Africa Power: Development Partners Warn Liberia over controversial electricity deal with Karpower

The Government of Liberia’s new energy proposal with Karpower is raising eyebrows amongst Liberia’s key development partners prompting them to issue an immediate caveat, which if not heeded to, could plunge the country’s emerging energy sector into jeopardy.

Karpower, a private Turkish company, operates a floating power plant, which according to the deal with Liberia would sell electricity to Liberia Electricity Corporation (LEC) for onward distribution to customers.

Under the proposed controversial plan with a 10-year contract stipulation, Liberia would be buying power from Karpower even though it already has an absorptive capacity of only 24 percent of current installed capacity at Bushrod Island and Mt. Coffee Hydro facility.

FrontPage Africa earlier reported that a number of stakeholders were concerned about the repercussions the new power deal could have on existing agreements with the Millennium Challenge Corporation (MCC), the Norwegian government, European Union, World Bank and the German Development Bank.

Sources hinted FrontPage Africa that the Cabinet is not fully in support of the deal, however, the Minister of State for Presidential Affairs, Nathaniel McGill, who has been pushing the proposal seems to have the backing of President George Manneh Weah.

Min. McGill, however, told this paper that the agreement is before the National Investment Commission (NIC) and discussions are ongoing, emphasizing that he has nothing to hide.

The deal is also said to have the weight of Mr. Ibrahim Mahama, brother of the former President of Ghana, who reportedly provided President Weah a fleet of vehicles as gifts and the use of his aircraft when needed. Mahama is also said to be a good friend of Mr. Emmanuel Shaw, one of President Weah’s principal advisors.

Under the terms of the power purchase agreement between the Ministry of Lands, Mines and Energy, the National Investment Commission (NIC), the Liberia Electricity Corporation (LEC) and KARPOWER INTERNATIONAL DMCC, KPS will provide electricity supply through a “powership” to be located at Free Port of Monrovia, Liberia including the provision of operation, maintenance and technical services and construction of Electricity Connection Facilities, as well as the provision of fuel for the operation of “Powership.”

Multiple sources confirmed to FrontPage Africa that there are many hidden costs attached and the LEC will, under the contract terms, have to pay for all power produced whether consumed or not. At 50 percent current theft rate, the actual cost will be doubled if 16 cents is only a base cost, one source told FrontPage Africa.

Currently, the cost of power at Mt. Coffee is set at 6 cents. The 35 cents tariff is necessary to cover operational cost, especially with 500+ employees and maintenance costs. The tariff would come down once the customer base increases. So, even if LEC buys at 16 cents, it would be unlikely that it would sell for that amount.

Karpower Denies Political Affiliation, Hidden Costs

In reaction to FPA’s report, Karpower in a press release last week denied having political affiliation with key executives of the government, while at the same time clarifying that its engagement with the Government of Liberia is solely based on its technical capabilities and its experience as successfully demonstrated in countries of operations such as Ghana, Gambia, Sierra Leone, Sudan, Mozambique, Indonesia and Lebanon

International Partners are Troubled

The letter, addressed to Mr. Samuel Tweah, the  Minister of Finance and Development Planning, seeks to draw the government’s attention to regrettable repercussions Liberia could face if the Karpower deal is ratified by the Legislature.

Put together, these international partners have invested over US$825 million in the electricity sector of Liberia support the government’s efforts at the Mt. Coffee Hydropower Plant, in transmission and distribution of power, training at the Liberia Electricity Corporation (LEC), sound administration of the utility, and the completion of the CLSG network.

“In light of the stakes, we note with great concern that LEC faces substantial financial and managerial challenges which risk the sustainability of the Mt. Coffee Hydropower Plant, as well as the success of other initiatives and opportunities in the energy sector,” the letter noted.

Amongst the concerns of these international partners is the failure of the Government of Liberia (LEC’s largest customer) to settle its utility bills much needed to fund LEC’s basic operations, such as connecting customers and servicing; high commercial losses for LEC that nullify rewards of lower cost energy generated by Mt. Coffee.

Also, the partners whose financial contributions brought Mt. Coffee back online are worried about the government’s deviation from the terms of a management services contract signed by the LEC Board delegating exclusive operational authority to ESBI through oversight of a Board of Directors.

Paramount amongst the concerns is the Government of Liberia’s 10-year “financially and technically mismatched power purchase contract” contract with Karpower, which these international partners see as counter productive to the how the ESBI management team could bolster LEC’s foundation.

According to them, as indicated in the letter, the remedy for Liberia’s energy crisis during the dry season (0-20 week gap of 0-15MW of electricity) lies within the completion of the CLSG.

The Côte d’Ivoire, Liberia, Sierra Leone and Guinea (CLSG) is a G-20 energy initiative funded by the World Bank, African Development Bank, European Investment Bank and the KFW.

The CSLG’s transmission line is a 1300 kilometer stretch, coming from Man to Danané; from Danané to Yekepa; from Yekepa to Buchanan; from Buchanan to Mount Coffee; from Mount Coffee to Bo Waterside, and is expected to provide huge opportunities for Liberia.

The development partners reminded the government of Liberia that this project would bridge the electricity gap in early 2020, thereby defying the need for a decade-long, year-round financial commitment to purchase 36MW of power and fuel to keep a power barge running 24/7 from Karpower.

“The Karpower proposal provides more of what Liberia already has in excess, would inhibit LEC’s ability to focus on connections and distribution, and would incur for LEC unnecessary debt in the millions of dollars that would result in higher prices for consumers. Practical solutions to this short-term gap exist; for example, a combination of full utilization of Mt. Coffee hydropower and HFO plants at Bushrod Island, and managing demand (large commercial users switching back to self-generation in the dry season) should the demand exceed 44MW. By 2020, the CSLG’s additional capacity (27MW) could be further increased to meet the 2020-21 dry season needs,” the letter stated.

The group of international partners appealed to the Government of Liberia for urgent intervention to safeguard current investments in the electricity sector.

According to them, without the government’s rapid response to their concerns, it would be difficult sustaining the unprecedented level of coordinated support to Liberia’s energy sector.

One international stakeholder who preferred anonymity told FrontPage Africa that this issue could lead to the suspension of donor commitment to the country.