17 August 2024 was a momentous day for the energy sector in Ethiopia. AMEA Power moves forward with the AyshaI windpower project in Ethiopia. It signed a power purchase agreement [PPA] and Implementation agreement [IP] with counterparty institutions in Ethiopia. Two important agreements to kick start the discussion towards financial close, [FC].

While I sincerely congratulate all who make this happen, specially Abebe G. Yihdego , Rajesh Ramesh and former EEP colleagues, I also reflect on Ethiopia’s path on PPP/IPP adventure.

One thing missing in the sector is the learning from local practice. We have so much of theoretical knowledge but little to no experience of putting projects on the ground, locally. I meant IPP projects. A decade PPP/IPP exercise with no MWs to date.

Tulu Moye Geothermal Operations (TMGO) has been the only IPP project that passed financial closing. And its progress stalled [under the premise of lack of security vs. mismanagement and lack of resource]. In any case, it was a blow to the sector.

Ethiopia deployed significant resources to bring in IPPs’ [ The tender process, PPP legislation and institutional set up] but the fruit has yet to come.

What is different this time ❓ And what do we expect from it❓

AyshaI wind power is located where the wind resource is at its best in Ethiopia. AyshaI wind power is on the Djibouti corridor next to AyshaIII wind power project

• Power export is easier along with supply of SEZs in Diredawa.
• The bilateral deal may push the negotiation forward esp. as the relationship between Ethiopia and UAE stays positive.
• The ongoing reform [the FOREX at its core] may be supportive.
• The upcoming electricity tariff reform may be a boost for the project’s profitability.

In my opinion, AyshaI wind power project’s success is a success for the energy sector and for the energy hungry economy.

Let us hope and wait for it, if the adventure can be different this time❗

Independent Power Producers, IPPs

For common understanding, independent power producer, IPPs, are build, operate and transfer models with little tweaks subject to the power purchase agreements, PPA’s. The project (SPV) is all financed by the developer.

From the utilities stand point, two things stands out. The PPA price so that it is not so high, and the needed power delivery on time so that the utility does not face under capacity.

From the broader government point of view: it is mainly the payment since, usually, it is forex denominated and the the utility default risk as it triggers guaranty instruments.

In IPP discussions, it is always the price [cost] and we often underestimate the MWs that will power the economy where half of the population is without any option to date.

Yes, IPPs are complex to manage but it is largely to the public’s interest esp. when alternatives are more expensive. Ethiopia badly needs more power, anyway.

Originally Posted on LinkedIn.

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