LEC delays M510m project

FamCast News
23 days ago

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‘Mantšali Phakoana

The setting up of a long-awaited multi-million electricity generation station in Mafeteng, which is envisioned to bring energy security to the national grid, has been delayed due to the perennial financial woes bedevilling the Lesotho Electricity Company (LEC).

theReporter has learnt that the cash-strapped power utility failed to perform its obligation of setting aside a payment M14.25 million security, throwing the M510 million project’s future into doubt.

LEC’s failure to play its part resulted in the Renewable Energy Performance Platform (REPP), a UK lender specialising in clean energy finance withholding a loan payment of about M292 million to the Neo 1 project.  The balance of M218 million is committed from private investors including Pension Fund.

The planned injection point is the Ramarothole substation in Mafeteng at the transition between the LEC’s 132kV and 33kV grid.

UK-based energy company OnePower was awarded a tender by the Lesotho government in a preferred bidder selection in February 2017 to develop the 24MWp PV Neo 1 generating station and attract M510 million in private capital to fully finance the asset.

If implemented, the country will benefit from clean and secure energy through a long-term power purchase agreement with LEC, as well as community programmes to uplift the adjacent villages of Ha Raliemere, Ha Ramarothole and Ha Lempetje in Likhoele.

Part of the conditions for disbursement of the REPP loan is emplacement of a six-month payment security amounting to M28.5 million in Escrow, under the terms of an Escrow Account Agreement signed on May 20, 2022 and later amended in January 2023. 

The parties to the agreement are REPP, Standard Lesotho Bank, Neo 1, LEC, and the ministry of energy.  The purpose of the arrangement is to provide the project lender with security in the event of interruption of loan repayment due to project issues with collecting receivables. 

Other relevant agreements include the Power Purchase Agreement, specifying the commercial offtake between Neo 1 and LEC, and the Implementation Agreement, specifying the government support of the project and guarantee in the event of LEC default, between Neo 1 and the government through the ministry of energy, all signed on November 25, 2021.

The project has been in limbo since the signing of the transaction documents because the LEC has not contributed its security payment to trigger the release of the REPP loan.  

The government through the ministry of energy has performed its duties by paying its contribution of M14.25 million as of December 2023 which is currently held in Escrow by Standard Lesotho Bank. The LEC was supposed to pay a similar amount in security.

OnePower Lesotho provides affordable and reliable electricity services to both on and off-grid customers, giving families, schools, health centres and local businesses the opportunity to thrive.

Efforts to get comment from LEC on Wednesday this week were fruitless as the company indicated that the right person to provide information on the matter was out of the country.

Contacted for comment this week, OnePower Chief Executive Officer (CEO), Matthew Orosz, said the project was now stuck and it would only be implemented once the LEC keeps its end of the deal.

Orosz noted that OnePower had so far spent over M36 million towards the preparation of the project.

He also indicated that LEC will establish a track record of the M14.25 million security payment once the plant is commissioned. The funds will eventually be returned to the government with interest and the LEC once the bankability of the off taker is established.  

“The government has paid its half of M14.25 million as of December 2023 and the balance is outstanding from the LEC, and pending conclusion of the payment security, the project would have met the lender’s condition for disbursement of the full loan amount.

“LEC have indicated they have managed to set aside M10 million for cash collateral for an irrevocable letter of credit from Standard Lesotho Bank.  We are hopeful that LEC will get a bailout soonest because this country needs multiple sources of energy.  With ‘Muela Hydropower Power under maintenance, this country will need power and reliance on imported power from Eskom entails risks.

“The delay of this much-needed local power solar plant is not good for the economy of this country and does not set a good precedent for signalling to the market that Lesotho is investment ready,” Orosz pointed out.

“If the country wants to attract foreign investment to supply energy or provide energy security, it will help if the government and LEC can set a positive track record of performance under the agreements they have entered into,” he added.

However, the affected villagers have lost patience and are fuming.

They blame the project proponents for exploitation and breaking promises after they agreed to rent their land for the construction of the project five years ago.

The villagers told theReporter in separate interviews last week that they believed the project would generate jobs as well as electricity but to their disappointment, it has left them in suspense.

When the project kick-started, land owners say, they were promised a payment of 50 cents per square metre, a sum they now realise was woefully inadequate due to the high cost of living and escalation in the prices of basic goods and services.

They added OnePower promised that once it occupied their pieces of land, they would receive quarterly rental payments for the lifetime of the project, which is 25 years.

But years have passed since the land was sold and no compensation has been received, they claimed.

One of the land owners, Julius Ramokhoa of Ha Lempetje said the families were going hungry as their fields were left fallow and their livelihoods in tatters.

He said he sacrificed his 3000-square metre plot for the implementation of the project which does not seem to be taking off.

“We are no longer planting crops in those fields because we are still expecting that the project might start before harvesting and cause losses.

“Most of us are suffering from hunger. There are no jobs, no production of crops and also no compensation money for us to survive on. We are just in suspense and wondering if the dream of having a power supply project will come true,” he noted.

Another villager, ‘Matšokolo K’humalo said many families that once relied on their crops for food and income now struggle as their land remains fallow.

“Our village is worse off than before. The youth were hoping to get jobs, while land owners were expecting they would have now received their quarterly compensations by now.

“Every day we are hopeful that we will hear good news from the implementing company, OnePower, but have not engaged with us on the progress,” she said.

But Orosz differs. He said a total of M14 million has been paid to the affected community in two batches.

He further claimed that the company had told the community several times that they have freedom to use the land for agricultural purposes until the project kick-starts.

A consultant engaged by OnePower, community liaison officer ‘Makatleho Habi said the project has been engaging with the community on a daily basis through a committee of directors elected by them (community) to represent land owners and indirectly impacted persons.

Habi explained that the villagers were free to use their land for agricultural purposes before the start of the project.

“The land would only be off-use once fencing is put up. We told them so; they should not fear losing their crops.

“If it happens that the project commences before harvesting, the company will compensate them for their losses.

“There are already two villagers that have been using their land for two years now, they did not have fear of losing their crops,” she added.

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