Validated without a call for tenders, the 350 million euro and 100% Senegalese power plant project is attracting its share of criticism in Dakar and elsewhere. But the former energy minister has allies and arguments. Will they be enough to make a difference?

It is a project that will be closely watched in Senegal and more broadly in the African energy world.

In early October, West African Energy, a company formed by Senegalese businessmen including controversial former Energy Minister Samuel Sarr, signed a contract with Turkey's Çalik Enerji and U.S. group General Electric (GE) to build a gas-fired power plant. 300 MW at Cap des Biches in Rufisque, about twenty kilometers from Dakar.

Consequent in terms of power, the project, valued at 350 million euros, is above all the first to be carried out 100% by national private actors. Enough to make West African Energy a model in case of success or a repellent in case otherwise as part of a full-scale test of Senegal's "gas to power" strategy.

Fast loopback

At the start-up time, the project looks promising. Noticed by the actors of the sector, the speed of its development, in one year, was welcomed by the Minister of the Economy, Amadou Hott, during the signing ceremony.

After the conclusion of an agreement (MoU) between West African Energy and the National Electricity Company (Senelec) in October 2019, the power purchase agreement (PPA) followed in June 2020 and the conclusion of the construction contract in October, before the start of work this November.

A right of scrutiny for Senelec

To this speed are added guarantees of seriousness, especially on the technical level. The choice of the manufacturer as well as the turbine supplier is not up for debate. While the Turkish group Calik Enerji has only three projects on the continent – a 550 MW single-cycle gas-fired power plant in Khoms, Libya, a 60 MW one in Aden, Yemen and the 18 MW extension of a 93 MW hydroelectric power plant in Tedzani, Malawi – it has proven itself in Eastern Europe and the Middle East, in particular on combined cycle gas power plants (the technology used by the Senegalese project) and on the respect of deadlines.

"The technical partnership with GE for the supply of turbines and engineering is working well," notes energy consultant Ahmadou Said Bâ, an engineer and economist trained at Ensea and Paris Dauphine-PSL University, a former executive of the American equipment manufacturers Visteon and French Valeo.

The chosen assembly also provides certain guarantees. On the operational side, Senelec is a 15% shareholder in West African Energy, which gives it a right of scrutiny over the entire project. An essential safeguard for the public company, buyer of the electricity produced according to the PPA, a take or pay contract.

Strong political support

At the financial level, in addition to the support of recognized donors, the project benefits from a state guarantee. Samuel Sarr, who highlights his experience as a financial consultant on more than fifteen IPP (independent power producers) projects since his work on Gampower, in The Gambia, in 1996, also highlights the solid profile of his co-shareholders: the trader Moustapha Ndiaye, at the head of the Comptoir commercial Mandiaye Ndiaye (CCMN), the boss of the Senegalese industry and commerce (Senico), Abdoulaye Dia, the West African investor Harouna Dia and Khadim Bâ, boss of Locafrique, whom he accompanies in his project to take control of the African Refining Company (SAR).

"Our project is part of the national strategy to promote local content," says Samuel Sarr, former managing director of Senelec between 2002 and 2006, adding that the preparatory work and studies were largely carried out on site. Ge, which will manage the plant for five years, has pledged to train 35 Senegalese engineers to take over.

Chaotic course

Still, this political support as the personality of the project leader, former confidant of former President Abdoulaye Wade, to whom he owes his appointments at the head of Senelec and then the Ministry of Energy between 2007 and 2010, make teeth cringe. If Samuel Sarr can boast skills in the energy field and a political network, his career is chaotic.

Not only has its debt-burdened management of Senelec been criticized, but its time at the Ministry of Energy has also been marked by recurring power cuts, particularly due to the use of contaminated fuel oil that reduces the performance of Senelec's power plants.

In 2013, a year after Macky Sall came to power, he was the subject of a report by the General State Inspectorate pointing to numerous irregularities (overbilling, lack of competition, non-compliance with standards) during deliveries in 2008 and 2009 of oil (to be refined) to the SAR – accusations that he rejects.

Over-the-counter

The following year, in 2014, he was jailed for offending the head of state after accusing Macky Sall of holding "ill-gotten" money in bank accounts abroad. After this period of tension and the invalidation of his candidacy for the 2019 presidential election for lack of sufficient sponsorships, a period of appeasement opens as he continues his personal affairs.

Would his recent return to grace via West African Energy, part of the opening up to the opposition led by Macky Sall, have more political than economic justification? That is what some people fear.

Beyond political considerations, a good connoisseur of the African energy world even sees it as a "negative signal" tainting several years of progress observed in the sector in Senegal, especially with the development of renewables. The reason for the malaise: the award of the project by mutual agreement and not via a call for tenders, the procedure required by the 2014 Public Procurement Code.

"Spontaneous offer"

"The rules are clear, otc by mutual agreement is prohibited," reacts an IPP project leader. In Senegal, the practice has left a bad memory, used in the past for the project today in the dead end of the Sendou power plant. A project launched in 2008, under the Wade presidency and while Samuel Sarr occupied the Energy portfolio, then confirmed by Macky Sall.

In the country, we also remember the disappointment created by a 300 MW coal-fired power plant project in Mboro, led by a Senegalese company called Africa Energy, awarded by mutual agreement in 2013 but which never came out of the ground.

Asked about the method of awarding the project, Samuel Sarr said he had presented a "spontaneous offer", a possibility offered by a subtlety of Senegalese legislation – in this case Article 81 of the Public Procurement Code – in the context of an investment whose amount is equal or greater. 50 billion CFA francs (76 million euros).

"This article 81 of the new public procurement code gave rise, at the time, to remarks by the World Bank, which was concerned about Senegal's technical capacity to gauge this type of spontaneous offer without the possibility of comparison between several offers," recalls the consultant Ahmadou Said Bâ.

Moreover, while the procedure is also included in the 2014 law on public-private partnerships, it is excluded for a number of sectors "subject to special regulations", including energy.

A tariff optimum "could have been achieved"

In fact, even if regulated by law, the practice raises questions about its ability to provide the State, via Senelec, with the best rate for its electricity.

On this point, Samuel Sarr explains that his experience in the sector, the low use of external service providers and the speed of execution make it possible to control development costs and to display a competitive price. It announces a price "40% cheaper than that of other existing plants" at 56.9 FCFA per kWh with naphtha (derived from oil) and then at 46 FCFA when the plant will run on gas.

"In view of the current conditions, if the first tariff is consistent, the second remains expensive," says Ahmadou Said Bâ, pointing out, in addition, that the announced cost of the plant ($ 1350 / kW) is higher than the average cost for this technology estimated in 2020 at $ 1,000 / kW.

"With a project cost in line with the market average and a local natural gas supply sold at the floor price, an optimum tariff of 39 FCFA/kWh for IPP and Senelec could have been achieved," adds the consultant. And other players stress that, in the Senegalese context, competition remains the best way to optimize the cost-performance couple. It remains for West African Energy to prove otherwise.