha, 2160 MW these are all hydroelectric power projects. We also have geothermal projects since the Great Rift Valley crosses Ethiopia, the country has big potential in this area; so we are trying to develop this with for instance the Corebetti Geothermal, and Tulu Moye geothermal, which is conducted by the private sector. We also have a wind project at Ayisha with 120 MW. There is also the Repi waste-to-Energy project which is in the completion stage and will be inaugurated within two or three weeks.
We also have the Aluto geothermal project aiming at increasing the existing 6 MW plant to 70 MW. And there is one solar project with 100MW capacity which is about to commence; the Power Purchase Agreement is to be signed within two or three months and the construction will be handled by the private sector. Corbetti and Tulu Moye are also other examples of private sector involvement. There are many other projects ready for construction. However, since the Public Private Partnerships (PPP) legal framework was issued recently all our projects which have been in the pipeline for tendering have to pass through the MoFEC procurement process. So, we have transferred the PPP Projects to MoFEC to comply with the new modality. There are also ongoing transmission and substation projects because simply only generating power will not help. At the moment we have about 23 such projects ongoing at different stages of construction.
Capital: How much will these ongoing projects cost?
Eng. Azeb: The entire generation and transmission projects and rehabilitation activities currently on going will cost about 348 billion birr. As I said before, construction of such infrastructure is capital intensive.
Capital: What stages are the projects in?
Eng. Azeb: Most of the projects are in progress and have exceeded 50% including the GERD which is now more than 65% completed. Also the KoyshaProject is 20%, Genale Dawa III is 96% and Ayisha Wind farm is 26% completed which in sum demonstrates good performance so far. The transmission lines are also progressing, including the Ethio-Kenya transmission line. Akaki-Debrezeit-Modjo-Ginchi, Genale Dawa-Yirgalem-Hawassa-Sodo are other examples of big transmission line projects.
In the case of Industrial Park Transmission lines, Bahirdar-Woldia-Kombolcha 400 KV transmission line, Bole Lemi-Koye Abo 400 KV, is among the major projects we have related with power supply to industry parks.
Capital: Have you secured the finance for the projects you have in hand? What is the source of the funds you have mentioned?
Eng. Azeb: We have secured the finances for most of the contracts signed. Our major source of finance is loan. We get foreign loans and Commercial Bank loans as we have very low revenue generated from local electric sales due to low tariff; that’s the major reason for our dependence on loans.
Capital: Would you say that finance is the major challenge in the sector?
Eng. Azeb: For this capital intensive sector there couldn’t be any bigger challenge than securing finance. The other major problem related with finance is the time consuming process of getting loans, it is not that you can get it when you want, it consumes a lot of time. The financing partners need to make sure everything is in the right place and that consumes a great deal of time. The case will be even tighter when the loan is taken from commercial partners, with guarantee from MoFEC, as they want to make sure the money they inject will be returned.
Capital: What other challenges do you face?
Eng. Azeb: There are internal and external challenges. Our capacity of administering contracts is one challenge in addition to our human resource capacity limitations. The capacity of the organization to retain experienced staff is really low in terms of incentives and salary especially. Of courses we do a lot of trainings so they can acquire new skills but often they still are lacking in that area.
Capital: What are the external challenges?
Eng. Azeb: Compensation issues for land acquisition are the other main challenges for the sector. To construct a substation or a dam you need to compensate the farmer for the property on the land, according to the compensation proclamation. Paying them what they deserve is the right way to do but these days we are facing challenges when the unit price per crop on the land is different and the value varies from place to place. Sometimes we face very inflated valuation.
One excellent example is the Genale Dawa III Hydro power project. The project is now 96 percent completed and was supposed to impound water two years ago. However, because of the increasing compensation issues the project is still stuck. It would be inappropriate to impound without compensating the people but because the amount became so much more inflated we are not able to pay.
Capital: Why is that and what are the implications?
Eng. Azeb: The estimated compensation at the beginning for Genale Dawa III was about 500 million birr but the amount when we start actual measurements it grew to 1.7 billion birr. A committee was established to recheck the estimates unfortunately the estimate ballooned to 2.7 billion birr. The increase might have been legitimate; we are still investigating with a joint team to solve the challenges.
The increasing costs might make our project economically non-feasible; and if such costs are needed for compensation only we may be obliged to drop the project at the onset.
The same is true when we compensated for transmission towers. A single tower needs a clear corridor of 50 meters for operation and maintenance purposes as well as to ensure the safety of the residents in the area. We have to pay compensations for those spaces if the farmers are already using the area.
Previously the major concern was that the power projects are capital intensive, but now the issue of compensation has become even worse. So in terms of implication, for instance we lost 508 megawatts of power from the Genale Dawa III project for the past two years since we couldn’t start impounding water on time.
The issue of compensation is not only about new projects. It includes plants that are already in operation and facing similar challenges. Fincha-Amerti-Neshe is one good example. It has a potential of generating 97 MW and it was inaugurated in 2009. Even though we finalized the compensation issues prior to the inauguration, as per the law, the community still has issues requesting for additional compensation, or other benefits.
We believe that offering monetary compensation should be replaced by restoring the livelihood of the community. Restoration must be done in a better way. So, we believe in replacing the land and paying for the property on it, but the residents often opted for cash compensation. After they finish the cash they keep asking for more as they have not used the money wisely.
The situation has gotten worse now that residents are blocking access roads so that our staff can’t move from their camp and so we were obliged to stop the operation of the plant.
Capital: What does that mean for the economy, especially when power shortages are already such a big concern?
Eng. Azeb: We are losing potential power and our staff has developed insecurity to work in the area,gets paid without being productive. But most importantly our relationship with the community is affected. The community should own and protect the power plants. If it wasn’t for the rainy season stoppage of the Fincha-Amerti-Neshe plant would have also affected the Fincha Sugar Plantation downstream. When the plant produces power, water is released and can flow to the sugar plant effectively.
Capital: Is there any activity in terms of undertaking the valuation of EEP to facilitate the privatization process? And what steps were taken to assess the properties of the EEP for the PPP?
Eng. Azeb: The involvement of the private sector was already there. As I said earlier, the Corbetti geothermal power plant and the Metehara solar power generation have private investors. Regarding the new plan of the government to sell shares, we are working on preparatory measures. The nature of the sector is complicated and there should be a well done research to address critical drawbacks like high debt. We need to reevaluate our assets. We have 160 plus substations, 21 generation plants, 19,000km of transmission lines. We have to consider the depreciation of the infrastructure. So evaluating the stands and positions of the company are important, which is what we are doing.
Capital: Tell us about the new tariff plans that your company proposed. The government previously discouraged raising electricity prices so how did you get the green light now?
Eng. Azeb: Tariff increase is a very sensitive issue. Tariff has not been adjusted for the past 12/13 years irrespective of the change in the economic indicators. But that doesn’t mean that there were no efforts. We are trying to improve the tariff rate because during this period many other factors like inflation, devaluation etc…have occurred.
Currently, we have proposed a tariff adjustment not tariff increment in order to normalize its value to 2006. The existing tariff which was introduced in 2006 is 7 US cents per KWH maximum which has an actual value of 1.8 US cents in the current economy. The intention is to fill the gap between the previous tariff and the actual value of the tariff (in USD).
Capital: What are the factors that pushed the evaluation of the tariff now?
Eng. Azeb: So many things happened but the main issues are the limited source of revenue. The only source of revenue is energy sales but we are selling it for almost free. Our tariff is one of the lowest in Africa. We also looked at neighboring countries’ tariff like Kenya, Tanzania, Egypt, Sudan, etc who have a much higher tariff.
Capital: How much do you collect from power sales monthly?
Eng. Azeb: On average we are supposed to collect 7 billion birr monthly, but our billing capacity has not exceeded more than 6 billion. After the EEU collects the revenue we share it based on a certain proportion. The legitimate division is not implemented well even though 60% and 40% entitlement was set for EEP and EEU respectively.
Capital: Does this amount include the power export?
Eng. Azeb: No that one is in another category and amounts to about USD 80 million per year. We export to Sudan and Djibouti only; the export to Kenya hasn’t yet started.
Capital: How much power do you export?
Eng. Azeb: During this rainy season which is the surplus season Sudan gets on average 100 to 300 megawatts and Djibouti gets 90 to 110 megawatts which of course varies from season to season. During Ramadan and during the dry seasons they demand more. 30% of the revenue from power export is obtained in foreign currency and the rest in Birr from the government. You know, if EEP could get all export revenue in foreign currency, we could have improved our challenges in spare parts availability faced due to lack of foreign currency.
Capital: Where are you with regards to the power contract signed with Kenya? It’s been a while, so what challenges are you facing in exporting power to such places?
Eng. Azeb: That is true, we have agreed to a power purchase agreement with Kenya some years ago. But transmission lines and converter stations’ construction must be completed; and both countries are involved in the actualization of the project. The project is financed by the World Bank Group, African Development Bank and French Development Bank. The transmission line in the Ethiopian side is 440 km long and was completed in February 2018 but the construction of the converter station with 500 KV capacity is ongoing and 62 percent is completed now. The completion time is set for May 2019 and we are working towards that.
The same is true from the Kenyan side. They are about to complete the transmission line. They also have this compensation problem on the Kenyan side which hinders completing the transmission line. So it is a very big challenge.
Capital: How much revenue are you expecting from this power export?
Eng. Azeb: For the first phase we expect to export about 400 MW then it will increase because the transmission line has a capacity of 2,000 MW. So every time depending on our purchase agreement we will provide the necessary power. This line doesn’t only stop in Kenya but will allow us to export power to Tanzania with the same line through Kenya. Kenya and Tanzania have to agree on a wheeling tariff because Kenya uses its system to pass the power to Tanzania. Both countries are working on it now. So this has delayed the power purchase agreement revision but the construction is going according to schedule.
Capital: What are your thoughts about the recently announced power tariff adjustment?
When will this new tariff be applicable and what will be the impact on the large population?
Eng. Azeb: It seems too early to talk about the adjustment as its process is not yet completed. However, just to give only some highlight, the tariff adjustment is done in accordance with the principle of protecting the low income population. We have about 2.9 million customers. Among these about 1.5 million are using less than 50 KWH per month. So our study assumes that these are the low income groups. This figure is more than 50 percent of the total customers and this group will not be affected with the adjustment. They will continue with the existing tariff. The rest depending on their consumption, we have classified them in groups. Our intention of adjustment is only to bring the actual value of 1.8 US cents per KWH to 7 US cents per KWH which is the original value of the tariff. So the low income will not be really affected. The tariff adjustment will be implemented upon necessary approvals. Discussion had been made with concerned stakeholders and the feedback obtained is very positive. We agreed that it has to be adjusted as the sector is suffering from lack of revenue. Implementation of the tariff adjustment will be done through phases so that we don’t burden the consumers. The regulator of the power sector, the Ethiopian Electric Authority is responsible for the tariff adjustment. After this stakeholders meeting the Ministry of Water, Irrigation and Electricity will submit it to the Council of Ministers for approval.
Capital: How do the tariff adjustments benefit your company in terms of revenue generation?
Eng. Azeb: As I mentioned above, it will be implemented through phases in four years or so. The maximum revenue we will get from this adjustment will be obtained at the end of the last implementation period. The maximum amount of revenue to be obtained at the end of the last implementation period will be about 35 billion birr/month instead of the mere 7 to 10 billion birr. This not a big number, we have not increased anything for many years and this one looks like a leap. But it is not, we should have revised our tariff in relation with inflation and devaluation but we have not done that.
Capital: Let’s talk about the Grand Ethiopian Renaissance Dam and the recently deceased project manager of the GERD Semegnew Bekele (Eng). What was your feeling when you first heard about it? What is the status of the project after his death?
Eng. Azeb: It was a very big shock for me and my colleagues. He was an icon in the power construction sector. You spend time together because of the intensity of the work. It was really an unexpected situation which one really cannot believe. As you have seen, it was also very shocking news to the public. It is also shocking for his family. It is really a very big loss because Semegnew was involved in different projects before he joined the GERD. He was involved in Gibe I, Gibe II and it’s devastating to lose him. He was fully responsible for GERD and he was trying his best to pursue this project. It is really an unfortunate situation for all of us. For me, I could not believe it at the time. I wish it was like a bad dream that passes. After his death, we tried to readjust the management at GERD. We conducted urgent meetings and notified all the contractors and consultants who work in the project to continue their work as usual even though it’s a shocking event and loss. So we reorganized the management of the project office and the deputy manager has taken full responsibility of the project now. There are contractors and consultants at the project and the role of the project office is to coordinate these activities. We make sure that these activities are continuing without interruption. The Water, Irrigation and Electricity Ministry has also established a steering committee to follow the development of the project and ways to improve the progress.
Capital: There are reports on social media that the construction of the GERD is halted after Eng. Semegnew’s death. How do you respond to that?
Eng. Azeb: Actually social media is becoming a pain in the neck. People say whatever they want to say. There are people who want to give inaccurate information about the project. I personally do not have any social media accounts. But I hear from other people that social media posts allege that the project will be stopped after his death. This is just a total lie and I can’t even imagine the purpose of these posts on social media. They don’t know the impact of such posts or probably they are purposely doing that. Their posts are just rumors; they are not based on any kind of facts. The activities at GERD are continuing as usual; the project is going smooth and there will be no interruption.
You know, social media is also affecting me personally. There are baseless rumors concerning the energy sector, concerning me and other things. People who do not know me may think that the rumors are true but they are totally complete lies aiming to devastate reputations. I don’t know but there should be a way to control these kinds of baseless allegations that attack personalities without any evidence or fact. I am a simple technician (a civil engineer) who is not influenced politically what so ever. I am a public servant who works day and night with limited family time and social life to contribute my part to this country. But when you hear such baseless allegations it is a disappointment.
In my sincere opinion, when women are in such position and are successful, there are few who cannot tolerate and try to eliminate them. This is ridiculous. Especially after the death of Eng. Semegnew the magnitude has grown and people who knew me are really worried and scared. It is very disturbing and it makes you uncomfortable. It creates a kind of insecurity in you. Whatever they said it is 100 percent baseless. The project continues with more commitment by all and the white lies will not affect its progress in any way.
Capital: You said earlier that steps are being taken to accelerate the project and a steering committee has been set up. What is concretely being done? Because many have the feeling that like the PM said, at the current pace, the GERD will not be completed anytime soon.
Eng. Azeb: Yes that is it true. A steering committee has been established under the Ministry to follow the project activity and to look into acceleration measures to help speed up the project works. We call these enhancement measures. We are also looking at how we can advance the project performance? It is true that unless we do something to improve the rate of activities with some additional support and input to the project, it may not be completed within the specified time. That is why this steering committee and a technical team composed of senior engineers was established to support the project; So this steering committee will continue to follow and support the project.
Capital: Tell us about your HQ project. What is the progress? And do you have any new project that will commence in this budget year?
Eng. Azeb: Yes our head quarter project was really an ambitious project. We have a plot of land around Mexico Square and a 38 storey building is to be constructed. But because of land acquisition and right of way issues we could not actually start the construction fully. At the moment we are only doing preparatory works; but now after a year and half we are in a better position to commence the project. You know there are offices in that area that we occupy including the Ethiopian Electric Utility and Lehulu Payment Centre. They have to evacuate from that area and that has taken quite long time. Currently, we have solved the issues and it is in good shape, so hopefully we will put the foundation stone within the next three months. Actually it’s a big project for us. Our employees are scattered everywhere in rental offices here and there; but as an energy sector we should retain an image and thus we have launched this high rise building.
Regarding other projects; Repi will be commissioned around end of August. Repi is a multipurpose project in special relation to the solid waste management of the city. As we know at the moment solid waste is a critical problem for the city. Now we have started collecting solid waste for our generation plant, burn and generate power. The transmission line has already been connected with the national grid. It is one of the big success stories for us because it goes beyond power generation for the city’s solid waste management.
The other one actually is Genale Dawa III. It was supposed to be completed and inaugurated two years ago but due to the problem I mentioned before it was postponed until next year. We have to impound water which takes six months and after that we will start generating power.
There are many other projects at completion stage including transmission and substation projects. These rehabilitation projects, which have improved the situation of power interruption at high voltage lines, are very big projects and most of them are now operational.
In general, I would really like to stress, there are lots of efforts in the sector, with huge investment to improve the situation. The investment at the industry parks, agro processing, railway, etc… require energy. The entire burden including financing is put on the energy sector. Thus, we really have to be alert in fulfilling expectations with no sleep. We are very much alert, working diligently to make a contribution to this country. You can see how the economy is growing and our investment is booming so we know we are the drivers of this economic boom. So can we sleep with all this responsibility? No way!
Capital: How big is your team?
Eng. Azeb: In EEP we have about 5,000 staff and most of them are permanent. Many are also related with projects. There is also a big team responsible for the operations.
Capital: Your final thought?
Eng. Azeb: Of course I would like to thank you for your time and your interest in the sector. I also want to re-affirm our commitment to the sector, customers, who really need power, and we always apologize for whatever inconvenience we are creating because of power interruptions. But we are not really just sitting around and watching. We are trying our best to improve the situation. We know that the problem is persistent, especially because industries are losing a lot of productivity when power goes out. We are actually asking the public to cooperate with us and be a little more patient until the rehabilitation activities in Addis Ababa and other cities are completed, which will for sure improve the current frequent interruptions. Moreover, we also understand that the electric system is not generally stable in our country and in Africa at large. It is not 100 percent free from interruption even in Europe or America. Power interruptions are also occurring there as well; of course the restoration time may be much shorter with them as it is dependent on the technology we use and efficiency of performance. Restoration needs a lot of equipment and tools. If you take a simple example of cranes; there is not enough capacity of cranes in Ethiopia to lift and put in place heavy machines like transformers. I know that people understand the situation we are in. And we have to see it from the Ethiopian perspective; but I assure you that there are no any efforts spared to improve this situation on our part.