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Saudi Billionaire to Invest $100 Million in Ethiopian Rice Farm
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By William Davison December 02, 2014
Employees of Saudi Star rice farm work in a paddy in Gambella. Photographer: Jenny Vaughan/AFP via Getty Images
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Saudi Star Agricultural Development Plc, an Ethiopian company owned by billionaire Mohamed al-Amoudi, said it plans to invest $100 million in a rice farm in western Ethiopia next year to kick-start its stalled project.
The company leased 10,000 hectares (24,711 acres) in the Abobo district in the Gambella region, where it’s based, in 2008 and bought the 4,000-hectare Abobo Agricultural Development Enterprise from the government 18 months ago for 80 million birr ($4 million). After delays caused by unsuitable irrigation design and contractor performance issues, Saudi Star wants to accelerate work in 2015 after a change of management, a redesign of the farm and a successful trial of rain-fed rice on 2,000 hectares at the formerly government-owned, Chief Executive Officer Jemal Ahmed said in a phone interview.
“We have a very aggressive plan,” he said on Nov. 26 from Jimma, about 260 kilometers (162 miles) southwest of the Ethiopian capital, Addis Ababa. “If we’re able to do that we’ll be able to produce more.”
The project is part of a government plan formalized in 2010 to establish commercial farms on 3.3 million hectares of fertile land in sparsely populated parts of the country such as Gambella. Ethiopia expected to earn $6.6 billion a year from agriculture exports in 2015, according to a five-year economic plan published in 2010, though total goods exports last fiscal year brought in $3.3 billion.
Prime Minister Hailemariam Desalegn said in October 2013 that progress on the program had been “very slow.”
Billionaire Investor
Ethiopia-born al-Amoudi is worth $8.1 billion, according to the Bloomberg Billionaires Index, which ranks him as the world’s 157th richest person. His company built underground oil-storage facilities in Saudi Arabia and he owns Preem AB, Sweden’s largest crude oil refiner. Al-Amoudi is increasingly investing in formerly government-owned farms in Ethiopia, a nation where companies under his Midroc group operate the only commercial gold mine and built the largest cement plant in 2011.
Saudi Star’s $100 million investment will focus primarily on building irrigation infrastructure, including finishing the main canal from the more than 25-year-old Alwero Dam built by Soviet engineers, as well as a rice de-husking plant, storage silos and land clearing, according to Jemal.
An initial plan to have the farm divided into 3.75-hectare plots to produce rice from submerged paddy fields has been shelved as unworkable, he said. Only 350 hectares has been developed since 2008 on the land leased for 300,000 Ethiopian birr ($14,908) a year.
Economically Unviable
“It was not environmentally and economically viable, that’s why they were struggling, so we stopped that,” Jemal said. “We want to make it large-scale flood irrigation, not small ponds.”
Saudi Star’s revenue is forecast to be about $60 million in 2016 once the irrigation system is developed, with 60 percent of the aromatic rice exported mainly to Arab nations on the Persian Gulf, Jemal said.
Hampering current harvesting are late rains and, for two days in October, unrest in Abobo town after violence between ethnic Anuak, who are indigenous to Gambella, and other Ethiopians. The company has Ethiopian soldiers guarding its compound and about 100 stationed nearby. Two Pakistanis and three Ethiopians employed by Ghulam Rasool & Co., a closely held Pakistani engineering company building the irrigation canal, died in April 2012 after an attack by a group of gunmen.
The government has “taken care” of security issues, farm manager Bedilu Abera said while seated in one of the air-conditioned trailers that are now Saudi Star’s headquarters after they were moved from Addis Ababa.
Land Conflict
Anywaa Survival Organization, a Reading, U.K.-based rights group, said in an Oct. 14 statement that land leases in Gambella have fueled conflict.
“The rush for land, water and other essential natural resources has become a curse for indigenous and minority peoples who barely have legal protection and redress,” it said.
Saudi Star says only two Anuak villages of huts with sweeping grass roofs lie just outside the project’s boundaries in deep forest. Some local residents complain they’ve not benefited from the investment and that they suffer collective punishment by the military.
“They used to kill people from the village,” Akea Ojullo, a 27-year old teacher, said in a Nov. 23 interview in Perbong village. “It got worse after the attack on Saudi Star,” he said.
The company plans to work with local residents by investing in workers, distributing rice and plowing land for them. “We know we’re creating job opportunities, transforming skills, training local indigenous Anuak, but there’s a campaign to have people perceive it as a wrong project,” Jemal said.
The farm still has the backing of officials, even though progress has been slow, Jemal said.
“The government wants the project to be a success and see more Gambella people be able to work and produce more,” he said. “That’s the big hope.”
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Ethiopia, Icelander firm negotiate geothermal power generation
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The Ethiopian government and Reykjavik, a joint venture of U.S.-Icelandic geothermal development company, are negotiating on a detailed power purchase agreement to generate geothermal energy, an Ethiopian spokesperson has said.
“The negotiation is expected to be finalized by December 2014,” Bizuneh Tolcha, spokesperson for the Ministry of Water, Energy and Irrigation, told The Anadolu Agency on Saturday.
Reykjavik will generate the geothermal power in Ethiopia’s rift valley region, 200 kilometers south of Addis Ababa and supply the power to the national grid.
The negotiation focuses on the mode of power provision and sell.
“So far the construction of access roads and camps is undertaken in the area, where the geothermal plant will be built,” Tolcha said.
The project, which will be undertaken in two phases within eight to 10 years, is expected to generate 20 megawatts in 2016 and 500 megawatts in 2018, he said.
The two sides had agreed to generate 1000 megawatt geothermal energy with an estimated $4 billion.
Ethiopia has the potentials to generate more than 7,000 megawatt geothermal energy.
http://www.portturkey.com/energy/7479-ethiopia-icelander-firm-negotiate-geothermal-power-generation
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Gov’t Reviews $1.4b Petrol Pipeline Proposal
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- The project would take two years to complete
Ethiopia’s government is going over a proposed project to build a petroleum pipe-line from the Port of Djibouti, which could cost 1.4 billion dollars and take two years to construct.
The news was disclosed during the “Powering Africa: Ethiopia Meeting,” which took place at the Radisson Blu Hotel, on November 21, 2014. The meeting was organised by the UK-based company Energy Net Ltd, which “organises a global portfolio of investment meetings, conferences and energy forums, focused specifically on the power and industrial sectors across Africa,” according to its website.
Officials at the Ministry of Water, Irrigation & Energy (MoWIE), confirmed that the proposal had been submitted and they would look at it before deciding to discuss it further with other stakeholders, such as the Ministry of Finance & Economic Development (MoFED), the Ministry of Foreign Affairs (MoFA), and Ministry of Transport (MoT).
The proposal was made by Black Rhino Group and MOGS (Mining, Oil & Gas Services). Black Rhino Group is owned by Blackstone, a large Wall Street private equity fund, and MOGS is owned by Royal Bafokeng Holdings, a South African investment group.
Brian Herlihy, CEO and founder of Black Rhino, made a presentation of the proposal at the Powering Africa meeting.
The companies are proposing building around 550Km of pipeline, carrying oil directly from the vessels at the port to a storage facility in Awash, by-passing the congested port and road from Djibouti. The trucks would then distribute fuel from Awash to the rest of the country, including Addis Abeba.
The proposal was submitted six months ago to the governments of Ethiopia and Djibouti. The government of Djibouti was happy, Brian said. If the Ethiopian government gives a green light to the project the company will proceed to study the environmental and engineering condition of the construction, according to Brian.
The Djibouti government has told Black Rhino and MOGS that the current port infrastructure is not big enough to meet Ethiopia’s long term needs. Currently, the demand for refined fuels in Ethiopia is growing at 10pc a year.
The project is expected to reduce the supply problem caused by truck shortages, as well as reduce the cost of transport.
Using trucks for oil transport is very expensive, not the least of which is because of the fuel consumption by the trucks themselves, says Demelash Alamaw, assistant to chief executive at Ethiopian Petroleum Supply Enterprise (EPSE).
Last year Ethiopian Petroleum Supply imported 2.6 million tonnes of fuel. On the current budget year it has plans to import 2.9 million tonnes, according to the EPSE. As demand for petroleum grew by an average 10pc, an expert in petroleum logistics says that the transport supply has not grown accordingly, suggesting that it is important to use alternative transport.
http://addisfortune.net/articles/govt-reviews-1-4b-petrol-pipeline-proposal/
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South African investors urged to use investment opportunities in Ethiopia
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Addis Ababa, 2 December 2014
The Ministry of Foreign Affairs (MoFA) has called on South African investors to utilize the investment opportunities in Ethiopia, a country endowed with vast resource, cheap labor and hard working people.
The call was made at the Ethio-South Africa Investment and Business Forum held today at Elilly International Hotel in the presence of representatives of South African companies from the sectors of construction, banking, infrastructure, manufacturing and agro-processing.
“Now is the time for South African investors to look at the prospect and opportunities of investment in Ethiopia,” MoFA State Minister, Dawano Kedir said while opening the meeting.
Ethiopia has everything that you need to invest, including conducive business and investment environment, political stability, sound economic policies, macro-economic stability, abundant natural resource and a sizable market, he said.
Moreover, the Ethiopian government is developing industrial zone to help companies engage in manufacturing, he said, urging the investors from South Africa to participate in building their own industrial zone.
The Forum will deepen the existing Ethio-South Africa relations to the uppermost levels through fostering strategic economic alliance and solid business and investment partnership, he said.
Representative of South Africa’s biggest winery, on the occasion said that his company has already received 1,000 hectares of land to invest in Ethiopia.
During the day long Forum, other companies have also expressed their interest to engage and exploit the investment opportunities available in Ethiopia.
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French Firm to Work on Wind Power Expansion up North
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Vergnet hopes to increase energy generation capacity to up to 40Mw
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Vergnet was established in 1976 and employs 700 people. In 2013, it had an annual turnover of 57.5 million Euros and operates in 35 countries. The company installed 900 wind turbines in different countries, including in Nigeria, with a generating capacity of 10Mw, and 4.5Mw in Mauritania.
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French power firm Vergnet Group SA is conducting a feasibility study for the extension of the Ashegoda Wind Farm. The farm will have the capacity of generating 10Mw to 40Mw of electric power in Tirgay Regional State.
The feasibility study started in October 2014 and Lodovic Dehondt, Ashegoda project director for the first phase of the project, said the project was expected to be finalised by January 2015.
Ashegoda is one of 11 sites experts identified in Ethiopia for the potential to generate power from wind, with a total size of 20,000Km² coverage. However, Ashegoda, 20Km south of Meqelle, seat of the regional state, is considered to be the windiest place in the country after Adama (Nazareth), 99Kms east of Addis Abeba in Oromia Regional State.
In 2008, the power utility monopoly, under the defunct Ethiopian Electric Power Corporation (EEPCo), had signed a deal with the French firm. The project was launched a year later, at a cost of 210 million Euros.
Vergnet was established in 1976 and employs 700 people. In 2013, it had an annual turnover of 57.5 million Euros and operates in 35 countries. The company installed 900 wind turbines in different countries, including in Nigeria, with a generating capacity of 10Mw, and 4.5Mw in Mauritania.
Vergnet installed 30 turbines, each with a capacity of one megawatt. Altsom, another french firm, installed 54 turbines, each with a capacity for 1.67Mw of electric power.
“After the place we reserved for the wind farm was taken over for the construction of a Civil Aviation training facility, we changed the plan and it was then that Alstom entered discussions,” Lodovic told Fortune.
The wind farm project, billed as the biggest in sub-Saharan Africa, was finalised and inaugurated in October 2013 by Prime Minister Hailemariam Dessalegne. It has supplied the national grid ever since.
A subsequent agreement has been reached for a study to expand power generation with Alemayehu Tegenu, minister of Water, Irrigation & Energy (MoWIE), and Debretsion Gebremichel, (PhD), minister of Communication and Information Technology with the rank of Deputy Prime Minister, according to Jerome Douat, CEO of Vergnet Group. Debretsion was in Paris two weeks ago, attending a bilateral business delegation between France and Ethiopia.
The agreement was a turnkey contract, also known as Engineering, Procurement and Construction, to be financed with a loan of 210 million Euros from the French Development Agency (AFD), indicating a change in approach of the government of France in providing vendor financing to its companies involved in infrastructural projects abroad.
German-based company Lahmeyer International GmbH has been hired by the government to provide project consultancy services and contract supervision and administration works, sources told Fortune.
A group of experts, including the former project manager of the Ashegoda wind farm, is expected to visit Ethiopia for the feasibility study detail. The project is anticipated to be finalised by the end of 2016 if the procedures work as scheduled.
“We will raise financing from European banks and the AFD,” says Douat.
Ashegoda wind farm is part of the government’s plan, which also includes Adama wind farm, to generate 10,000Mw electric power from water, wind and geothermal sources during the conclusion of its five-year growth plan. From wind sources alone it wants to see 890Mw of electric power generated, including 300Mw from Ayesha, in Somali Regional State, Debre Berhan and Assela, which are set to produce 100Mw each, and Messebo wind farm, with a capacity of 51Mw.
While many of these are still at the drawing board phase, the Adama Wind Farm was completed by Chinese companies, CGCOC Joint Venture and Hydro China, with a 117 million dollar loan of financing from the Export-Import Bank of China. It has a capacity of generating 51Mw electric power.
http://addisfortune.net/articles/french-firm-to-work-on-wind-power-expansion-up-north/
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Ethiopia adopts Israeli day/night solar power system
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Powered primarily by the sun, AORA’s Tulip energy system works 24/7 – even at night and when it’s cloudy
Solar energy is an ideal solution for the power needs of the developing world – except for one problem: It stops working when the sun goes down, at precisely the time power is needed to turn the lights on. The solution, according to Zev Rosenzweig, CEO of Israeli energy technology company AORA, is a hybrid system – one that utilizes solar to the fullest, and supplements it with a “backup” system to keep the power flowing when the sun is not high in the sky, using scant resources, with an operating cost of next to nothing.
It’s perfect for developing countries, said Rosenzweig – and after six years of research and pilot projects, and an investment of $40 million, AORA is ready for prime time, he said.
The company announced Tuesday that it had signed a deal to build one of its Tulip solar-hybrid power plants in Ethiopia. “We are transforming our Green Economy Strategy into action and are pleased to partner with AORA to help achieve our vision,” said Alemayehu Tegenu, Minister of Water, Irrigation and Energy for Ethiopia. “AORA’s unique solar-hybrid technology is impressive and well-suited to provide both energy and heat to support local economic development in off-grid rural locations in Ethiopia.”
“Off-grid rural locations” are exactly the places Rosenzweig wants to see more Tulips installed. “Our hybrid system uses both solar power and biogas to operate a turbine, with the hot air moving the turbine to generate electricity.”
Video: Ethiopia adopts Israeli day/night solar power system
Enhancing the sunlight are a series of mirrors to heat compressed air to over 1800 degrees Fahrenheit and drive a turbine. When the sun goes down, the system moves seamlessly from solar to biogas in order to power the turbines, with the biogas derived from animal waste, biodiesel, natural gas – just about any material that can be burned for fuel.
For villages in places like Ethiopia, the best part of the system, said Rosenzweig, is that it doesn’t even need water to operate. In essence, Tulips are like perpetual energy machines; when the sun is out, solar power is converted into power to run the turbines and create electricity; and when the sun is in, the system turns to biogas, created by an AORA conversion system.
There are Tulips in Israel, Spain, and the US, but those are test programs; Ethiopia will be the first country to deploy the system commercially. Construction of the first plant is expected to begin by mid-2015. Following a trial, the Ethiopian ministry intends to expand deployment of AORA installations for rural economic development to off-grid communities in selected areas of the country.
Each Tulip station is small and modular, producing 100kW of electricity in addition to 170kW of heat, while occupying less than 3,500 square meters (0.86 acres), requiring much less land per kWh to generate usable power and heat than other systems, like photovoltaic, said Rosenzweig. “Each Tulip can generate enough electricity for 30-40 homes in Western countries, and should be enough to cover all the power needs of villages in the developing world,” with each system costing between $500,000 and $750,000, depending on size.
The Tulip technology was developed at the Weizmann Institute, and AORA has the worldwide rights to commercialize and distribute it, with Rosenzweig one of the leaders of the research. “I got the idea for this in India, where they lose a lot of their harvest because they have no place to store fruits and vegetables in rural areas,” he said.
Existing solar systems in rural areas could only operate part of the time – not at night, and not during the rainy season – so they weren’t usable for refrigeration, without which produce would start to rot within a few days, long before most of it could get to market. “Electricity can change the lives of people in the developing world, and the Tulip system can provide an effective solution to any community anywhere,” said Rosenzweig.
“We are pleased to partner with the ministry and look forward to bringing our technology to Ethiopia to provide the population with affordable access to power,” added Rosenzweig. “Such access will have significant social and economic impact on off-grid communities, helping to provide power to schools and medical facilities, refrigeration for food processing and post-harvest storage, groundwater pumping and much more.”
http://sodere.com/profiles/blogs/ethiopia-adopts-israeli-day-night-solar-power-system
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First Quarter Brings Profit Bonanza to Telecom Monopoly
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Fiber hacking, fraud stand as prime challenges of ethio telecom as it grosses 3.6b Br in profit
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ethio_telecom_headquarters
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Ethiopia’s state-owned telecom monopoly has seen first quarter operations bring its books 3.64 billion Br gross profit, from an operating revenue of over five billion Birr. Its profit, described by its corporate communications head, Abdurahim Ahmed, as “remarkable results”, represents an 11pc growth compared to the same period last year.
However, ethio telecom’s operating revenue is five percent short of its plan, yet experienced a 20pc growth in comparison with the same period last year. Of this, about 70pc was earned from mobile services. International call service, data and internet accounts about 10.5pc and 13.3pc of the general revenue, respectively.
Though the report shows increases in profit, the quarter year also witnessed several network malfunctions, upsetting many of its customers who have no other alternative. The company has recently entered into a 1.6 billion dollar service expansion agreement, under a vendor financing scheme with two international companies, Huwaei and ZTE.
Huwaei and ZTE were granted a two year contract dividing the country’s telecom network into 13 zones. However, the Ethiopian government has considered handing ZTE’s contract to Sony Ericsson, a Tokyo based company and a subsidiary of Sony Corporation.
The telecom expansion project contract aims to take the country’s mobile service capacity to 50 million, to expand third generation (3G) technology across the whole country and to provide customers in Addis Abeba with fourth generation (4G) services.
The expansion project is very important in attaining ethio telecom’s objective of increasing telecom service access and coverage across the nation, as well as to upgrade the existing network to the new technology, according to Abdurahim.
“Through the telecom expansion project contracts, ethio telecom will be able to increase its overall network coverage to 85pc across the nation,” Abdurahim said.
Mobile service performance stands at 73.3pc. Data and internet stands at 176pc, while regular call services is at 26.2pc. National telecom coverage is at 81pc and international linkage capacity is at 61.3pc.
In the first quarter of the fiscal year the number of customers jumped to 30.45 million, in comparison with last fiscal year’s ending, which saw 29.36 million customers, a 3.7pc increase. Of this, around 22.5 million are active customers.
In the current fiscal year, the company’s priority areas include the improvement of quality of service and making the telecom expansion project roll-out a success, Abdurahim told Fortune. Repetitive hacking of fiber cable lines and the ever increasing ‘telecom fraud’ have been mentioned as major setbacks for the quarter year.
http://addisfortune.net/articles/first-quarter-brings-profit-bonanza-to-telecom-monopoly/
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Ethiopia issues unfamiliar investor warning over war and famine
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Javier Blas, Africa Editor
Every country tapping the global sovereign bond market details the dangers investors face in its prospectus, often in a boilerplate section enumerating possible problems – such as fiscal deficits or taxation issues – that is largely ignored.
But the document sent by Ethiopia to international investors ahead of its foray into the global sovereign bond market is somewhat different. Far from a boilerplate, it includes a list of unfamiliar hazards, such as famine, political tension and war.
The document, seen by the Financial Times, is a sobering reminder of the risk of investing in one of Africa’s less developed nations. With gross domestic product per capita at less than $550 per year, Ethiopia is the poorest country yet to issue global bonds.
In the 108-page prospectus, issued ahead of its expected $1bn bond, Ethiopia tells investors they need to consider the potential resumption of the Eritrea-Ethiopia war, which ended in 2000, although it “does not anticipate future conflict”.
There is also the risk of famine, the “high level of poverty” and strained public finances, as well as the possible, if unlikely, blocking of the country’s only access to the sea through neighbouring Djibouti should relations between the two countries sour.
Addis Ababa, Ethiopia’s capital, also warns that it is ranked close to the bottom of the UN Human Development Index – 173rd out of 187 nations – and cautions about the possibility of political turmoil. “The next general election is due to take place in May 2015 and while the government expects these elections to be peaceful, there is a risk that political tension and unrest . . . may occur.”
But the long list of risks is not deterring investors, as ultra-low interest rates in the US, the UK, eurozone and Japan push sovereign wealth funds and pension funds into riskier countries in search of higher-yielding bonds.
Instead, some investors are focusing on the danger of a currency crisis. Addis Ababa has devalued its currency, the birr, twice over the past five years – by 23.7 per cent in 2010 and 16.5 per cent in 2011 – in an effort to win export competitiveness. Since then, the Ethiopian central bank has managed to slow the currency’s depreciation by intervening regularly in the market.
Addis Ababa has now told potential investors that “it may not be possible for the National Bank of Ethiopia to manage the exchange rate as effectively in the future as it has in the past” because of reduced hard currency reserves.
The country has reserves to cover only 2.2 months’ worth of imports – almost half the 4.3 months it had in 2010-11. “Failure to manage a steadily depreciating exchange rate may adversely affect Ethiopia’s economy . . . [and its] ability to perform obligations under” the bonds, it says.
The prospectus also reveals for the first time details of Ethiopia’s heavy dependence on Chinese loans to finance its infrastructure investment. Credit lines from China and Chinese entities accounted for 42 per cent of all external loan disbursements in 2013-14, and for 69 per cent in 2012-13.
“China has emerged as a key development partner,” the prospectus says, “often providing sizeable financing tied to infrastructure projects undertaken by Chinese firms.” Among those, telecoms groups ZTE and Huawei and a company the prospectus names as China Electric Power have lent Ethiopia more than $2bn over the past few years.
Lazard, the investment bank advising Addis Ababa on financial matters, declined to comment. The Ethiopian government did not respond to a request for comment. Investors said the bond was expected to price later this week at between 6 and 7 per cent.
Filed under: Economy, Infrastructure Developments, News Round-up Tagged: Agriculture, Business, East Africa, Economic growth, Ethiopia, Investment, Millennium Development Goals, Sub-Saharan Africa, tag1
