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RR RUEHMA RUEHPA
DE RUEHMV #0082/01 0231545
ZNR UUUUU ZZH
R 231545Z JAN 09
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 0727
RUEATRA/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RHEHAAA/NSC WASHDC
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHRO/AMEMBASSY ROME 0984

UNCLAS SECTION 01 OF 02 MONROVIA 000082 
 
SENSITIVE 
SIPDIS 
 
E.O.12958: N/A 
TAGS: ECON ENRG EINV ETRD OPIC LI
SUBJECT: LIBERIA: GOL SIGNS CONTRACT POWER PLANT FUELED BY 
RUBBERWOOD 
 
REF: 08 MONROVIA 649 
 
¶1.  (SBU) SUMMARY: Canadian firm Buchanan Renewables (Monrovia) 
Power, Inc. (BRP) signed January 21 a concession agreement with the 
Government of Liberia (GOL) and a power purchase agreement with the 
Liberia Electricity Corporation (LEC) for the construction of a 
35-megawatt power plant to provide electricity from renewable 
sources to the Monrovia area.  The agreements commit to over $200 
million of investment and must be ratified by the national 
legislature.  The Overseas Private Investment Corporation (OPIC) has 
approved a loan of up to US$112 million for the project with the 
remaining amount funded by equity.  BRP expects to begin producing 
power by the end of 2010, but putting that power to use requires 
speedy action by the GOL to reform LEC management and complete a 
transmission grid.  END SUMMARY. 
 
¶2.  (U) BRP hopes to begin construction of the power plant in 
February.  The power plant and transmission line linking the plant 
to the Monrovia grid are estimated to cost $150 million.  The power 
plant will be fueled with woodchips from Liberian rubber trees that 
are beyond their useful life (approximately 30 years).  BRP has 
pledged to re-plant new trees in even greater numbers in order to 
ensure the project has a carbon neutral footprint.  The use of 
domestically available renewable sources of fuel is thought to be 
the first of its kind in Africa. 
 
¶3.  (SBU) BRP says the power will be sold at about 25 U.S. cents per 
kWh.  Current diesel-generated power under the Emergency Power 
Program costs about 50 cents per kWh.  Long-term hydroelectric power 
is expected to cost roughly 5-12 cents per kWh.  Initial 
transmission to the LEC grid is expected to begin in late 2010.  BRP 
expects to employ 100 Liberians at the plant and another 600 are 
already employed by other subsidiaries.  (Note: Buchanan Renewables 
(Monrovia) Power, Inc. is a Liberian corporation, wholly owned by 
Buchanan Renewables (BR) B.V. which in turn is owned over 90% by the 
investment arm of the Canadian McCall MacBain Foundation, currently 
the largest private donor in Liberia.  The foundation has pledged to 
give back any profits to health, education and development projects 
in the country.  End note.) 
 
¶4.  (SBU) The three agreements BRP and GOL signed all require 
legislative ratification.  The first is a concession agreement 
authorizing BRP to build a 35-megawatt power plant that will provide 
electricity to the Monrovia area.  The second and third agreements 
enable parent company Buchanan Renewables (BR) to bring in heavy 
equipment and spare parts under favorable terms to cut and chipQnproductive rubber trees, both for domestic use in the power plant 
and for export.  The agreements also define the essential 
construction, road repair and maintenance services associated with 
the operation. 
 
¶5.  (SBU) Negotiations for the agreements were complex and 
protracted.  To minimize risk, BRP reportedly demanded a "lockbox" 
arrangement in the Power Purchase Agreement (PPA) under which 
revenues earned by the LEC are paid directly into an escrow account 
from which BRP is paid first.  Attorneys and advisors to the GOL 
were concerned the arrangement would discourage other potential 
investors in the power sector.  The GOL was also concerned by the 
"affordability" of the power compared to long-term hydroelectric 
power.  Ultimately, pressure to begin power generation pushed both 
sides to reach an agreement on this and other outstanding issues. 
 
¶6.  (SBU) The project still faces considerable hurdles.  The 
national legislature does not have a record for speedy or 
transparent consideration of concession agreements, and there is a 
danger delays in the ratification process could jeopardize financing 
and construction (Note: Ratification is required by Liberian law and 
a condition precedent for the OPIC loan.  End note.)  Second, 
although BRP will construct the 30 miles of power lines required to 
get the electricity from the plant to Monrovia, completion of the 
distribution and transmission lines inside Monrovia will require a 
sizable and swift intervention by the GOL and its donor partners. 
Finally, the LEC's ability to manage the distribution and billing 
network remains in doubt; the GOL now supports a proposal from the 
Government of Norway to outsource a management contract for the LEC. 
 
 
¶7.  (SBU) Parent company Buchanan Renewables (BR) announced January 
15 that its subsidiary BR Fuels had completed the first export 
shipment of 12,000 metric tons of woodchips to Italy for use in low 
carbon energy production.  The shipment, which was initially 
scheduled for March 2008 but was repeatedly postponed, is believed 
to be the first shipment of its kind from Africa to Europe.  BR also 
has a Technical Services subsidiary to handle roadbuilding and port 
operations.  BR signed an agreement in November with the National 
 
MONROVIA 00000082  002 OF 002 
 
 
Port Authority under which BR will receive favorable berthing and 
storage rights at the Port of Buchanan for its woodchip exports in 
exchange for which BR would help renovate port facilities and dredge 
shipping lanes in Buchanan, in addition to removing the Torm 
Alexander ship currently blocking key berths at the Port of 
Monrovia. 
 
¶8.  COMMENT: (SBU) BRP has demonstrated considerable vision and 
determination in its efforts to make this project work in the face 
of significant challenges, risks and uncertainties, many of which 
remain unresolved.  If successful, the 35MW BRP power plant will be 
an important source of more affordable electricity and a positive 
contribution to improving the investment climate in Liberia.  The 
plant would bridge the gap between the costly (40-50 cents per kWh), 
donor-funded, fuel oil-powered 10MW Emergency Power Program and 
cheaper (5-12 cents per kWh), high capacity hydroelectric sources in 
the longer-term future.  In addition, the BRP plant would be a model 
for environmentally friendly generation of electricity - one of the 
very few countries in the world to rely on renewable fuels as its 
basis for power generation. 
 
THOMAS-GREENFIELD