VZCZCXRO1364
RR RUEHMA RUEHPA
DE RUEHMV #0139/01 0501405
ZNR UUUUU ZZH
R 191405Z FEB 08
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 9769
INFO RUEHOT/AMEMBASSY OTTAWA 0171
RUCPDOC/USDOC WASHDC
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 03 MONROVIA 000139 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR AF/W 
OPIC FOR JOHN SIMON 
 
E.O. 12598: N/A 
TAGS: ENRG EAGR EAID EINV SENV ECON OPIC LI
SUBJECT: LIBERIA: ENERGY FROM RUBBER WOOD CHIPS? 
 
REF: 07 MONROVIA 1190 
 
¶1. (SBU) Summary:  The GOL continues to pursue medium-term power 
sources but is stymied by indecision.  Buchanan Renewable Energy 
(BRE, a Canadian firm) has proposed using chips from rubber trees to 
provide 17-34 MW of energy in Monrovia, with the possibility of 
similar smaller scale biomass power generation in rural areas.  This 
project could open exciting new options, but depends on donor-funded 
transmission and distribution lines, a well-managed national 
electricity regulator, and GOL commitment with regard to securing an 
appropriate site and legislative approval.  End summary. 
 
¶2. (SBU) Buchanan Renewable Energy made a high-profile entry to 
Liberia last year with a multi-million dollar proposal to ship 
rubber wood chips to Europe as biofuel.  This month, BRE returned 
with OPIC consultant James Steele and Canadian investor John MacBain 
(of the MacCall MacBain Foundation) to pitch a proposal to provide 
rubber chip-fueled power generation in Liberia.  The delegation held 
extensive meetings with all players in the electricity sector, 
including the Liberia Electricity Corporation (LEC), major 
consumers, USAID electricity experts, the International Finance 
Corporation (IFC, which is advising the GOL on power), and GOL 
officials.  Before leaving, they met with President Sirleaf and top 
officials including the Minister of Lands, Mines and Energy Eugene 
Shannon, head of the National Investment Commission Richard Tolbert, 
  National Coordinator of the Liberia Reconstruction and Development 
Committee Natty B. Davis, and GOL advisor on economic issues Steven 
Radelet. 
 
Environmentally sound power generation 
-------------------------------------- 
 
¶3. (SBU) The proposal calls for a 17-34 MW biomass plant using chips 
from 1,000 acres of past-productive-age rubber trees a year.  The 
plant would need to be located near the transmission line that will 
link to Monrovia's largest consumers and would require a site with 
adequate space for extensive chip storage that would be accessible 
to an anticipated 25 truckloads a day of wood chips.  The target 
completion date is June 2010, and a firm deadline to make that 
target is OPIC's July 20 board meeting -- the last scheduled meeting 
of the Bush administration.  In addition to providing power and an 
estimated 15,000 jobs, the project is more environmentally friendly 
than most alternatives.  The fuel is a by-product of clearing 
obsolete rubber trees, and eliminates the need to import heavy fuel 
oil.  Once the price is established, it should be relatively steady, 
in comparison to petroleum prices.  BRE said they want Liberia to be 
a pilot project, and that "biomass generation is going to explode in 
Africa."  In addition to the proposed power plant for Monrovia, BRE 
is working on design for smaller 250-500kw plants that could be used 
in rural areas. 
 
¶4. (SBU) The EC-funded transmission ring that will circle Monrovia 
is critical to the viability of BRE's proposal.  The EC 
representative informed them he had just signed a contract with a 
Swedish company to construct the transmission lines.  The EC also 
has another 20 million Euros that could be spent on developing 
either water or power.  If invested in the electric transmission 
system, that money could support rehabilitation of most of the 
distribution lines within Monrovia.  An EC team will assess next 
steps in April. 
 
A couple of loose ends remain 
------------------------------ 
 
¶5. (SBU) The financing is still not firm.  OPIC is enthusiastic 
about the project, but the American participation that would make 
the proposal eligible for OPIC support had not, at the time of the 
visit to Monrovia, been nailed down.  BRE said they are not 
requesting specific investment incentives, but would welcome 
something like accelerated depreciation. 
 
¶6. (SBU) OPIC needs a firm legal framework, perhaps a concession 
agreement ratified by the legislature, to proceed with the project. 
They also need to have the permitting and regulatory issues settled. 
BRE noted that to meet the unusually tight deadlines, they would 
need to order $10 million in equipment within the next 90 days (by 
early May), in order to have it on hand by the proposed start date. 
 
 
The GOL's perspective:  cautious but encouraging 
--------------------------------------------- --- 
 
¶7. (SBU) In the meeting with President Sirleaf, GOL officials made 
it clear they appreciated the benefits of the proposal but said they 
could not proceed without knowing the price BRE would charge for 
power.  (MacBain and BRE would not commit during the meeting, but 
told Econoff separately they are aiming for 18-22 cents/kwh, well 
 
MONROVIA 00000139  002 OF 003 
 
 
below the estimated 55 cents/kwh for self-generation or the 40 
cents/kwh currently charged by LEC, but probably above the eventual 
cost of hydroelectricity.)  There was discussion of whether the 
proposal needs the same full legislative approval as a concession, 
but agreement that legislative approval would offer the most legal 
comfort.  The President assured the delegation "we can work with the 
legislature." 
 
¶8. (SBU) There was concern by the GOL officials about integrating 
this into other power proposals.  BRE pointed out that it is 
integrated with (and relies on) the EC transmission line and does 
not rule out any other options.  They are not asking for 
exclusivity.  LEC, they stressed, will need strengthening and they 
raised the possibility of a management contract for LEC that would 
extend into the implementation of their project.  The President 
responded "we would not have a problem with that." (Note:  BRE had 
previously asked USAID about the likelihood of extending USG support 
for the LEC past 2010.  End note.) 
 
¶9. (SBU) In a subsequent meeting with the Ambassador, President 
Sirleaf's energy advisor Christopher Neyor confirmed the GOL's 
interest in BRE's proposal but noted the cabinet had felt pressured 
to respond without full cabinet vetting of the project.  He said the 
GOL is still trying to get an accurate estimate of total demand. 
(Note:  The IFC has estimated it at 19 MW in Monrovia in 2010, 
growing to 40 MW in 2020.  End Note.)  Regarding the longer-term 
hydro prospects, he confirmed the optimistic USTDA-funded 
feasibility study's finding that Liberia's Mt. Coffee hydroelectric 
plant could be refurbished within 18-24 months from contract signing 
and producing electricity within three years. 
 
Next steps 
------------ 
¶10. (SBU) During the February 1 meeting, the GOL and the MacBain/BRE 
delegation initialed a non-binding MOU and agreed on the following 
next steps. 
 
--  The GOL will consult interagency and respond within 10 days. 
(Note:  According to BRE on February 18, the GOL response is 
"imminent" and they understand the proposal is 
circulating actively for comments. End note) 
 
--  The investors will provide a more concrete response with price 
and site data within 60-90 days.  BRE planned to hire someone that 
week and get "the best team possible" on the ground in Liberia 
within two weeks to do the assessment. 
 
--  The GOL will provide a legally solid decree or concession 
agreement. 
 
¶11. (SBU) In his meeting with Neyor, the Ambassador asked about the 
GOL's decision-making process on energy policy.  Neyor said the GOL 
considers the United States and Norway the prime donors in the 
energy sector.  The Ambassador encouraged the GOL to select a policy 
and then put out a tender for what it needs, rather than trying to 
select among possibly conflicting proposals made by potential 
investors.  Neyor noted that they want to make a decision within 
weeks. He added that they are looking at making carbon neutrality 
part of the national energy policy. The Ambassador warned not to get 
so caught up in the perfect environmental policy that they do not 
generate needed electricity.  (Note:  We have heard that the GOL may 
be considering issuing a Request for Proposal for 20-30 MW for 
Monrovia.  The RFP would request price of electricity and timing of 
the project, but be open to all sources of fuel.  There are other 
groups that might be interested in investing in power generation 
projects on those terms.  End note.) 
 
Update on BRE fuel project 
--------------------------- 
 
¶12. (SBU) Progress continues on the biomass fuel project BRE 
initiated in June, 2007.  BRE has accumulated 25,000 tons of rubber 
wood chips in Buchanan (Liberia's second largest port) and plans to 
start exporting to Europe or Turkey this month a full two months 
later than initially projected.  BRE management believes that 
successfully exporting the initial cargo should give lenders more 
comfort.  As a sanitary and phytosanitary measure, the exported 
chips are fumigated in the hold of the ship during transport. BRE 
said they are using a Liberian transport company affiliated with the 
OPIC-funded Liberian Enterprise Development Financing Corporation 
for about 30% of their hauling. 
 
¶13. (SBU) Comment:  BRE has garnered extensive positive press since 
announcing its initial investment last year, and has imported heavy 
machinery, concluded contracts with supplier rubber plantations, and 
is chipping up old rubber trees.  However, there is still skepticism 
in some circles about the viability of the biomass proposal.  As one 
 
MONROVIA 00000139  003 OF 003 
 
 
player in the rubber sector noted, "If there were money in sending 
wood chips to Europe for fuel, we'd have done it."  There is also 
concern that small plantations may find it more economically 
feasible to sell for biomass rubber trees that are still producing, 
lowering Liberia's rubber and latex production.  Although BRE said 
they are replanting a tree for each one cut, some Liberian rubber 
farm owners are just selling their trees to BRE and pocketing the 
money, not replanting.  This leaves increasingly large areas of 
barren land that will soon blow or wash away.  This is the 
environmental downside of the BRE project.   End Comment. 
 
Booth