The lowest rates were offered for the first public private partnership (PPP) independent power purchase (IPP) of two Scaling Solar schemes, but bidders are complaining.
On Friday, September 6 bid opening, only one company produced a financial proposal for the two solar power projects, while four other companies were involved in the bid process and offered their proposal.
However, the evaluation of the technical document suspended the opening of a financial offer from the companies including: Enel Green Power/Orchid, EDF/Masdar Consortium, FRV/ Globeleq/ Belayab Consortium, and Al-Nowais/ Aldwych/ Alten Consortium.
During the financial opening, a proposal from Acwa Power, a Saudi firm, was the only contender.
As per its financial offer the company gave USD 0.252/kWh for the Gaad scheme in the Somali region and USD 0.0598/kWh on the Dicheto scheme in the Afar region.
The amount was the lowest tariff compared with similar projects on the continent and one of the lowest globally.
On Wednesday September 11 the PPP board in its extraordinary meeting held at the Ministry of Finance approved the winner of project that will generate 125MW each at both sites.
Teshome Tafesse, State Minister of Finance, told Capital that the bid process has shifted to the next stage.
There are companies complaining about the bidding process, while the State Minister said that the claim shall be submitted in the seven days since the board disclosed the bid result.
He added that so far complaints have not been submitted. If is there are any, they will be evaluated based on the process, according to Teshome.
Experts said that the company might manage the project for twenty years with an optional five year extension. Teshome said that the details will be discussed after they speak with the client, Ethiopian Electric Power. He said that the project might take 18 months from start to finish.
The International Finance Corporation (IFC), the World Bank’s private sector wing, which promised to finance the projects, excluded itself on the day before the opening of the bid due to the government refused to give convertibility guarantee for the debt that IFC provides for investors.
Sources stated that initially the project was backed by the International Finance Corporation (IFC), which attracted several prominent firms.
Experts said Scaling Solar is the IFC scheme implemented in other African countries. Based on the agreement with MoF, the Ethiopian scaling program was also developed via the concept, procedure and support of IFC. IFC also agreed to provide the finance at an attractive interest rate to realize the project, which made bidders more confident.
“Based on National Bank of Ethiopia (NBE) foreign currency guideline it has stated that the government would not give convertibility guarantee and based on the country law there is not convertibility guarantee for the private sector investment,” Teshome explained.
He added that it shall be bound by the agreement with the client from the government side and the private sector. “This does not mean that the private sector will not access the finance and change it to foreign currency to service its debt as per the PPP guideline,” he argued saying that the under PPP the private sector will get the finance in foreign currency to settle the debt and other services.
“In the past the private sector wing of the World Bank has provided finance to the private sector in the country without a convertibility guarantee from the government. The current demand is not acceptable. It seems like leverage to change the country’s policy. We led the technical support and knowledge transfer as much as possible on wise manners, and now we stand at the level to handle international level PPP without their support,” he said.
He said that the implication that the offer of a lower tariff is the result of our effort to expand the PPP in the country and the current government’s initiative to improve the economic sector in different directions. The fair and transparent competition and bidding process is the crucial point for the lowest tariff that shall compare with the previous similar trend in the sector.
From the compliant side sources said that some of the companies sent a delegation or are managing the issue via their country’s embassy here. Bidders said that the withdrawal of IFC happened a few days before the opening of the bid so it is difficult for bidders to come up with alternative financers in that short period. Bidders also claimed that the process is not transparent; meanwhile the government argued that process was clear.
“Acwa Power, which came up with finance from Chinese sources, said at the financial offer that it will discuss with the government on the convertibility guarantee that means it should be disqualified from the process,” sources said.
In June 2019 the 49 percent share of Acwa secured by Silk Road Fund that was given to exports that the company will come with the finance from China.
Experts in the area assured that the offer of the company is very fair. “The risk in other country and Ethiopia is different. The political and financial risk from one to other is different. Regarding financial risk of our case it is convertibility. This raises the question of realistic issue on the project in relation with the offered tariff,” experts said.