SA MIGHT escape its hasty and costly decision to lead the financial package needed to kickstart the stalled Inga 3 Hydroelectric scheme in the Democratic Republic of the Congo (DRC).
The project, on the Congo River, is a proposed component of the five-dam Grand Inga hydro colossus, and it might never happen. A treaty signed between the DRC’s President Joseph Kabila and his counterpart Jacob Zuma in 2013 commits SA to buying 2,500MW of the scheme’s 4,800MW output. In other words, the treaty is a power-purchase agreement that binds SA to a huge financial liability to help the dam to be built. Assuming 90% availability, SA’s uptake with normal maintenance and no droughts would be worth about $500m-$600m a year.
The life of the treaty is 10 years, giving it a total face value of $5bn-6bn.
Transmission losses en-route would be considerable, and it is unclear who pays for these. However, in terms of the treaty the dam must be completed by 2021, failing which the agreement becomes void.
It now looks increasingly unlikely that the DRC will meet the deadline.
Workers were due to move on site in October last year, but failed to appear. Sporadic meetings between the DRC and possible development partners seem to have yielded little that could be described as positive. It seems that a World Bank vision to assemble the estimated $14bn financial package the project demands is fading, while the government’s calls for a start to the programme are falling on deaf ears of institutional money.
"Some discussions and the establishment of agencies such as Agence pour le Développement et la Promotion de Grand Inga (ADPI) have taken place," reports Rudo Sanyanga, Africa director of the International Rivers nongovernmental organisation (NGO).
"Meanwhile, the majority of people in the country continue to experience energy poverty and estimates of Congolese with access to electricity remain stubbornly low, at just 9%-15% of the population."
Ms Sanyanga was in the Congo to attend a state-sponsored workshop held on site by energy and diplomatic officials.
"At the conference, it quickly became apparent that civil society and the government have wildly different views of Inga 3 and Grand Inga," reports Ms Sanyanga, "and the government is understandably getting impatient with the World Bank, which they claim is slowing Inga 3’s development."
The political contingent was vocal in its insistence that not only Inga 3, but the Grand Inga complex must be built, with many suggesting that it is the only vehicle that will spur meaningful development in the country and encourage economic interest in the continent as a whole.
"The government is also fiercely proud of the fact that the DRC has the largest potential for hydropower in Africa — estimated at over 100,000MW including the mighty Congo River and small microhydro sites in smaller watersheds around the country. The Inga site alone has a potential of 50,000MW," she says.
...
MOST Congolese politicians have long held the view that developing the Inga Rapids site will make the Congo extremely powerful, and that it will be a game changer for the entire continent.
The government believes Grand Inga can stabilise the continent from conflicts, and transform the economics of Africa.
André Kabwe, a senior government official in the ministry of energy, says: "Grand Inga will enable us to extract vast amounts of minerals, encourage other investors, and help us develop the country."
The belief, however, that Grand Inga is a pipe dream is strengthening, and even if it is built, it will not see the light of day for at least 20 years. Even Inga 3 is at least 10 years away.
There is also a growing lobby within and outside the DRC that holds that a widely distributed series of small renewable energy projects is more sensible. "The potential for microhydro is there," reports Ms Sanyanga.
"The recently published Renewable Energy Atlas for the DRC clearly shows the tremendous potential renewable energy options for each of DRC’s 11 provinces.
Such energy projects would be much cheaper and quicker to build, and would supply electricity to more communities and households spread through the country much sooner than Inga 3 ever could. The national grid network is antiquated and not extensive enough, but microhydro does not need to rely on it to begin supplying power locally. Unfortunately, there is insufficient effort to obtain financing for renewable energy projects."
The growing view is that independent power producers must take the initiative to develop DRC’s renewables potential: without investment, Congo’s vast clean energy potential will remain a pipe dream.
It is possible that the World Bank’s reluctance to increase its spend on the project is due to the tiger it has by the tail in trying to repair the dilapidated Inga 1 and 2 hydro schemes.
In 2004, the World Bank embarked on a $200m, two-year rehabilitation of Inga 1 and 2. Today, 12 years later, the programme cost is well over $1bn — and it still is not complete. The DRC continues to import electricity, while Inga 1 and 2 operate at less than 50% of capacity. This issue was largely overlooked in the government’s analysis of Inga 3.
The big question for this country is whether the DRC can beat the Inga 3 2021 completion deadline as stipulated in the SA-Congo treaty.
This is difficult to assess, because neither government will discuss the murky terms of the treaty. For example, when will the treaty’s PPA become bankable and allow the Congo’s Inga 3 dam builders to draw down on it?
...
A PPA is, in effect, a funding facility that provides the developers with the money to build. The lender will recoup the loan in kind when the electricity starts flowing. That is why a project commission deadline is a major component of the arrangement, in Inga 3’s case — 2021.
"At a guess, a scheme of that size will take at least five years to get the first machines in operation. It should be completed within seven or eight years. But that assumes that a big, independent dam-savvy corporation controls the project and is free of government interference," observes New Zealander Bryan Leyland, a globally renowned expert on hydroelectric schemes, who is in this country to present a paper on increasing the safety of spillway gates at the World Conference on Large Dams in Johannesburg.
If Mr Leyland’s assessment is correct, then the Inga 3 project is dead in the water before it starts, unless the terms of the treaty are extended, a process that could go on indefinitely.
"The government’s position is in stark contrast to civil society’s view of Inga 3, energy delivery, and development in the DRC," observes Ms Sanyanga.
"Various groups at the workshop expressed dissatisfaction with the totally dysfunctional state of the energy delivery system in DRC and the level of corruption in the country, and voiced doubts that the grand vision of this massive project would ever be realised or that it would benefit Congolese," she says.
"Government officials met this criticism — whether it was about the dam’s impacts, the country’s capacity to handle such huge projects, finances, or corruption — with very simple answers. When presented with any negative aspects of the project, officials gave the short and unsatisfactory answer that ‘all impacts will be mitigated’, and noted that ‘every project has some impacts, but these are small issues because the benefits are huge’.
"The facts about the project, thus far, do not bear out this strange combination of denial and optimism," Ms Sanyanga says.
...
CORRUPTION as an investment buster was a hot topic at the workshop.
Bruno Kapandji, minister in charge of the Grand Inga development agency insisted there would be "zero corruption" for Inga 3, claiming that nothing would stand in the way of Inga 3 and the ultimate Grand Inga. He accused NGOs of following western lobbyists’ agendas, suggesting that NGOs were "fabricating" stories about Inga 3’s social and environmental effects.
According to the Ventures Africa website, the World Bank’s last contribution to the project was a grant in 2014 of $73m to help the Congo fund some of the technical aspects of Inga 3 by underwriting a study around the effect of the project socially and environmentally, as well as an investigation into the dam’s sustainability.
"Inga 3 is undoubtedly the most transformative project for Africa in the 21st century," Prime Minister Matata Ponyo Mapon told the workshop. "It is one of the strategic pillars of development for the DRC that needs energy to expand growth and reduce poverty in a sustainable way."
He conceded, however, that disagreement had arisen between the government and the World Bank over project start dates. The government wants the project to get under way immediately, so as to comply with the terms of the treaty with SA.
His government considers it critical that work on Inga 3 begins this year, and opposes the World Bank’s stated possible start date of 2018.
Ms Sanyanga quotes the government as saying it is considering floating shares to raise capital for the project. It hopes to raise $3-$4bn this way. The government has undertaken to match the funds raised.
Inga 3’s 2013 cost estimate was $14bn, not including overruns.
According to Kapandji, the selection of a contractor would be made next month. The pick is between a consortium headed by China Three Gorges Corporation, Sino Hydro, and Snel, the state-owned power utility; or a consortium comprising ACS and Eurofinsa of Spain.
The winning bidder would then, presumably, start looking for funding. The inclusion of Snel (The Congolese National Electricity Company) came as a surprise. Both the World Bank and the government had publicly dismissed this possibility in 2013. It is unclear how Snel’s inclusion would influence the final decision.
There seems little chance that the Inga 3 project would be completed in time to meet the 2021 deadline, and the treaty’s validity would, presumably, expire.
SA and the DRC could sign on to an extension, but this does not seem likely.
President Zuma was the big motivator behind the current treaty and he would have completed his second term long before the time came to negotiate an extension to the agreement.
Democratic Republic of the Congo President Joseph Kabila, left, and South African President Jacob Zuma signed a treaty in 2013 that commits SA to buying 2,500MW from the scheme. Picture: REUTERS/SIPHIWE SIBEKO
SA MIGHT escape its hasty and costly decision to lead the financial package needed to kickstart the stalled Inga 3 Hydroelectric scheme in the Democratic Republic of the Congo (DRC).
The project, on the Congo River, is a proposed component of the five-dam Grand Inga hydro colossus, and it might never happen. A treaty signed between the DRC’s President Joseph Kabila and his counterpart Jacob Zuma in 2013 commits SA to buying 2,500MW of the scheme’s 4,800MW output. In other words, the treaty is a power-purchase agreement that binds SA to a huge financial liability to help the dam to be built. Assuming 90% availability, SA’s uptake with normal maintenance and no droughts would be worth about $500m-$600m a year.
The life of the treaty is 10 years, giving it a total face value of $5bn-6bn.
Transmission losses en-route would be considerable, and it is unclear who pays for these. However, in terms of the treaty the dam must be completed by 2021, failing which the agreement becomes void.
It now looks increasingly unlikely that the DRC will meet the deadline.
Workers were due to move on site in October last year, but failed to appear. Sporadic meetings between the DRC and possible development partners seem to have yielded little that could be described as positive. It seems that a World Bank vision to assemble the estimated $14bn financial package the project demands is fading, while the government’s calls for a start to the programme are falling on deaf ears of institutional money.
"Some discussions and the establishment of agencies such as Agence pour le Développement et la Promotion de Grand Inga (ADPI) have taken place," reports Rudo Sanyanga, Africa director of the International Rivers nongovernmental organisation (NGO).
"Meanwhile, the majority of people in the country continue to experience energy poverty and estimates of Congolese with access to electricity remain stubbornly low, at just 9%-15% of the population."
Ms Sanyanga was in the Congo to attend a state-sponsored workshop held on site by energy and diplomatic officials.
"At the conference, it quickly became apparent that civil society and the government have wildly different views of Inga 3 and Grand Inga," reports Ms Sanyanga, "and the government is understandably getting impatient with the World Bank, which they claim is slowing Inga 3’s development."
The political contingent was vocal in its insistence that not only Inga 3, but the Grand Inga complex must be built, with many suggesting that it is the only vehicle that will spur meaningful development in the country and encourage economic interest in the continent as a whole.
"The government is also fiercely proud of the fact that the DRC has the largest potential for hydropower in Africa — estimated at over 100,000MW including the mighty Congo River and small microhydro sites in smaller watersheds around the country. The Inga site alone has a potential of 50,000MW," she says.
...
MOST Congolese politicians have long held the view that developing the Inga Rapids site will make the Congo extremely powerful, and that it will be a game changer for the entire continent.
The government believes Grand Inga can stabilise the continent from conflicts, and transform the economics of Africa.
André Kabwe, a senior government official in the ministry of energy, says: "Grand Inga will enable us to extract vast amounts of minerals, encourage other investors, and help us develop the country."
The belief, however, that Grand Inga is a pipe dream is strengthening, and even if it is built, it will not see the light of day for at least 20 years. Even Inga 3 is at least 10 years away.
There is also a growing lobby within and outside the DRC that holds that a widely distributed series of small renewable energy projects is more sensible. "The potential for microhydro is there," reports Ms Sanyanga.
"The recently published Renewable Energy Atlas for the DRC clearly shows the tremendous potential renewable energy options for each of DRC’s 11 provinces.
Such energy projects would be much cheaper and quicker to build, and would supply electricity to more communities and households spread through the country much sooner than Inga 3 ever could. The national grid network is antiquated and not extensive enough, but microhydro does not need to rely on it to begin supplying power locally. Unfortunately, there is insufficient effort to obtain financing for renewable energy projects."
The growing view is that independent power producers must take the initiative to develop DRC’s renewables potential: without investment, Congo’s vast clean energy potential will remain a pipe dream.
It is possible that the World Bank’s reluctance to increase its spend on the project is due to the tiger it has by the tail in trying to repair the dilapidated Inga 1 and 2 hydro schemes.
In 2004, the World Bank embarked on a $200m, two-year rehabilitation of Inga 1 and 2. Today, 12 years later, the programme cost is well over $1bn — and it still is not complete. The DRC continues to import electricity, while Inga 1 and 2 operate at less than 50% of capacity. This issue was largely overlooked in the government’s analysis of Inga 3.
The big question for this country is whether the DRC can beat the Inga 3 2021 completion deadline as stipulated in the SA-Congo treaty.
This is difficult to assess, because neither government will discuss the murky terms of the treaty. For example, when will the treaty’s PPA become bankable and allow the Congo’s Inga 3 dam builders to draw down on it?
...
A PPA is, in effect, a funding facility that provides the developers with the money to build. The lender will recoup the loan in kind when the electricity starts flowing. That is why a project commission deadline is a major component of the arrangement, in Inga 3’s case — 2021.
"At a guess, a scheme of that size will take at least five years to get the first machines in operation. It should be completed within seven or eight years. But that assumes that a big, independent dam-savvy corporation controls the project and is free of government interference," observes New Zealander Bryan Leyland, a globally renowned expert on hydroelectric schemes, who is in this country to present a paper on increasing the safety of spillway gates at the World Conference on Large Dams in Johannesburg.
If Mr Leyland’s assessment is correct, then the Inga 3 project is dead in the water before it starts, unless the terms of the treaty are extended, a process that could go on indefinitely.
"The government’s position is in stark contrast to civil society’s view of Inga 3, energy delivery, and development in the DRC," observes Ms Sanyanga.
"Various groups at the workshop expressed dissatisfaction with the totally dysfunctional state of the energy delivery system in DRC and the level of corruption in the country, and voiced doubts that the grand vision of this massive project would ever be realised or that it would benefit Congolese," she says.
"Government officials met this criticism — whether it was about the dam’s impacts, the country’s capacity to handle such huge projects, finances, or corruption — with very simple answers. When presented with any negative aspects of the project, officials gave the short and unsatisfactory answer that ‘all impacts will be mitigated’, and noted that ‘every project has some impacts, but these are small issues because the benefits are huge’.
"The facts about the project, thus far, do not bear out this strange combination of denial and optimism," Ms Sanyanga says.
...
CORRUPTION as an investment buster was a hot topic at the workshop.
Bruno Kapandji, minister in charge of the Grand Inga development agency insisted there would be "zero corruption" for Inga 3, claiming that nothing would stand in the way of Inga 3 and the ultimate Grand Inga. He accused NGOs of following western lobbyists’ agendas, suggesting that NGOs were "fabricating" stories about Inga 3’s social and environmental effects.
According to the Ventures Africa website, the World Bank’s last contribution to the project was a grant in 2014 of $73m to help the Congo fund some of the technical aspects of Inga 3 by underwriting a study around the effect of the project socially and environmentally, as well as an investigation into the dam’s sustainability.
"Inga 3 is undoubtedly the most transformative project for Africa in the 21st century," Prime Minister Matata Ponyo Mapon told the workshop. "It is one of the strategic pillars of development for the DRC that needs energy to expand growth and reduce poverty in a sustainable way."
He conceded, however, that disagreement had arisen between the government and the World Bank over project start dates. The government wants the project to get under way immediately, so as to comply with the terms of the treaty with SA.
His government considers it critical that work on Inga 3 begins this year, and opposes the World Bank’s stated possible start date of 2018.
Ms Sanyanga quotes the government as saying it is considering floating shares to raise capital for the project. It hopes to raise $3-$4bn this way. The government has undertaken to match the funds raised.
Inga 3’s 2013 cost estimate was $14bn, not including overruns.
According to Kapandji, the selection of a contractor would be made next month. The pick is between a consortium headed by China Three Gorges Corporation, Sino Hydro, and Snel, the state-owned power utility; or a consortium comprising ACS and Eurofinsa of Spain.
The winning bidder would then, presumably, start looking for funding. The inclusion of Snel (The Congolese National Electricity Company) came as a surprise. Both the World Bank and the government had publicly dismissed this possibility in 2013. It is unclear how Snel’s inclusion would influence the final decision.
There seems little chance that the Inga 3 project would be completed in time to meet the 2021 deadline, and the treaty’s validity would, presumably, expire.
SA and the DRC could sign on to an extension, but this does not seem likely.
President Zuma was the big motivator behind the current treaty and he would have completed his second term long before the time came to negotiate an extension to the agreement.
