Flash Back: NAWEC has been mortgaged to Kinesis Enerji of Turkey


NAWEC has been mortgaged to Kinesis Enerji of Turkey

This is to bring to your attention and to all Gambians at large that NAWEC has being mortgaged. In fact NAWEC has being messed up full time right now.

This is in relation to the Power Purchase Agreement (PPA) that has being signed under an executive directive between NAWEC and Kinesis Enerji. Kinesis is a Turkish company mostly engaged in the renewable energy business particularly Solar. They have never built a thermal power plant and thus has no expertise in this area and now they want to come and solve our energy crises.

I know everybody including the Government of the Gambia, MOPE and NAWEC are in a very desperate situation to solve the current energy crises and rightly so, but it should rather be done in a more professional and cost effective way.

Now the issue at hand and which is particularly disturbing and may end up destroying NAWEC and by extension the Gambia is the payment terms injected into the PPA. Note that there was no tendering (whether international or local) leading up to the singing of the PPA. It was just an unsolicited offer just like many others, at least close to ten (10) offers from various companies all over the world.

At first, I thought the executive directive issued by the Secretary General, Dawda Fadera sometime ago, is fake having issued it when the President, Adama Barrow is already in Saudi Arabia for the Hajj. But when I heard the President re-echoing the Kinesis deal during his recent visit to the Kotu Power Station made me believe that the executive directive was indeed an instruction from the President himself.

Now what is particularly disturbing about the payments terms of the Kinesis deal is the Capacity Charges. If you asked your contacts at MOFEA, they will tell you it is the same capacity charges in the GEG (read Muhammed Bazzy) deal that put NAWEC in its current financial troubles more especially the Bond they are now servicing with the Central Bank and on which they are always defaulting till now. It seems they have not learnt anything from the GEG saga.

The Capacity Charges that Kinesis will charge NAWEC (probably 15 months from now) is pegged at US $ 30/kW with an annual escalation price based on consumer price index. The Kinesis deal is a 72MW project. And this capacity Charges is to be paid by NAWEC on a monthly Basis for the next Twenty-Five years.

On its face value, this deal looks great, but if one makes some few basic calculations you will realized that a Cost-Benefit analysis was not done, and this is a great dis-service done to the nation by the experts (Economists, Accountants, investment analysts and Energy Experts) involved in reviewing the deal.

Now 72MW is equivalent to 72 x 1000 kW = 72,000 kW

Multiply this figure by US $ 30/kW to get the monthly Capacity Charges Bill to be paid by NAWEC

= 72,000 kW x US $ 30.00 = US $ 2,160,000.00

Yes NAWEC will pay US $ 2,160,000.00 (Two Million, One Hundred and Sixty Thousand United States Dollars) to Kinesis on a monthly Basis.

Now convert this figure to an annual basis and then for 25 years which is the duration of the PPA

= US $ 2,160,000.00 x 12 months x 25 years = US $ 648, 000, 000.00

Yes NAWEC will pay US $ 648, 000, 000.00 (Six Hundred and Forty-Eight Million United States Dollars) to Kinesis Enerji over the next Twenty-Five years and this is just for the Capacity Chagres. I have not yet talked about the fixed O & M Charges and the Variable Energy Charges. You may also note that NAWEC will start paying this Capacity Charges on the date of completion of the Plant for Twenty-Five years, regardless of Production of Energy.

Now don’t get me wrong here. The essence of Capacity Charges is for the Investment Company (in this case Kinesis) to recover its Capital outlay in establishing the Power Plant and this is normal in every kind of investment. To quote Kinesis “Capacity Payments ….. are intended to cover the expenses of the COMPANY related to the amortization of the Investment equity/loan, the interest on the loan.” But what is disturbing is recovering such an exorbitant amount of US $ 648, 000, 000.00 is way over board if you consider what Kinesis would spend to build the plant.

Going by Industry Standard, between US $ 65, 000, 000.00 (Sixty-Five Million United States Dollars) US $ 75, 000, 000.00 (Seventy-Five Million United States Dollars) will be needed in building a 72MW power plant. Now check the difference between their (Kinesis) supposed investment against what they will recover. This is a difference of between US $ 573, 000, 000.00 and US $ 583, 000, 000.00. You don’t tell me this is to cover interest on Bank loans or the Rate of Return on their Investment. This is simply a rip off, and if this deal is not cancelled right now, NAWEC will be in a worse situation than what Bazzy and Yahya Jammeh already put them with the earlier mentioned GEG deal.

What I know about this deal is that the two Permanent Secretaries at MOPE and the Permanent Secretary for Investment at OP are deeply involved. Another thing that is certain is that President Barrow has also fallen head over heels over this deal. The President is completely convinced about the deal but if this deal goes ahead, this will be the beginning of the end of NAWEC.

Another issue is that the management of NAWEC can easily shift the blame as they would say that their hands were tied and they have an executive directive to back it up. Another thing that is worrying about the deal is that MOFEA has already being instructed to issue a sovereign guarantee on behalf of NAWEC for the deal, meaning that if NAWEC defaults in payment, the Government of the Gambia will have to step in and pay the charges and this is the more reason why NAWEC management is not bothered. Sorry they are bothered but can’t do anything about the damn whole thing.

Another serious issue about the deal is the timing of the signature of the PPA. If I may recall very well, President Barrow was away in Saudi Arabia (after issuing the Executive Directive) along with some of his ministers, the MD of NAWEC was on his way to the United States, whist the DMD was also in Mecca at the same time. So, with a weaker NAWEC management, MOPE and OP used the opportunity, having being armed with an Executive Directive, to push the PPA deal through. The minister seems to be a spectator in all this. Though I will confess I don’t know his level of involvement in this issue.

NAWEC would rather be advice to take a commercial loan of about US $ 70, 000, 000.00 (Seventy Million United States Dollar) and build a similar power plant. Yes a commercial loan, may be from one of the Bretton Woods Institute and pay in addition to the principal amount, some compound interest than get entangle in this deal. Yeah the deal is that bad that a commercial loan is even a better option.

Sometime ago Aggrekko and APR along with some other companies, were in the Gambia and had some extensive engagement with OP, MOPE and NAWEC and despite offering NAWEC prices of between US $ 0.14/kWh to US $ 0.16/kWh (with Fuel inclusive and no capacity charges), these deals could not go through. For comparison the price for the Senelac Power Supply arrangement for Farafenni is about US $ 0.13/kWh. My question is what is so special about Kinesis Enerji that their rip off price has being accepted by OP to the point of issuing an Executive Directive. Though I am not in any way in support of the Aggreekko and APR offers.

The Fixed O & M Charges and the Variable Energy charges considering that the Supply of Fuel for the Plant is the responsibility of NAWEC is another major issue that needs to be scrutinize. As NAWEC will always say 70% – 80% of their revenue goes into buying fuel, The Fixed O & M charge of US $ 4.5/kW and the Variable Energy Charge of US $ 0.8/kWh is another payment designed to rip off NAWEC. An analysis of the anticipated revenue for NAWEC from this deal will show that, it is going to be impossible for NAWEC to meet its payment obligation under the PPA, because of the huge deficit they will incur.

I also understand there is a Waste to Energy Contract in the works. This is a big hype and may not see the light of day and if it all it comes to fruition it will be in a very different format and possibly the Contracted has being or will be exaggerated. The horrendously over inflated contract price of US $ 165 Million for the Synohydro Contract for the Integrated Power Supply that was signed some months back seem to fizzle out and that this is off the table because of some advice the government received from the World Bank. NAWEC and Government is not telling the Chinese the reality who seems to be going about the project, with so much zeal, gathering information here and there and doing the necessary ground works.

Written By An Insider

The story above was first published by the Freedom Newspaper on October 10th 2017

Join The Conversation