Report from WEC's Inga Financing Workshop in London, 21-22 April 2008

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Approximately 84 participants gathered at the meeting in London. The final participant list shows that there were 4 African governments represented (DRC, Nigeria, Namibia, and Botswana); 9 African utilities (Angola, Botswana, Egypt, Kenya, Nigeria, Namibia, and South Africa, Zambia). Among those invited who did not attend were: African governments of Cameroon, South Africa, and Uganda, and the African Union. The African Development Bank (AfDB) was also a weighty no show, soliciting multiple, frustrated comments by workshop participants. In April, the AfDB approved $58 million for Inga 1 and 2 rehabilitation and $15.7 million to finance a study on Inga 3 and Grand Inga. (Funding for a similar study was rumored to have been approved several years ago, so it’s not clear if the April approval is the first or second.) In 2006, the AfDB also hosted an International Round Table on Inga. So where was the AfDB?

View the workshop’s final Participant List.

International Rivers gave a short presentation regarding our concerns, which focused on: neglect of African public participation, unpaid compensation to displaced communities, potential project corruption, royalties for communities, and the poor electrification and development record in DRC.

Of Particular Note

Only 2 representatives from DRC attended: an official from the DRC Embassy in UK, and an assistant from the DRC Finance Ministry. Both were absent for most of the two-day meeting, having left by lunch on Day one.

No official English-French translation was offered. Other than remarks read in French by the Congolese Embassy official at the beginning, the rest of the meeting was in English only.

The meeting was closed to the media, but WEC organized a press conference at their office away from the meeting venue.

Key Points

Inga 3 and Grand Inga are both meant to be privatized initiatives, in order to minimize the role of the Congo government so as to keep ownership and most of the project money out of their hands.

There was a lot of discussion about skyrocketing prices of transmission lines. Half of Grand Inga’s price and at least a third of Inga 3’s are for transmission systems. While power would be remarkably cheap at its source, it will be increasingly costly the further it must travel, and transmission tariffs will need to be implemented. There were critical questions asked about the financial feasibility of the transmission lines.

The meeting also revealed that there is a lot of informational confusion amongst participants. Below is a summary of project updates.

Inga 1, 2 Background

Inga 1 and Inga 2, were built in the 1970s and 1980s, respectively. They have a total installed capacity of 1,775 MW, but currently operate at only 40% capacity because they have never received maintenance. About half of the 14 turbines don’t work at all. When Inga 2 was built, a 1,800 km transmission line was also built to transport the power to state-owned copper mines in the Katanga province, bypassing nearly every town and community underneath. Four of Inga 2’s eight turbines are being rehabilitated through a privatization deal between SNEL and MagEnergy. Rehabilitation of Inga 1 and the rest of Inga 2 is being financed through a World Bank-led initiative called PMEDE. African Development Bank also recently approved a portion of funding for this program and the European Investment Bank is set to consider a similar loan in June. Funding for rehabilitation of the transmission line was approved by the World Bank in November 2003.

Inga 1, 2 London Update: All rehabilitation work has been delayed, and nearly all fingers are pointing at the government.

No work has been done on the World Bank-financed Inga – Kolwezi transmission line which has resulted in a $150 million cost increase, causing a massive gap in financing. MagEnergy has completed work on only one turbine so far, and lamented about the government’s disinterest to enable their work. One example: parts imported for MagEnergy’s rehabilitation work were held in the Matadi Port (60 km away from the project site) for 4 months. Studies completed by MagEnergy have also revealed that the reservoir’s intake canal is severely blocked. Until the entire reservoir can be dried out and repaired (a costly undertaking, no doubt) the poor water flow will allow Inga 1 and 2 to generate only 70% of their installed capacity (after all the turbines are rehabilitated). The cost to repair the canal has not been factored into current rehabilitation costs.

Inga 3 Background: Inga 3 would be a tunnel diversion which pulls water from the existing reservoir used by Inga 1 and Inga 2. SNEL has signed two agreements regarding the development of Inga 3, first with Westcor, then with BHP Billiton. A pre-feasibility study was recently completed by SNC-Lavalin and handed over to the Government.

Inga 3 London Update: Inga 3’s design is based on a total of 8 parallel tunnels, 6,770 meters long, 13.3 meters in diameter each. Each tunnel would have 2 turbines, each turbine would be 270 MW. Geological studies have not been conducted yet and project costs will likely rise after studies are completed. Westcor and BHP Billiton representatives stated that their seemingly overlapping agreements with SNEL were complementary

Westcor revealed that power from Inga 3 may likely never reach South Africa, where the project has been declared a presidential priority to help alleviate South Africa’s power crunch. Inga 3’s power would be purchased by the 5 member utilities in a priority order, to which South Africa is last. There would be no limit to what each utility could buy, so if SNEL could use all 3,500 MW (to sell to BHP Billiton, for example), it could, and Eskom was happy to let it be so. This raises important questions about Eskom, such as:

  • What then is the benefit of Inga 3 to South Africa?
  • Has Eskom become a commercial investor rather than a public utility?
  • Could Eskom use profits earned from an Inga 3 investment to build nuclear closer to home?

Grand Inga Background: Grand Inga would be the mother of all hydro installations if it is actually built. No studies have been done in the last decade, but that hasn’t stopped the excitement of WEC and prospective dam builders. It would flood the Bundi Valley which parallels the existing reservoir. At this point, it’s not clear what the environmental impacts of the dam could be. However, WWF has identified the Lower Congo Rapids as an ecoregion of high conservation importance.

Grand Inga London Update: WEC is implementing a promotional company to take Grand Inga forward. The presentation made by Egypt seemed less enthusiastic about relying on power from Grand Inga, but Nigeria (whose energy sector is suffocating under a $16 billion scandal) eagerly (though unrealistically) announced that it could absorb half of Grand Inga’s power. There is a push towards looking at financing for an IPP arrangement, but if the venture is commercially viable, it begs the question, what value could development banks, like the World Bank, add? The answer seemed to be that public lending at concessional rates would increase the project’s rate of return, or profits, for private investors.