TM Geothermal – Bringing Geothermal Power to Ethiopia
In December 2017, TM Geothermal Operations (TMGO) was established, signing a Power Purchase Agreement and Implementation Agreement with the Ethiopia Electric Power and the Government of Ethiopia, establishing the company as one of the first independent power projects in the country. We take a look at how Ethiopia’s first geothermal power plant to be delivered by the private sector is showing the way for foreign investment in the country.
“It’s been a bit more of an engineering challenge because we’re building on an old lava field,” explains the company’s CEO, Darrell Boyd. “Well, geologists say it’s young as it’s only 100,000 years old!”
The company is contracted to deliver 150 megawatts of geothermal energy into the grid over two phases, sponsored by Meridian Infrastructure, a public sector infrastructure long term view investor, and Reykjavik Geothermal Ltd, a geothermal business based out of Iceland. It is a $260 million investment for Phase One, with a projected budget of $800 million for both phases.
Over the last two years, TMGO has done a lot of work putting infrastructure into place to support geothermal exploration drilling, including water, roads, and 16 km of carbon steel ten-inch pipeline.
“We’re engaging with all the environmental and social matters linked to the project with high standards of community engagement,” Darrell insists. “Our project is in a very rural area with no access to electricity and limited access to water as well as poor road infrastructure and telecom coverage. So, we’ve either already helped to improve these issues or have very firm plans to do so over the next six to twelve months.”
TMGO has also recognised the importance of finding the right partners to work with on a project of this scale and importance.
“We’ve appointed Kengen as our geothermal drilling contractor, and we’re very pleased to have them on board,” Darrell says. “Their experience drilling themselves or contracting out drilling is impressive, with 300 successful geothermal wells over 40 years. In terms of science, there are potentially a lot of similarities in terms of the geology of the areas Kengen has worked in and our own license area.”
TMGO has performed many years of surface studies, research and investment but as Darrell points out “The proof of the pudding is in the eating, so we’re fingers and toes crossed that in six-to-eight months’ time we’ll have strong evidence of the geothermal resources there, which will be a big milestone for Ethiopia, our customer organizations, sponsors and investors.”
This project is the first of its kind in Ethiopia, not just its first private sector developed greenfield geothermal investment but Ethiopia’s first independent power producer. But Darrell believes it will lead to big things for the country to support its ambitious reform and continued growth agenda.
“Prime Minister Abiy Ahmed actually tweeted that it’s the first project of its kind built around the public-private partnership model in Ethiopia,” Darrell tells us. “The Ethiopian government has done great work putting the legislative framework in place for PPPs, foreign direct investments, and in recognising it wanted to attract investment to major infrastructure projects. We are very much at the vanguard of that and mindful of the responsibility that comes with it. We’re working collaboratively with our customer partners because that may well influence investors and lead to more money flowing to support Ethiopia’s continued economic growth.”
Darrell is quick to sing the praises of Ethiopia as a site for investing in infrastructure projects.
“It’s my second time working in Ethiopia,” he says. “I’ve worked and lived in 13 countries around the world and Ethiopia is the only place I’ve come back to. I love their values what they stand for and I’ve seen them tested and they’ve always come good.”
This has been particularly true over the last decade, Darrell points out, “In the last ten years Ethiopia has been the fastest growing economy in Africa. Ethiopia is also pretty fantastic in terms of what it produces from renewable energy sources, competing with Iceland, Norway, in terms of renewables. We’ve strong governance from our sponsors and board and for me, it’s fantastic that they come to meet the team every three months and see things first-hand and get a real flavour for the culture and excellence of what we’re doing on the ground.”
However, while the country has a great deal of potential, Ethiopia is still in the process of adapting to new ways of doing business, and there is a distance between putting new laws and regulations in place and having them in practice through all the country’s institutions.
“I mentioned all the legislation and governance put in place to attract foreign investment and participation. The energy proclamation and the updated investment proclamation, but they’re all new to the institutions administering them, so just the newness of it all is a challenge,” Boyd says. “We have a lot of consultation to help with that.”
While Ethiopia is growing in appeal for foreign investment, Darrell is also keen that TMGO ensures that investment pays off for the people of Ethiopia itself.
“We have a strong social license that’s taken a lot of resources and effort but it’s something we’re very committed too, and we and our local communities are hopefully seeing the benefits of that,” he says. “We’re working in a pretty rural area, so we’ve already cut journey times for people to market by upgrading and fixing up the road and building new road sections. We have got water quality testing we hope to share with communities along the route, we have plans around electrification. People will not look at a shiny new power plant and think ‘Where’s mine?’ We have electrified a local health centre already and are working on plans for our local communities to receive access to electricity. Telecoms coverage is quite far away, weak or intermittent so we are working with EthioTelcom to extend that. We’ve also achieved zero resettlement in our drilling infrastructure build-out to date.”
That investment will also help TMGO grow local talent to help fuel future projects.
“We’ve taken 40 young people from the local area, with three-year apprenticeship schemes, learning skills. We don’t just want them to be casual labourers, we want it to be high value for them,” Darrell says. “We want to create electricians, plumbers, technicians, mechanics, engineers, and we hope they will come back after completing those vocational qualifications and come to work on our project. We have created 400 jobs in the local area. They have fantastic skills here, the number of people who go to university is high compared to the rest of the continent, with geothermal drilling specifically they do not have a lot of experience. We have found some fantastic individuals for our team, real talent, some of whom are potential future CEO candidates. So, I try to create an environment for them to be empowered and enthused and take the initiative.”