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Coalition bungles M2b energy project


Billy Ntaote

A M2 billion renewable energy project remains in limbo, two years after the coalition government signed a Memorandum of Understanding (MoU) with London-based Prime Enviro International Holdings Limited to jointly establish the venture in Butha-Buthe, Leribe, Mafeteng and Maseru districts.

According to Prime Enviro Managing Director, Peter Anthony Smith, the initiative is now 18 months behind schedule, while his company continues to lose money due to the delay, which he blames on “out-dated bureaucracy and the complexities of working with a multiparty government”.

Mr Smith says it has been frustrating working with the coalition government led by Prime Minister Thomas Thabane and blames its “complexity” for lack of progress on the project which is expected to produce electricity, biodiesel and industrial gas. At least 12 800 jobs are expected to be created through the project, but according to Mr Smith, red tape and having to deal with “too many ministries” have put the project in danger.

Mr Smith also told the Sunday Express his company had already spent M26 million on the project since 2011 when it began feasibility studies on the viability of the initiative.

However, Mr Smith says the issue became “complicated” when the coalition government comprising Dr Thabane’s All Basotho Convention (ABC), Lesotho Congress for Democracy (LCD) and Basotho National Party (BNP) led by Deputy Prime Minister Mothetjoa Metsing and Sports Minister Thesele ‘Maseribane respectively, came to power in June 2012.

Despite committing to the project soon after taking over from the Pakalitha Mosisili-led administration, the coalition government has continued to dither on injecting M10 million into the joint-venture, grounding the potentially lucrative and mutually beneficial initiative, Mr Smith further told the Sunday Express.

“We are backed by the British government and have financial support from Germany’s Deutsche Bank. We have already convinced Deutsche officials about the viability of the project, whose major appeal is its focus on unemployment reduction, and poverty-alleviation,” Mr Smith said.

“However, we are being frustrated by the government even after we have spent M26 million since our people arrived in Lesotho four years ago when we first conducted feasibility studies and initial project start-up proposals.”

Mr Smith further said fields had already been leased in Butha-Buthe, Leribe and Mafeteng for the project, while the company would soon finalise its largest land-acquisition for the main power-plant to be established in Maseru district.

“After the feasibility studies and proposals had been completed, they were presented to the Lesotho government ahead of the 26 May 2012 election and the then government was impressed and so were the successors, who had just formed a coalition government.

“We signed an MoU with Deputy Prime Minister Metsing sometime in July- August 2012 and formed a joint-venture called Prime Enviro Limited Company. The Lesotho government had a 49 percent shareholding in the company, while we had the remaining 51 percent.

“Under the MoU, it was agreed that the company would be under the control of seven directors, with three coming from the government of Lesotho and four from our company.”

However, Mr Smith is frustrated the project’s implementation had now been delayed by 18 months due to the “bureaucratic red tape and the complexities of working with a coalition government”.

Mr Smith added: “We find ourselves frustrated as we are trying to convince a series of ministries about the project. We are involved with the Ministry of Energy, Ministry of Planning, Ministry of Education, Ministry of Finance, Ministry of Environment and Ministry of Local Government over one project.

“I believe this delay would not have taken place if this out-dated complexity called red tape, and working with a multiparty government were not there.

“We are now in financial woes simply because the government cannot meet its end of the bargain, which is injecting M10 million into the project or issuing a bank guarantee so that our company can have the M2 billion our financier is ready to release to us once the government of Lesotho has shown its commitment to the project,” Mr Smith said.

According to Mr Smith, without government’s commitment, the project cannot continue as the funders need to be assured that their investment would be protected. He also said the Lesotho National Development Corporation (LNDC) — government’s trade and investment-promotion showcase — had since become the focal point for the project, further complicating and delaying the scheme.

“Since the signing of the MoU in 2012, the only time government has shown commitment to the project was touring our company’s projects in the United Kingdom in April 2014.

“Our then Minister for Africa, Mark Simmons, met with Prime Minister Thabane over the project, but despite this, there isn’t much progress, if any at all.”

Contacted about the project, former LNDC caretaker Chief Executive Officer, Tseko Bohloa, who vacated the post last week, said: “We could not inject any funds into the project until certain processes had been completed.

“The LNDC came into the project when everything had already been finalised; Minister Temeki Tsolo had signed for government, and the LNDC is only being brought into the project now.

“Among issues the LNDC had to look into included how it could fit in as the project agreement was signed without its involvement.

“The government only realised at a very late stage that we, at the LNDC, would be the best people to implement the project. I have just been compiling a report for the incoming CEO on the progress we have made since the minister handed the project to us officially through a commitment letter just four months ago,” Mr Bohloa revealed.

However, Mr Bohloa emphasised the LNDC does not take-over any projects without following due processes.

“We had to take some time to study the project and meet Peter Smith and his promoters. On the other hand, he seems to have endured two long years without any progress, and we understand his plight but we have to properly appraise the project like any other,” Mr Bohloa said.

Mr Bohloa further told the Sunday Express that Mr Smith’s company had since demanded that it be compensated for its expenses “as things have been delayed more than they had anticipated”.

“We know their frustrations and as a result, we have since requested the Ministry of Finance to issue us a back-to-back guarantee as the LNDC can’t give any guarantee to the project without proper appraisal,” Mr Bohloa said.

Also known as back-to-back credit or reciprocal credit, a back-to-back guarantee is a type of standby credit that involves the arrangement of some type of security on the performance of a seller or owner while simultaneously arranging some type of guarantee on the part of the buyer. The idea behind this arrangement is to protect the interests of both parties involved in the transaction from incurring a loss, or at least minimising that loss to a great degree.

According to Mr Bohloa, the project would be good for the country hence its support by the LNDC.

“This is a very good project but the LNDC would have to wait for the back-to-back guarantee to be approved by the Finance ministry.

“We already have an officer dedicated to the appraisal of the project to ensure we speed up the process and the new CEO has already met with the company’s representative,” he said.

Mr Bohloa’s sentiments were echoed by Government Secretary, Moahloli Mphaka, who reassured Mr Smith of government’s commitment to the initiative.

“The government is doing all it can to assist the company. However, the ministry of finance does not just commit government funds without accounting for what the money is being used for.

“I’m confident government would soon be releasing the guarantees for the funds that the company needs to continue its operations.”

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