Aggreko Namibian power deal ‘expensive’

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AggrekoThe current power purchase agreement between Mozambican supplier, Aggreko and NamPower is said to be the most expensive deal in the history of the power utility.

This is revealed in emails exchanged by top NamPower managers in their fight over the Aggreko deal where they accuse each other of sabotaging the Kudu Gas Project (KGP).

Despite this revelation, NamPower chief executive officer Paulinus Shilamba told The Namibian last week that they were considering a second power proposal with Aggreko, which was made in May this year.

The new proposal was made on the same day Aggreko pledged to give NamPower Foundation US$250 000 (N$2,5 million) for the development of its social responsibility programme.

This revelation is contained in an email written by senior manager: new ventures, research and development Bertholdt Mbuere ua Mbuere on 30 May to Foibe Namene who chairs the Kudu Gas Project, Muyenga Muyenga who is the KGP secretary, Leandro Kapolo and Gerson Rukata.

In the email, Mbuere ua Mbuere reveals that before NamPower signed the deal with Aggreko, they had held discussions where a deal by Giggawatt, a South African which offered US$0.14c/ kWh compared to Aggreko’s US$0,19c/ kWt was scuttled when some managers misled Shilamba by saying that Eskom would not grant Giggawatt the necessary wheeling path.

According to Mbuere ua Mbuere, in 2011 Foibe, Kapolo and himself went to Mozambique to negotiate with Electricidade de Mozambique (EDM) on the possibility of buying power.

“EDM could not offer us anything but they introduced us to Giggawatt. Discussions with Giggawatt commenced in early 2012 (Kapolo, Kandali and I) paid a visit to Gigajoule/Giggawatt office at the time in Johannesburg. After that visit the NDA was concluded, due diligence was completed and the ball started rolling.

“[On] 16 April 2012, Giggawatt came to do a represetation to the bigger NamPower negotiation team at the NamPower Convention Centre. At the time, Giggawatt opening offer for the deal was 14USc/kWt including transmission cost in Mozambique for a period of 7-8 years (enough time for NamPower to complete the Kudu project). The price of 14USc was going to drop further if we were willing to go into a longer PPA of 10 years or more,” the email said.

Mbuere ua Mbuere pointed out that the Aggreko deal at 19U$c/kWh excluding wheeling and transmission cost is not cheap “quantified roughly at plus or minus N$400 million (for 90MW over a period of two years”.

“Suspiciously enough,” Mbuere ua Mbuere further wrote, “the Giggawatt deal which was labelled to be expensive and not technically viable at the time, emerged a year later as Aggreko deal (only it turns out to be the most expensive deal and it was dubiously negotiated single-handedly by one character . . .”

Shilamba, said they had not reached any decision considering the new Aggreko deal which proposes to offer NamPower Make-Up Energy on a cash on delivery basis.

The offer made by Aggreko business development manager Southern Africa, Sheldon Bailey, offers NamPower 140MWh per day and would be available for six days per week.

“In order to provide NamPower with the additional energy, particularly during the winter months when there is a shortage in the Southern Africa region, Aggreko can confirm that this opportunity is available from COD date (scheduled for 8th June 2013) to August 2013 which totals 12 weeks. An extension to this period is possible by way of a 30-day notice period for the extension in order to secure gas from the gas supplier but this additional quantity required is available until March 2014 currently,” Bailey wrote to Werner Graupe who is NamPower energy trader.

According to Bailey’s email, this new deal would cost NamPower US$0,16c/kWh.

Bailey’ email was written on the day Aggreko director James Alexander Shepherd also wrote to Shilamba pledging to allocate US$250 000 to the NamPower Foundation.

“We are pleased to confirm that, as part of our commitment to contribute to the economic and social development of Namibia, Aggreko Mozambique Lda, shall allocate the total sum of US$250 000 to the NamPower Foundation for the development of a social responsibility programme within Namibia,” Shepherd said.

But Shilamba said there was nothing untoward about the donation, adding that it had nothing to do with the second ‘proposed’ power purchase deal with Aggreko.

“Aggreko committed to make a donation of US$250 000 towards Namibia’s economic and social development as part of the currently standing 90MW Mid Merit power supply agreement with NamPower. It is a practice for multi-national companies to make contributions to socio-economic development in countries they invest in as part of their corporate social responsibility,” Shilamba said.

Two weeks ago, The Namibian carried a story about the infighting among NamPower top brass over the Aggreko deal. Shilamba confirmed then that they were still discussing the deal and that they had different views about it.

He reiterated the different views among his management last week, adding that he “does not understand what the issue is with this particular project.”

“As a leader of this company, I encourage diverse views,” he said adding that it was part of the company’s culture that issues are debated before the company came to one decision.

Shilamba also said that the proposed Aggreko deal was only being dealt with at the technical level and has not even reached the executive management level, before it could go to the board for consideration.

 

Information from The Namibian was used in this report.

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