06 December 2015, Porto Novo, Benin – The republic of Benin has signed a landmark 360 megawatt multiple gas fired power project valued at 190 million US dollars. CNBC Africa’s Esther Awoniyi spoke to Akinwole Omoboriowo, CEO of Genesis Energy, the firm that put the deal together for more insight on this project.
AWONIYI: Talk us through the power project in Benin republic worth 190 million US dollars, we heard that this could actually be the biggest project Benin republic has seen this year.
OMOBORIOWO: I would say we would rather look at it in terms of electron, so this would be perhaps one of the biggest power project investments in West Africa this year, but certainly for Benin republic, it is the first independent power project and it’s a bold step for the government to leave a strong legacy of clean power solution in the country.
AWONIYI: Tell us about the funding structure of this project, we know that Benin republic like some other small countries in West Africa, is a little short on cash when it comes to funding big projects and of cause they seek private sector intervention or borrow money from development finance institutions.
OMOBORIOWO: This is true. If you look at the way a lot of the economies in sub- Saharan Africa are structured, a lot of countries are mono products while some have been able to diversify their economy in terms of trade and alternative income. For Benin, it is part of the CDR region in West Africa which is regulated within the region and having a strong tie into the French economy. This project enjoys strong support from the African Development Bank and also, the process of negotiating the power purchase agreement was funded by the AfDB who provided to the Benin republic government a technical support service facility which enabled the government to engage world class advisers, legal advisers, and financial advisers to negotiate a transparent bankable power purchase agreement.
The utility of Benin called the SBE has also been reorganised and is still been reorganised by the government to position that utility to meet and collect sufficient revenue from electron sold, electricity sold in the country and to take care of that last mile where you can recover majority of revenue from the electron you distribute. You find that the positive revenue collection would impact the entire value chain. So it is our anticipation that based on this project and based on the fundamentals in the power sector in Benin and based on the fact that this 360 megawatts is gas fired, competitively priced and we expect this to be very sustainable and we have the necessary support from the African development bank, guarantees from the government of Benin, and we expect that with our partnership with General Electric, Engro corporation and commerce, we will be able to deliver a strong service which will substantially increase the power generating capacity in Benin republic.
AWONIYI: Is there a target level of capacity the government is aiming for? I’m not sure what the exact figure is but I do know that Benin republic does pay for power from Nigeria.
OMOBORIOWO: This is true. Benin is blessed with the upside of being able to import power from Nigeria where Benin republic also imports power from Ghana and they also have some small hydro generating power capacity in the country as well as some thermo plans.
In terms of the target of the tariff, I think every government wants to bring down the pricing and the structure of the country, but there is one thing that we are very happy about is the tariff developmental process itself was cost reflective, and so we would see that in the short medium term we will have a tariff that is based on competitively priced energy solution with technology in capital cost and in terms of few costs being gassed we will see a mix of reasonable tariff coming out of the IPP and the government has also signed up concession for solar solution, there is B-hydro that is been contracted to be built so when you put all of this into the tariff box you will have levelized tariff intended to be competitive even though it is cost effective.
AWONIYI: It is good that Benin republic is talking about other alternative sources of energy, in terms of the balance the country is striking right now are they looking more to renewable energy or the traditional source of energy?
OMOBORIOWO: Countries like Benin they have the advantage to write their own power footprints in a proper way and I serve on the clean power Africa advisory board and all of this activities is geared towards refocusing the continent from just producing power from any source into producing power from clean renewable energy sources in clean gas. There was a recent report by the United Nations that allude to the fact that Africa could actually be the global leader in terms of how renewable energy is deployed and in terms of the volume of renewable energy resources that is available on the continent.
The current demand in Benin is estimated for about over 1200 Megawatts and so if we can get majority of that to be clean power from gas, from hydro from solar, I think Benin and the government would have succeeded in leap froging away from dirty fuel and biomass into majority of clean power. We at Genesis Energy believe in this vision and if this plan of the government is strongly encouraged and for it all to come to fusion you will see Benin republic producing most of its energy from clean power.
AWONIYI: What about sub-Saharan Africa as a whole, do you see a strong demonstration on the part of the government to diversify their energy?
OMOBORIOWO: Absolutely. Dr Akinwunmi Adesina, the president of the African development bank made a statement recently when he said that “the greatest challenge to socio economic development in Africa is modern form of electricity.” Now this statement is resounded all across Africa and all the government in Africa today understand that Africa is in darkness and the need for us to have strong socio- economic development, growth and also the fundamentals to do this.
Power is a critical social infrastructure and added to this is the fact that the government, the private sector in Africa and deregulators are gearing aggressively towards clean power, so if you have access to gas as a natural resource in the country like we have a gas pipeline that comes all the way from Nigeria and terminates in Ghana. We have Togo, Benin republic, Ghana and the pipeline is intended to go further down. So countries along that belt have obviously been enjoying natural gas supply from Nigeria and Africa is blessed, sunlight, multiple rivers, renewable energy, so we have a lot of countries that I have seen personally that we have engaged focusing their energies into promoting renewable energy solution as a viable option.
AWONIYI: You are spear heading this project in Benin republic and you are also going to be implementing it going forward now for Genesis Energy, after all this is over do you have more in the pipeline do you consider this as a good investment for you?
OMOBORIOWO: For any investment to be attractive we have to have strong governance, bankable power purchase agreement and have protective guarantees in place. All of this and the key fundamentals which will enable investment grade power purchase agreement have been provided by the government of Benin republic. We are very excited that countries such as Benin republic with a very serious approach to how they encourage power investment and so for us it’s a very strong signal that many countries like Benin are very serious to develop their power sector.
Now in terms of how do you take this initiative from Benin and castigate it to other countries you know this is where our media and conferences play a very strong role to talk about the good success stories that are coming up out of sub Saharan Africa and to encourage other people and other governments to do the same. For us the work has just started and we have a short time to deliver this project. Our partners are geared to do what we have done before and what we did in Benin republic is precisely what we have done in Nigeria.
In the Port Harcourt refinery, where we have 84 mega watts water power currently operational and was commissioned a year ago and is running uninterruptedly. We are increasing that capacity and replicating that same plan that we built brand new GE gas turbines that we have installed in Port Harcourt, we are installing the same gas turbine in Benin so we are very excited about it.
*Esther Awoniyi – Guardian