Sierra Leone has again endured power outages after Turkish company Karpowership suspended its operations in the country for several days over a $40m unpaid bill.
Karpowership is the country’s main source of grid electricity, especially during the dry season when output from hydroelectric power stations is lower. The company first deployed a “power ship” – a floating gas-fired power station – in Sierra Leone in 2018, and added a second vessel the following year. Under its latest five-year contract with the government, signed in 2020, Karpowership supplies up to 65 MW of electricity to the country.
However, the costs of procuring electricity from Karpowership have caught up with Sierra Leone and its Electricity Distribution and Supply Authority (EDSA), the state-owned utility. Power outages have become increasingly common since late 2021 as EDSA’s arrears have accumulated.
A Karpowership spokesperson told African Business that it “took the unfortunate and difficult decision to briefly suspend operations” in Sierra Leone, following a “protracted period of non-payment”. The company said it restarted operations on 15 September.
Although the exact terms of Sierra Leone’s contract with Karpowership have not been publicly disclosed, the World Bank described the supply of electricity from the company as “costly” in a report last year. Noting that the purchase price of electricity from Karpowership is indexed to global fuel prices, which significantly increased after the Russian invasion of Ukraine, the World Bank has advised Sierra Leone to invest in solar and hydropower generation as an alternative.
Nivedh Thaikoottathil, renewables and power analyst at consulting firm Rystad Energy, says that Sierra Leone’s $40m unpaid debts reflect “the lack of cost-reflective tariffs”, with government subsidies covering more than half of Karpowership’s per-unit charges. The crisis in the country highlights how African countries can be in a position of “vulnerability” to providers like Karpowership, Thaikoottathil adds.
Sierra Leone’s options for settling its reported $40m bill appear limited in the short term, as a major economic crisis continues to bite. Its currency, the leone, lost 37% of its value against the US dollar between September 2022 and February 2023, while inflation is running at more than 40%.
Karpowership operates in more than 20 countries worldwide, including Côte d’Ivoire, The Gambia, Ghana, Guinea-Bissau, Mozambique and Senegal. Thaikoottathil notes that the advantages of Karpowership stem from its ability to rapidly provide power during an emergency situation. “Power ships can be operational within 30 days of signing a contract, providing a fast, flexible, and reliable solution to energy shortages,” he says.
Dispute in South Africa
But the company’s expansion in Africa has not been entirely plain sailing. In particular, Karpowership’s entry into South Africa has been delayed by a long-running dispute over its impact on the environment, as well as questions over the burden it would place on the economy if used as a long-term solution.
The company was selected as a preferred bidder for a 20-year contract to supply electricity from three floating power plants in March 2021, but was initially denied environmental permits on the grounds that it failed to properly evaluate and disclose likely impacts.
Karpowership was given permission to re-submit its environmental impact assessments, prompting almost two years of legal back-and-forth with NGOs and groups representing the small-scale fishing industry. Public statements from ANC ministers indicate they continue to favour awarding contracts to the company, although the regulatory approval process remains ongoing.
NGOs opposing Karpowership’s contract have seized on the crisis in Sierra Leone to strengthen their argument against procuring electricity from the company. “We believe that Karpowerships will be too expensive for a country like ours, whose economy has been severely weakened by poor governance, corruption, and mismanagement,” said Neville van Rooy, community outreach coordinator at the Green Connection, in a statement last week.
The 20-year term of the proposed contract with the South African government is particularly contentious, given that that it would lock the country into purchasing fossil fuel generated power for an extended period. In August, the company offered to reduce the contract to five years, although this is likely to entail a higher unit cost of electricity.
Karpowership told African Business that its three projects “were some of the most competitive amongst the 11 preferred bidders” in the tender process that concluded in 2021. “We believe that our gas to power projects will make an important contribution to combatting South Africa’s energy crisis, and helping to provide stable, cleaner, reliable electricity supply to the businesses and communities that so urgently need it,” the spokesperson said.
But Thaikoottathil estimates that the cost of electricity from Karpowership would between 2.5 and 4 times greater than from new combined-cycle power plants or wind or solar farms.
“What is happening in Sierra Leone is just another example illustrating why this is another bad energy idea from our government,” said van Rooy. “In addition to the load-shedding crisis and the rising cost of everything, South Africa cannot afford to go down the same path.”
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