PPA ‘favours’ Enron
A Nigerian government committee may cancel part of a power plant development contract between Enron and Nigerian state power company NEPA over concerns that the power purchase agreement (PPA) is too favourable towards Enron.
A separate World Bank committee has also raised objections to the $800m project after reviewing the PPA, which was signed in December 1999 by US developer Enron, the Lagos state government, the power and steel ministry and NEPA. The dispute is a blow to Nigeria, and in particular the commercial and industrial heartland around Lagos, which suffers from blackouts.
The project involves the immediate construction of two barge-mounted power units to supply 90 MW, followed by the development of 548 MW at Agbara. The project may now be limited to the first phase.
The World Bank observed that Enron obtained the right to sell power in Lagos without competitive bidding, and would not be penalized for poor plant performance. It would also receive excessive contract termination payments.
The World Bank also noted that the terms of the PPA could affect NEPA’s privatization. Nigeria recently unveiled a detailed timetable for the sell-off, which will see core investors selected in March 2001 before privatization in early 2003.
Turkey gets 17 pc capacity boost
A US-Turkish consortium developing three combined cycle power plants in Turkey has awarded GE Power Systems a contract to supply ten MS90001FA gas turbine generators that will increase the country’s generating capacity by 17 per cent. The contract, valued at over $900m, includes long-term service agreements.
The plants are being developed by a joint venture between InterGen of the USA and ENKA of Istanbul. Two of the plants, Gebze and Adapazari, will enter commercial operation in the second half of 2002, while the third, Izmir, will start supplying power in March 2003. Financing is being arranged through the US Export-Import Bank and the US Overseas Private Investment Corp., among others.
The deal represents three milestones for GE Power Systems: the largest order for power generation equipment ever secured in Turkey; the largest single order for 9FA gas turbines; and the largest long-term service agreement in the 50 Hz market segment. The long-term service agreement will cover all of the turbine-generators’ scheduled and unscheduled maintenance for 16 operating years.
Bulgaria aims for reform
Bulgaria is to begin reforming it electricity sector in 2000 in order to meet International Monetary Fund (IMF) recommendations. Restructuring plans will be drafted by the end of March 2000 which will seek to end state subsidies, close inefficient production units and attract strategic investors.
IMF recommendations that could be implemented include the separation of power generation, transmission and distribution, and increasing electricity tariffs. State power company NEK currently accounts for 90 per cent of generation and has a monopoly on transmission and delivery. The draft plans will be presented for government approval in June 2000.
NEK will become the single buyer of electricity, and seven power distribution firms will be set up, based on NEK’s existing distribution branches. Some electricity generation units will also become separate firms.
Hungary settles with RWE, EnBW
Hungary’s state privatization company, APV, has reached a settlement with German energy companies RWE Energie and EnBW following a dispute over a power plant construction contract signed in 1995. APV will pay the two companies a total of $30.16m as part of an out-of-court settlement reached in February.
The dispute centred on a “special agreement” reached between the three parties in 1995 and for which RWE and EnBW paid $26m. When APV announced that it wanted to withdraw from the agreement, RWE and EnBW demanded the return of the payment with interest and other costs.
The “special agreement” was signed when RWE and EnBW acquired stakes in Hungary’s Matrai Eromu Rt. power plant, and gave the two companies the right to construct new power plants using lignite from mines owned by Matrai Eromu. APV decided to withdraw from the agreement after the downward revision of the country’s future electricity needs by the government.
Egypt awards project contracts
Electricité de France (EDF) has awarded Foster Wheeler Corp. contracts worth a total of $100m for equipment at two 700 MW power plants in Egypt. Several Foster Wheeler subsidiaries will supply and erect steam generators and auxiliary equipment at the new plants in Port Said and Suez Gulf.
EDF is developing the plants under a build-own-operate-transfer (BOOT) contract with the Egyptian Electricity Authority (EEA).
Foster Wheeler will supply four natural circulation conventional steam generators, each rated at 350 MW. The plants will burn natural gas and oil, and are scheduled to enter operation in 2003.
AES Corporation has signed a contract with state utility NEK to construct the $750m lignite-fired Maritza East 1 power plant. AES will develop the 2 x 335 MW plant on a build-own-operate-transfer basis in southeast Bulgaria at the site of the partly decommissioned Maritza East 1 plant. The project represents the largest private foreign direct investment of any kind in Bulgaria.
Belgian energy group Tractebel has launched legal action against the government of Kazakhstan for alleged breach of contract. Tractebel says that the government has failed to increase electricity tariffs and pay for investments as agreed when the Belgian company took over the running of a power and heat utility in Almaty in 1996. It is taking action in the international arbitration court in Stockholm following failed talks with the government.
The polish treasury is to privatize its 4300 MW brown coal-fired Belchatow power plant in a stock market flotation in 2001. The plant supplies around 20 per cent of the country’s power requirements, and is expected to be popular among investors.
The Ukrainian government has renewed pressure on the European Bank for Reconstruction and Development (EBRD) to provide funds for the construction of nuclear units to replace the Chernobyl plant, which it says it will close by the end of 2000. Ukraine wants to complete two nuclear units at the Rivne and Khmelnitsky plants, but needs international funds to do so. The only working reactor at Chernobyl, unit 3, has been shut down for repairs several times in recent months. The EBRD is expected to take the lead in funding the completion of the new units, and other potential lenders are likely to wait for a decision by the bank before committing money.
Dubai Investments Park Development Co. has announced that it will develop a power plant with a capacity of up to 150 MW. The plant will be the first private power station in the United Arab Emirates and will be built in conjunction with foreign partners. Details of the project will be finalized by the end of March 2000.
The government of Zimbabwe has proposed a counter trade deal with Mozambique to help offset a total of $20m of debt owed by the Zimbabwe Electricity Supply Authority (ZESA) for power imports. The deal would liquidate at least part of the debt mainly through the supply of agricultural goods to Mozambique. ZESA imports half of its power needs from Mozambique, South Africa and the Democratic Republic of the Congo.