Kudu fight becomes vicious

14 November 2014 Author  

front leevi 14 novPERMANENT Secretary of the National Planning Commission (NPC) Levi Hungamo faces accusations of secretly sabotaging the US$2.5 billion Kudu gas to power project.

Industry observers attribute this to a long-standing rift between Hungamo and Minister of Mines and Energy (MME) Isak Katali, as well as his alleged desire to push the agenda of a coal-fired power station in which he allegedly has an interest.

The detractors who oppose Kudu Gas and Tullow Oil’s recent announcement that it would no longer participate in the Kudu gas project due to financial commitments elsewhere have reportedly left Katali dejected.

Insiders fear that Hungamo’s interference will negatively affect Government’s decision to finance 44 percent of Namcor’s equity in the project.

The minister of finance has apparently agreed to finance Namcor’s stake (which it has struggled to sell to international investors) with around N$5-6 billon over a three-year period.

However, various sources approached for comment said the Ministry of Finance still needed to deliberate on the issue, and needed some time to make and announce its final decision.

Energy insiders said they expect Cabinet to sit on 2 December to discuss the issue.

“When you want security of supply, or development anywhere in the world, you pay for it. The Ministry of Finance was initially sceptical but they are coming round; if it were up to them, things would be fine.

“What we don’t know is who still needs to sanction the decision or if it will go to Cabinet. Those who are sceptical, and I will not name them because I am sure you already know them, have been sceptical for years.

“Some have the intention to rather export liquefied natural gas (LNG) for their own business benefits. But Namibia has to make a tough decision as to whether we want to be industrialised by 2030, or end up in the situation South Africa is in now with Eskom.

“However, exporting LNG is not a feasible option because to make it economically viable the Kudu gas field would need three times the reserves of natural gas,” an insider remarked.

Sources said the International Finance Corporation (IFC) – a member of the World Bank – has made a commitment to finance the remaining 10 percent in the Kudu project.

Japanese company Itochu has also not given official word about whether or not it will also pull out, but right now, everyone is working on the assumption that the company will still form part of the project.

Sources close to the project claim that Tullow Oil’s recent announcement that it would not continue as part of the project has given Hungamo, who reportedly wields much influence amongst those who hold the power, more ammunition to shoot down the feasibility of the project.

Some believe that those in Hungamo’s camp have suggested that the country should rather direct the funds Government has earmarked for Kudu to building several power stations around the country.

Speaking in an interview this week, sources who preferred to remain anonymous, said prior to Tullow’s announcement, Prime Minister Hage Geingob had called an important meeting to establish the status and feasibility of the project.

He apparently did this because he had some doubts and wanted more clarification.

In attendance were the ministers of mines and energy, finance, and trade and industry, as well as the director-general of the NPC and their various permanent secretaries.

Namcor and NamPower senior management also attended the meeting. The meeting also covered power projects in the country in general as well as Independent Power Producers (IIPs).

“Namcor gave an update on the project and what needed to be done to make it work. NamPower also made presentations.

“All institutions favoured the project. MME said that everything was on course but that they needed to put certain things in place, such as the Government support package.

“In that meeting, Government, through the Minister of Finance Saara Kuugongelwa-Amadhila announced the support it would give the project through guarantees and equity injections.

“The unfortunate thing is that this happened two to three weeks before Tullow informed the MME it would pull out because of its own capital restrictions,” the source said.

However, the MME remained optimistic because it had contingency plans in place and apparently had a number of possible companies eager to replace Tullow Oil.

Those close to the project say the ministry should finalise this by the end of the year.

After the presentations at the meeting, Government officials were reportedly satisfied with the responses they received to their questions.

The Kudu team admitted there were issues that they still needed to iron out but convinced Government that they would eventually solve these issues.

However, what irked insiders is that, instead of addressing his concerns during the meeting, Hungamo apparently consulted with the PM in private, informing him the Kudu project was likely to fail and that the presentations given in the meeting were misleading.

“This is unfair; this is somebody who is not in the energy industry, somebody who is used to manipulating situations for his own personal interests.

“He, personally, was part of a group that wanted NamPower to build a coal-fired power station and the suspicion is that they wanted to make money from that, which is why they did not want Kudu.

“Officials made clear in the meeting that other power projects could proceed, but Government would not financially support these,” the source said.

The question, insiders asked, was why Hungamo did not instead make his concerns about the project known during the meeting, instead of in private consultation with the PM.

“Hungamo dances around ministers and he thinks others are stupid,” the source said.

“In that meeting, even the stance that the director general of the NPC (Tom Alweendo) took was also negative, indicating Hungamo has also negatively influenced him.

“One can say that the NPC is one of the organisations that are negative about Kudu. If the NPC and Hungamo had their way, this project would stop,” the source said.

Sources fear that, since Government has not yet put its agreement to fund Kudu in black and white, efforts to sabotage the project could result in Cabinet not approving the funding at all.

Meanwhile, the setbacks have apparently discouraged Katali, who serves his last leg as minister of mines and energy, about the Kudu project, which he hoped to see come to life during his term.

When approached with questions regarding the issue of internal sabotage of the project, Katali could only say, “that is a difficult question,” but that there “was still hope for Kudu to proceed despite Tullow pulling out”.

“Katali has really tried his best to revive this project and bring it to the level where it is now and a lot of effort has gone into this. NamPower and Namcor have already made significant progress; the project is so close to realisation.

“They have found mechanisms to mitigate all the problems regarding gas price, Namcor’s equity and issues of foreign currency. In fact, had Tullow not pulled out, by now we would be home and dry,” the source said.

Hungamo refuted and dismissed allegations that he was in any way against the Kudu Gas project.

“My job at the NPC has nothing to do with energy. Whether I support the project or not is immaterial,” he replied.

Without specifically responding to the allegations, NamPower MD Paulinus Shilamba would only address detractors of the project in general.

“Honestly speaking, there is no alternative to Kudu in the country. It’s the only base-load power station in the country and we will use our own resources. If Kudu is delayed significantly or stopped for whatever reason, then this country is in trouble,” Shilamba said.

“Detractors are doing a disservice to the country because of their ignorance. The economy will be in trouble.

“What I can say to people who want to destroy or damage this project is that it is economic sabotage and we should not tolerate it. We must all work very hard to make sure that Kudu is realised and commissioned on time,” he said.

Petroleum Commissioner Immanuel Mulunga was also not forthcoming and could not confirm knowledge of the sabotage claims, but responded based on Hungamo’s past relationship with Katali.

“If it is true I would not be surprised as this was an individual (Hungamo) who was never supportive of this project. The minister of mines and energy fired him as chairman of the NamPower Group, so I wouldn’t be surprised if this did in fact happen.

“The NPC has always been negative about Kudu and we believe this is wrong and unfair. They don’t know more than anybody else; there are in fact people who know better.

“There is an entire ministry entrusted to do this, there are organisations like NamPower and Namcor who work on this project on a daily basis and if it is indeed true I would feel it is totally wrong for him to do this,” Mulunga remarked.

WINDHOEK OBSERVER

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