IPPs & The Public Interest

It is quite likely that it’s the taxpayers who will eventually have to foot the bill for the Lepep government’s lack of similar zeal to dig into the black box that is the IPP-CEB deal

The Alvaro Sobrinho affair and the debates on the resignation of Mrs Ameenah Gurib-Fakim should not detract us to address other national issues which have not been resolved in the public interest to this day. One major issue relates to the IPPs-CEB cast-iron contracts, a few of which will come up for renewal this year. Readers will recall the efforts of the previous government to review these contracts without much success. The present government has not shown the same earnest zeal vis-à-vis the IPPs as it did in the case of the STC-Betamax contract negotiated by the Labour-MSM-PMSD government for the transport of petroleum products from mangalore, India, and it is quite likely that it’s the taxpayers who will eventually have to foot the bill for the Lepep government’s lack of similar zeal to dig into the black box that is the IPP-CEB deal.

Readers will recall that it was in 1997, based on a model employed to encourage energy production in less developed energy-deficient economies, that the World Bank advocated that Mauritius should also embark on a model that shifts energy production from public sector producers to the private sector producers of electricity – the Independent Power Producers (IPPs). As far as Mauritius is concerned, the CEB was not an inefficient power producer. However, politics nevertheless had the upper hand, thus making place for IPPs.

Under this concept, the government signs up a long-term contract, a Power Purchase Agreement (PPA), typically for 15 or 20 years, with the IPPs to supply electricity to the public grid. Thus, the CEB was displaced to the benefit of IPPs, the first of which was signed in 1997. Six others were subsequently signed with other sugar-milling companies, thus extending the scope of the private sector from being a negligible supplier of electricity to the country to come to occupy today some 60% of the total electricity generated.

The PPAs are cast-iron contracts which force the CEB to take or pay (even if it doesn’t take) whatever the IPPs produce, leaving the CEB with the residual role to supply the balance to meet demand. Under the IPP arrangement, the IPPs pass on to the CEB — the country’s electricity distributor through the national grid — all risks (such as exchange rate, internal and external inflation, guaranteed return on equity to investors, etc.) and are fully insulated. The CEB passes on such risks to consumers including, amongst others, the cost of insulation from all risks sugar millers grouped in IPPs have been accorded by different governments under the contracts.

Readers will also recall the lobby against other than the restricted group of suppliers entering the electricity supply chain, a victim of which lobbying had been CT Power, a potential 110 MW alternative suppler to the CEB, on the grounds that it would have polluted the environment, notwithstanding the fact that the IPPs themselves use over 50% coal in their electricity generation.

Under the 1990s and early 2000s long-term contracts binding the CEB irrevocably to IPPs, consumers have been at the receiving end of all added costs/risks encountered by the IPPs. It looks as if they will, once again, be made to pay the price for IPP protection when existing contracts are renewed or expanded in the domestic electricity supply.

We believe that as a sovereign State, Mauritus through its government has a right to review all contracts which are disadvantageous to its citizens, particularly in these hard times. The private sector had recourse to EU experts on energy during the negotiations of the IPP-CEB deal, and we don’t see why the government cannot likewise have recourse to experts in the domain too.

This is a serious issue and it needs to be pursued seriously, and meanwhile give the greatest encouragement to generate electricity from other sources, even if that means coal in the medium to short term. After all there is already an asymmetry with the local IPPs using coal. For that matter, it may be recalled that even in the US, Donald Trump had signed legislation that allows the use of coal, despite the Paris Agreement. As a small island state, we surely have more of a case to use a traditional source even as we pursue alternatives?

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Interesting Times Ahead

The circumstances leading to the resignation of Mrs Ameena Gurib-Fakim as President of the Republic, and the various ramifications following from Mr Alvaro Sobrinho’s interest to park his ‘investments’ in various instruments as well as in immoveable properties in Mauritius, have been amply commented upon in this paper and elsewhere. They will no doubt continue to hog the headlines for many more weeks to come, in spite of the Government’s reluctance to set up a full-fledged commission of inquiry thereon, when more details will filter out from knowledgeable quarters unbound by the omerta that seems to impose silence on some of the protagonists.

In the meantime, one remark from the Prime Minister during the debates at PNQ time in the National Assembly, last Tuesday, that would not have escaped the attention of Mauritians — and his alliance partner, the Mouvement Liberater — about his unwillingness to bet his life on whomsoever within the governing alliance begs a few questions. This is the more so as one rarely gets to see a Prime Minister and alliance leader casting a shadow of doubt on his own troop.

Mauritians would want to know whether the Prime Minister, who is duly briefed by the NIU and presumably by other information sources, holds confidential information about the doings — and misdoings — of some of his Cabinet colleagues that could jeopardise the political careers of the latter, but mostly that have a bearing on the national interest. Just like he said he had been exposed to some disturbing facts about the former President of the Republic, and which would be revealed to the Commission of Inquiry his Government would set up at the appropriate time? If he does, when is he proposing to enlighten public opinion about these disturbing elements, if any, about his own colleagues? Would that be any time before the next general elections, or when negotiations for another electoral alliance get started? Would the ICAC — the preferred choice of the government for such inquiries — be enlisted to buttress whatever would already be in the know of the PMO?

There are interesting times ahead — unless some choose to toe the line and go quietly into the night.

 

* Published in print edition on 30 March 2018

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