The predecessor entity of EEP and Terra Global entered into a Memorandum of Understanding (the “MOU”) in 2012 for the development, financing and construction of the initial 100 MW phase of a planned 400 MW project at the Debre Berhan site (the “Original Project”). That project was to be developed on a finance, build and transfer basis, whereby EEP would become the owner of the Original Project following the completion of construction.
Terra Global is principally owned and has been financed by members of the Ethiopian Diaspora living in the United States. These individuals undertook this effort, which required significant time and cost, based on a strong desire to help the advancement of Ethiopia from an environmental and economic perspective.
In the last quarter of 2014, Terra Global completed a comprehensive feasibility assessment for the Original Project with the assistance of qualified third-party consultants and submitted its proposal (the “Proposal”) to EEP for review. The Proposal provided for (i) the wind turbines to be supplied by Goldwind International Holdings (HK) Limited (“Goldwind”), (ii) the project to be constructed on a turnkey basis by Goldwind and (iii) the financing to be provided by a consortium of banks led by the Industrial and Commercial Bank of China Limited (“ICBC”) and the Bank of China (“BOC”). The Original Project was to consist of 67 Goldwind GW 93 wind turbine generators, each with a gross generating capacity of 1.5 MW. The annual net energy output of the Project was forecast to be 249.8 GWh.
Shortly after the submission of the Proposal, the GOE shifted its strategy for the implementation of future power projects to a power purchase agreement approach with a focus on bidding and the Original Project was placed on hold pending a further review and has not advanced since that time. The principals and investors of Terra Global, based on their keen desire to see a project realized for Ethiopia from their efforts (as opposed to simply being compensated for the performance of a feasibility study) have been working diligently for the past two years to reimagine the project to supply electricity to EEP under a PPA and have the construction and installation of the Project be financed 100 percent by an international power project developer/owner and international banks.
A shortage of electricity is an impediment to the economic growth of a country. The Government of Ethiopia (the “GOE”) has been working to increase its electricity generation capacity to meet a growing demand for electricity and expand economic growth. In addition to meeting the increased demand for electricity, the GOE has been (i) expanding its electric generation capacity to increase the export of electricity to neighboring countries to provide Ethiopia with a major source of foreign currency and (ii) seeking to diversify its generation resources.
Today, Ethiopia relies on hydroelectric power to provide the vast majority of its electrical energy requirements. However, Ethiopia has been experiencing more frequent climatic extremes in recent years which have had a direct impact on power production from its hydro plants. As water levels fluctuate due to the changes in rainfall levels and an increase in evaporation from reservoirs, the electricity generated from hydro resources fluctuates, leading to power shortages, particularly in the dry season. Also, the resulting variations in energy output lead to unwanted uncertainties. To mitigate such uncertainties, the GOE has been working to expand and diversify its electric power generation resource mix and has pursued the addition of wind, Geothermal and solar resources.
In Ethiopia, wind and hydro are counter-cyclical to each other. Hydro generation peaks during the winter and dips during the summer. Conversely, generation from wind will dip during the winter and peak during the summer. The complementary nature of these two resources makes wind energy development a very high priority for Ethiopia.
The predecessor entity of EEP and Terra Global entered into a Memorandum of Understanding (the “MOU”) in 2012 for the development, financing and construction of the initial 100 MW phase of a planned 400 MW project at the Debre Berhan site (the “Original Project”). That project was to be developed on a finance, build and transfer basis, whereby EEP would become the owner of the Original Project following the completion of construction.
Terra Global is principally owned and has been financed by members of the Ethiopian Diaspora living in the United States. These individuals undertook this effort, which required significant time and cost, based on a strong desire to help the advancement of Ethiopia from an environmental and economic perspective.
In the last quarter of 2014, Terra Global completed a comprehensive feasibility assessment for the Original Project with the assistance of qualified third-party consultants and submitted its proposal (the “Proposal”) to EEP for review. The Proposal provided for (i) the wind turbines to be supplied by Goldwind International Holdings (HK) Limited (“Goldwind”), (ii) the project to be constructed on a turnkey basis by Goldwind and (iii) the financing to be provided by a consortium of banks led by the Industrial and Commercial Bank of China Limited (“ICBC”) and the Bank of China (“BOC”). The Original Project was to consist of 67 Goldwind GW 93 wind turbine generators, each with a gross generating capacity of 1.5 MW. The annual net energy output of the Project was forecast to be 249.8 GWh.
Shortly after the submission of the Proposal, the GOE shifted its strategy for the implementation of future power projects to a power purchase agreement approach with a focus on bidding and the Original Project was placed on hold pending a further review and has not advanced since that time. The principals and investors of Terra Global, based on their keen desire to see a project realized for Ethiopia from their efforts (as opposed to simply being compensated for the performance of a feasibility study) have been working diligently for the past two years to reimagine the project to supply electricity to EEP under a PPA and have the construction and installation of the Project be financed 100 percent by an international power project developer/owner and international banks.
The Ethiopian Government consideration of the wind power is due to the augmentation of the more than 90% hydro power:
The Largest African Hydro Dam, Renaissance Dam, which is under construction on the Western part of Ethiopia with a capacity of 6000MW