Investors ask to shed light on solar project

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Investors are complaining about the bidding process of the first public private partnership (PPP), independent power purchase (IPP) for two solar power projects.
On Friday, September 6, when bidding opened, only one company produced a financial proposal for the two solar power projects.
Sources told Capital that during the financial opening held, a proposal from Acwa Power, a Saudi firm, was the only contender. Details were not accessible since the company and the committee only attended the event.
In the PPP auction process the Public-Private Partnerships Directorate-General (PPP-DG) for the Ministry of Finance (MoF) invited the private sector to participate in the Scaling Solar project of Dicheto and Gaad.
PPP-DG has identified 12 bidders, to compete for developing 250 MW of new solar capacity under the first round of the Scaling Solar program, by requesting a pre-qualification. From the 12 companies five were shortlisted and invited in the bid process that was opened on August 15 for a technical and commercial evaluation.
The five companies that passed the financial stage were EDF/Masdar Consortium, Enel Green Power, Al-Nowais/ Aldwych/ Alten Consortium, Acwa Power and FRV/ Globeleq/Belayab Consortium. However, only one company, Acwa Power, made it to the final result.
Sources stated that initially the project was backed by the International Finance Corporation (IFC), the World Bank private sector wing, which attracted several prominent firms.
“Initially 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,” the source said.
IFC also agreed to provide the finance at an attractive interest rate to realize the project which made bidders more confident.
They also provided the models of the power purchase agreement, implementation agreement and other instruments for execution of the project. Under the model the Ethiopian government also agreed to provide a convertibility guarantee, which is a guarantee that the government gives for the settlement of the loan.
As per the agreement on the modeling the bid has been floated, but in the middle, the Ethiopian government via National Bank of Ethiopia (NBE) announced that it would not give the convertibility guarantee.
Following the decision of NBE, IFC has pulled out from the project.
“On the other hand, IFC pulled out from the project before two weeks of the bid opening which narrowed the time for companies to find alternative financers,” the source said.
Even though four of the five companies mentioned IFC’s financial terms, Acwa Power has come up with its own equity financing. Based on their financial terms MoF disqualified the others from the financial proposal part of the bid, according to sources.
Bidders that Capital talked to said that universally such kind of financers provide the credit based on their own condition. “Even after the loan was approved and the agreement is signed, it will be available in different conditions, process and based on the progress of the project. This means the finance will be released in a manner even after the agreement is sealed,” the bidders argued.
“On the other hand, the bidders did not get ample time to assess optional financers in connection with the pulling out of IFC from the scheme because it happened two weeks before the bid submission timeframe,” a bidder complained.
The Friday financial opening is the feed in tariff that the developers offer the selling rate of the power for the government.
Teshome Tafesse, State Minister of Finance, told Capital that the bid process will be disclosed after the evaluation. “It could be difficult to give any information in this stage, we will elaborate the issue by next week,” he said.
The projects sites located at Afar and Somali regions are expected to generate 125MW each and estimated to cost USD 150 million each.

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