Energy Sector: Overview of the Azito Thermal Power Plant

Interview with Luc Ayé, Managing Director of Azito Energie

You are a part of Côte d’Ivoire’s energy sector, what is your opinion of this sector. What are the big challenges for the State?

Concerning the energy sector, more specifically electricity in Côte d’Ivoire, it should be mentioned that it is a sector which has experienced several reforms early. The first of which dates back to 1989/1990, when for the first time in Africa, notably Sub-Saharan Africa, this sector was subject to privatisation. All production and distribution to clients was undertaken by a private operator. The distributor was in charge of managing all of this and meeting with the State via a contract. Today this grid operator remains the same – it’s the Ivorian Electricity Company (CIE) who has a private structure like ours.

Through these very interesting reforms, this sector was able to quickly reach a level of organisational stability, which gave it more reliability and visibility. Subsequently in 1994, it was able to allow in interested private operators. At one stage, this sector was badly organised structurally. No one knew what to do in terms of the State and private sectors – it was clear that private investors had never worked in this sector. So through these reforms, 1994 was the first time in Côte d’Ivoire that a private operator appeared in the field of production. It was the company CIPREL which launched their first IPP project in 1994. After CIPREL, this subsequently enabled the State to have a new approach to investments dealing with electricity demands – to manage by once again appealing to the private sector and by basically saying come and invest in us and you will be paid through long term contracts. It is a cycle with definite advantages.

Today, globally it is one of the best organised sectors in Africa. Everyone is talking about it at all the international conferences – it has a very clear path for example with the management of financing the sector, which removes any concerns. We are really interested in this sector because of all of the guarantees in terms of transparency. There is no favouritism between operators in the sector, everything is clearly defined, due to the actions of the government. So this has given organisational reliability to the sector for the sub-regions, as an example. Of course all of this, along with the competition of our financial partners, has helped to create a better structure. Therefore it’s really down to the strength of Côte d’Ivoire, with an organisation which has a path and an organisation with transparent management. This is a sector which works well despite any difficulties it may face.

Notably the sector experienced difficulties in recent years during the economic crisis of 2002-2010. Despite all of these organisational measures which were put in place, there have been highs and lows in terms of regular remuneration for private operators like us. But very quickly since the government took charge of the situation things have been put back in order with particular thanks to the actions put in place for energy. The government’s administration saw that financial equilibrium was fundamental for maintaining the private financing of this sector. This was essential for the revival of Côte d’Ivoire as it was necessary to be able to provide electricity for industry, for internal consumption which had started to grow again just after the crisis. So as you can see, everything was linked: the fact that it is well structured and also that we have the luck of being managed by people who know the sector alongside the State – a State structure. This is a very good thing because very quickly we understand the issues and we manage to work together to find a solution for dealing with customs in a way in which we are not threatened. Working alongside the State we can better understand problems which can sometimes arise but the drive is there, and that is the determining factor. It’s fundamental for us…

If Côte d’Ivoire has sufficient energy, what is the situation in terms of exporting it?

It should be pointed out that Côte d’Ivoire has always been in a situation of being able to export electricity. During the economic crisis, it wasn’t something we had to do seeing as there weren’t the necessary investments and in that climate, private operators like us couldn’t invest. Today yes, the government has stated that it would like to maintain the position of being the leading exporter of electricity in the sub-regions, as it gives us a comparative advantage. We have at our disposal gas resources which allow us to produce electricity in Côte d’Ivoire at a lower price compared to neighbouring countries like Mali and Burkina Faso for example. It’s a comparative advantage so in recent years the government wanted to be a support and contribute to giving the other countries of the sub-regions electricity: Mali, Togo, Benin, Burkina Faso and sometimes Ghana (a lot less to Ghana but it does happen). There are equally enormous projects which have interconnections with new countries, notably Guinea and Liberia. Therefore the government is in a very strong position which it must maintain and is equally going through a growth in terms of internal production.

However, after production, the energy must be transported. This means doubling the amount of transmission lines, paying attention to transporting this energy to distribution stations for anything which is to be used for local consumption and equally in order to transport it to neighbouring countries. Therefore this is our contribution to the private sector and to the production sector itself by means of this private electricity power plant which produces electricity. The average standards are implemented by the State to reinforce and upgrade the transport network and I would say that nowadays it is somewhat outdated as there have been no renovations for more than 10 years. This is a long time as there have been lots of adjustments in terms of reproducing investments, which have not been carried out for roughly ten years. Adjustments need to be made because consumption is growing, but this is a really good thing. We must approach it differently but we are on track for reaching this objective devised by the government for the huge amount of needs today in Côte d’Ivoire. Practically it is to give order to cater for the new capacities which must be set up – it is practically 100 megawatts per year which must be installed.

Today in Côte d’Ivoire, with our new projects, we are making more adjustments to install the capacity. It is a very powerful power station which is available for use which has been producing 1,600 megawatts since its installation. The objective of the Ministry of Energy is to increase this energy to 2,000 megawatts by 2015 and practically double that (4,000 megawatts) by 2020.

Equally, all of this can respond to the exportation energy needs. I think there is a strong political desire for Côte d’Ivoire to play this role as it can reflect the new changes to restructure and create advantages concerning other countries.

In terms of projects, are they with the same partners?

I think the demand is there and it is strong. There are lots of projects which we have become involved in and for which the government has signed concession contracts with new operators. These projects must play a role in the years to come but also continue to grow, so I think there are places for operators to help meet the needs. What I want to say is that the fundamentals are there. The organisation of the future path and of the sectors is clear. There is a solid foundation even though we have experienced difficulties. We have financial partners who know the sector very well e.g. SFI. We have a new-found appeal and stability. We have an environment which really inspires confidence. It is directed by people who inspire confidence. So I think that everything has come together for a revival of the electricity sector.

Let’s talk about projects. You have many advantages, for example the power station project increased the initial 300 megawatts. You have the combined site which enabled a 50% increase in capacity without additional gas consumption. You have set up one of the most modern and powerful power station in Western Africa. You have done many positive things. Could you talk a bit about this – which projects have you developed?

Let’s talk about how we got there with Azito. Before talking about the current extension project of the power plant, it should be mentioned that this power station was built in 1999. We did not succeed (as I mentioned earlier) in reinforcing the capacity of Côte d’Ivoire’s production. The government appealed once again to private investors and several companies to participate in the tender to which a group of sponsors were selected and created an energy company. Originally this project was designed to be a “combined cycle power plant”. I will explain this in detail later.

This project should be implemented in three stages. We carried out this project in accordance with the concession agreement which we signed with the State in order to achieve the first two stages which we call stage “one and two” which has enabled us to have at our disposal 300 megawatts since the completion in order to produce electricity using offshore Ivorian natural gas. The oil company Foxtrot essentially provided it for us.

So that was the first two stages of the project. The third stage, which is known as the combined cycle, should follow immediately afterwards. Unfortunately, we went through a period of economic crisis where there were very few private investments in the Ivorian business climate. Near the end of 2009-2010 we tried to revive the projects despite the fact that we were confronted with financial difficulties in the sector, with the possibility of generally improving the financial situation long term. We had to lower the costs of electricity production to give sufficient margins, in terms of the sector, for all countries and private operators like us. So really, we wanted to start the third stage of this project, creating the combined site as that was the objective. It’s implementing a technology which allows us to increase our capacity of production by 50% without consuming more gas. The initial gas costs are the same, but using this technology we produce more electricity. By simply increasing and recuperating the calorific value that there is in the exhaust gas emissions of our turbines. We achieve this by using different circuits to vaporise the water (through heat recovery steam generator, HRSG). This steam drives a machine which is called a steam turbine which produces electricity.

Therefore the extension project will contribute to reduce the production cost. It is really in the State’s interest and it is beneficial for the equilibrium of the sector. Therefore it is a fundamental project which has many benefits and advantages for the government that we couldn’t carry out. Efforts were made in 2011 by the government to finalise the implementation of stage 3 and things were moving very quickly. This was a really good thing. After a few months of negotiation, an amendment to the concession agreement was signed in October 2011 to carry out stage 3. It is a really symbolic project for the State acting as a shop window for success stories with the PPPs (Public Private Partners) in Côte d’Ivoire, even Sub-Saharan Africa and further afield.

Azito’s project was the first infrastructure project of this size which was financed by commercial banks in Africa at that time. Of course all of this was appropriated by some banking groups from SG Paris for example. But in terms of funding, it was the first project of this size. At that time, it was a project of more than 200-300 million US dollars in Africa. Afterwards, the first two stages were implemented successfully in terms of excellent and efficient operation. In terms of standards, we had the latest generation equipment and gas turbines. Everything was gathered together for a continued success which was highlighted during this crisis. The government took things into their own hands again very quickly to achieve the implementation of the third stage of the project. Therefore, we hope to see it being implemented and put in service within six months – by May 2015 .

You mentioned May. Is there something now which is causing difficulties or complications?

We have a new-found appeal and stability. We have an environment which really inspires confidence. It is directed by people who inspire confidence. So I think that everything has come together for a revival of the electricity sector.

I would say that we are still at a stage of moving forward so things are really thriving. All the materials are here, the essential equipment has already been assembled, I would say in terms of assembling everything we have advanced by more than 90%. There is the assembling stage, after that the partial testing DC stage, then it goes through a more global test (the global installation test) and after we have what we call the performance test (the global installation in terms of expected power to respond to the demand).

I would say that on a global scale, the major construction risks are behind us. We have managed things well, of course some risks still remain with the provisional acceptance of this contract. It should be noted that with this type of contract, in general the business in control of all of its installation, knows how to spread out the risks. That’s the reason why in terms of construction, we have an EPC contractor which is specialised in this area and who knows what to do – the Korean company Hyundai who built the extension of the plant. They are in charge of major equipment, for one of the world’s leading electricity giants. All of this ensures the equipment is reliable, the assembly of the equipment is reliable – one of the best in the world – and equally we monitor the control. As owners we follow the engineering to ensure everything is done well. All of this allows us to maintain this initial period of planning which was to be expected. There is no misconduct in terms of planning.

What is the impact on the environment?

In terms of the environment the impact is quite positive as we will recuperate as much of the exhaust gas emissions as we can. Only the unavoidable things are emitted into the atmosphere. Even with this waste, it is controlled. We understand the effects on the environment and we respect all standards in terms of environment. There is international opposition so everyone is very vigilant in this respect. The advantage of the extension of the combined site is that waste will be limited so environmentally it’s better. Moreover this project is eligible for carbon credits.This project will limit the waste given out into the atmosphere, notably carbon dioxide and nitrogen oxides. We have normative standard rates which we cannot exceed. We have specific equipment to improve the quality of waste put into the atmosphere, and this project will be more environmentally friendly.

And concerning the social environment?

It is clear that when Azito started this project the citizens themselves built the plant. It was next to a small village and our priorities have always been to maintain very good relations with the neighbouring community. Why? Because this is a very strategic infrastructure where it is very important to be able to access it at any moment. We don’t want to be perceived as being the only ones who profit from it. It was necessary to redistribute the dividends on a social level to the community- this was one of our priorities. We had obligations to help under financing documentation for example with the health sector, notably with the renovation of community centres. In terms of education we support the village’s best students with grants and by buying them school books, etc. Equally, we have created activities which generate revenue. We have helped the women of the village by providing them with materials so they can take charge and earn money. In recent years we have helped on a national scale with children in distress, with SOS Children in Côte d’Ivoire. In terms of academics, we sponsor the best students who study subjects such as engineering, mechanics, technology – anything in our activity sector – even actions on a global scale such as helping the Ministry of Culture, the national library and young people, as our children should have the means to be able to educate themselves. With the crisis, we have the national library of which we are very proud. Nationally and globally our plan is to continue being close to the community and the neighbourhoods and to benefit them.

How do you see the situation in three years’ time? What future projects do you have, what is the future for private partners like yourself?

For the immediate future the big challenge is to operate the plant with this new technology, in a very appropriate and efficient way. This technology will be implemented in the sub-regions for the first time. I perhaps haven’t emphasised that our role is still to innovate in the technological domain and to always produce the best and most reliable electricity possible. This combined cycle plant which will be implemented, is a specialised technology for which a training programme will be implemented for all our current staff. Even so, this will be a challenge, a big challenge as it will be the largest individual unit on the Ivorian network. This means it is a very sensitive project. Therefore it is important that we are as reliable as possible. It will be a challenge to operate this technology for the first time in Africa.

Training, is that putting aside human resources?

As for training, I would say that in general, human resources is one of the advantages of Côte d’Ivoire. We have qualified human resources personnel but the profits are very poor. The large engineering schools have all been implemented by the State. Even so, new apprenticeships for new technologies have been upgraded. In terms of management, exploitation and maintenance, a dedicated training programme is needed. This technology which has been implemented and which we have already started working on essentially responds to all our training needs. We would like all of our staff who works for the power plant to be trained in Côte d’Ivoire so they don’t need to go abroad.

What would be your message for those abroad about your sector and the development of Côte d’Ivoire?

I would say that in Côte d’Ivoire, the energy sector is a very interesting and reliable sector in which we have lots of confidence and we have invested so much. With this extension project there is huge potential. There is still a large growth to satisfy and I think that operators and private investors can really be interested in the sector because of the regulatory framework which gives you comfort when there are major difficulties. The relationship with the State is very good and there is everything you need for a good partnership.