West Nile power project in crisis
Sep 10, 2009
ENDLESS disagreements between the Government and the West Nile Rural Electrification Company (WENRECO) have put a rural electrification project worth $12m (about sh32.7b) in balance.
By Ibrahim Kasita
ENDLESS disagreements between the Government and the West Nile Rural Electrification Company (WENRECO) have put a rural electrification project worth $12m (about sh32.7b) in balance.
The Government and the Industrial Promotion Services Kenya, owned by the Aga Khan Foundation, agreed to set up a 1.5 megawatts heavy-oil thermal plant to extend electricity to West Nile.
The firm was also supposed to built another 3.5 megawatt hydro-power project on River Nyagak. A special purpose company, WENRECO, was formed to operate the two projects.
However, the project that started in 2006 and was expected to be commissioned by December 2008, has stalled due to lack of money.
Problems started in April when the Electricity Regulatory Authority (ERA) warned WENRECO it could revoke its licence to generate, distribute and sell electricity for failing its obligations.
The firm was supposed to supply power to West Nile for 18 hours daily and also develop and commission the 5MW Nyagak mini-hydro-power project by March 2006.
WENRECO has blamed its problems on the Government arguing that it has failed to pay is electricity bills and failed to implement the tax exemption clause.
The Government on its part has accused WENRECO of “dishonesty.â€
This stalemate was resolved after the energy ministry, the Rural Electrification Agency and ERA held an emergency meeting with WENRECO.
A new legal framework was drafted where the Government would provide fuel to WENRECO for the operation of the heavy-oil thermal plant. The Government also agreed to provide fuel to WENRECO for the operation of the West Nile grid.
This enabled WENRECO to continue supplying electricity to West Nile.
They further resolved that an audit would be undertaken to confirm the funding gap and the potential of the Government equity.
The findings would then form the basis for negotiations on the terms of the Government’s investment in WENRECO.
But disagreements between the energy ministry and WENRECO have re-emerged.
ERA this week notified the firm “to show cause by October 23 why its licence should not be revoked over breach of its licence obligations and conditions.â€
“The audited statements for 2008 have not been submitted to date and the regulator believes that WENRECO may not be in position to complete the Nyagak hydro-power project in time in spite of the numerous reasons they have advanced,†the ERA notice said.
Kevin Kariuki of the Industrial Promotion Services-Kenya, confirmed receipt of the notice but declined to give details, saying he does not discuss licensing issues in the media.
“Given the ERA notice, it seems that either the Government has abandoned the agreed approach and withdrawn from the process, or Electricity Regulatory Authority has acted independently,†observers said.
Based on the threats to revoke the licence, unless WENRECO demonstrates capacity to complete the Nyagak power project, the Government may have to step in and complete it.
A Government take-over would mean that the public-private partnership model, for which WENRECO was to be a case study for future rural electrification, would be at risk.
Industry watchers say the snag highlights concerns that disbanding the Uganda Electricity Board and setting up numerous entities, like the Rural Electrification Agency, has not brought the promised investments into the sector.
ENDLESS disagreements between the Government and the West Nile Rural Electrification Company (WENRECO) have put a rural electrification project worth $12m (about sh32.7b) in balance.
The Government and the Industrial Promotion Services Kenya, owned by the Aga Khan Foundation, agreed to set up a 1.5 megawatts heavy-oil thermal plant to extend electricity to West Nile.
The firm was also supposed to built another 3.5 megawatt hydro-power project on River Nyagak. A special purpose company, WENRECO, was formed to operate the two projects.
However, the project that started in 2006 and was expected to be commissioned by December 2008, has stalled due to lack of money.
Problems started in April when the Electricity Regulatory Authority (ERA) warned WENRECO it could revoke its licence to generate, distribute and sell electricity for failing its obligations.
The firm was supposed to supply power to West Nile for 18 hours daily and also develop and commission the 5MW Nyagak mini-hydro-power project by March 2006.
WENRECO has blamed its problems on the Government arguing that it has failed to pay is electricity bills and failed to implement the tax exemption clause.
The Government on its part has accused WENRECO of “dishonesty.â€
This stalemate was resolved after the energy ministry, the Rural Electrification Agency and ERA held an emergency meeting with WENRECO.
A new legal framework was drafted where the Government would provide fuel to WENRECO for the operation of the heavy-oil thermal plant. The Government also agreed to provide fuel to WENRECO for the operation of the West Nile grid.
This enabled WENRECO to continue supplying electricity to West Nile.
They further resolved that an audit would be undertaken to confirm the funding gap and the potential of the Government equity.
The findings would then form the basis for negotiations on the terms of the Government’s investment in WENRECO.
But disagreements between the energy ministry and WENRECO have re-emerged.
ERA this week notified the firm “to show cause by October 23 why its licence should not be revoked over breach of its licence obligations and conditions.â€
“The audited statements for 2008 have not been submitted to date and the regulator believes that WENRECO may not be in position to complete the Nyagak hydro-power project in time in spite of the numerous reasons they have advanced,†the ERA notice said.
Kevin Kariuki of the Industrial Promotion Services-Kenya, confirmed receipt of the notice but declined to give details, saying he does not discuss licensing issues in the media.
“Given the ERA notice, it seems that either the Government has abandoned the agreed approach and withdrawn from the process, or Electricity Regulatory Authority has acted independently,†observers said.
Based on the threats to revoke the licence, unless WENRECO demonstrates capacity to complete the Nyagak power project, the Government may have to step in and complete it.
A Government take-over would mean that the public-private partnership model, for which WENRECO was to be a case study for future rural electrification, would be at risk.
Industry watchers say the snag highlights concerns that disbanding the Uganda Electricity Board and setting up numerous entities, like the Rural Electrification Agency, has not brought the promised investments into the sector.