Q&A WITH NEJIB ABBA BIYA
FULL OF ENERGY
From left:US Ambassador to Ethiopia, Patricia Haslach, Deputy PM, Dr. Debretsion Gebremichael, co-founder of Allana Potash and Chairman of EGC mining, Nejib Abba Biya and CEO of EEPCo, Mihret Debebe after the signing ceremony
26 October 2013
The Ethiopian Electric Power Corporation (EEPCo) on Wednesday signed the first electric power purchasing agreement (PPA) with Reykjavik Geothermal, the Icelandic company, that will enable the latter to build a geothermal energy plant in Ethiopia with an installed generation capacity of 1000 MW. The agreement was signed by Gud Munder, CEO of Reykjavik Geothermal (RG), and Mihret Debebe, CEO of EEPCo, at the Sheraton Addis. Dr. Debretsion Gebremichael, deputy prime minster and board chairman of EEPCo, Sinkenesh Ejigu, minister of Mines, Tolossa Shagi, minister of State, and officials of the Ministry of Water and Energy attended the signing ceremony. RG plans to spend 4 billion dollars on the geothermal project deemed to be the largest in Africa.
source: https://www.thereporterethiopia.com/index.php/news-headlines/item/1170-full-of-energy
Tapping into large investment funds
A Q&A with Nejib Abba Biya
Two weeks ago the Ministry of Mines and Allana Potash Afar signed an agreement that will enable the latter to exploit a large potash mine in the Afar Regional State with an outlay of 750 million dollars.
Again this week the Ethiopian Electric Power Corporation (EEPCo) signed an agreement with an Icelandic company, Reykjavik Geothermal, to develop a geothermal power plant that will have an installed generation capacity of 1000 MW at a cost of four billion dollars. The architect of these two projects is Nejib Abba Biya, an Ethiopian-born Canadian businessman. Kaleyesus Bekele of The Reporter sat down with Nejib Abba Biya and discussed issues related to the large investment projects. Nejib Abba Biya is a graduate of the University of Toronto Rothman School of Business and Finance. He is principal of Rift Valley Geothermal, co-founder of Allana Potash and Chairman of EGC mining, with over 20 years of management experience conducting business in Africa and Canada. He also founded and has run several mining and technology companies both in Africa and Canada. He is a senior partner in two technology companies operating in Canada.
The Reporter: Tell us about yourself.
Nejib Abba Biya: I am an Ethiopian. I was born in Ethiopia in Jimma town. I grew up in Jimma. I attended a boarding school in Addis Ababa, General Wingat I was involved in the political struggle of the day. During the 1974 Revolution there was Red Terror, counter Red Terror and what not. I was arrested and tortured. Finally I managed to escape. I fled the country in 1980 after spending a couple of years underground. I lived in Djibouti for two years as a refugee and then I emigrated to Canada. I continued my education in Canada. After graduating from a university, I started working for a big corporation. It was a multinational corporation and I worked in different positions. Later I got bored and started my own business.
What was your first business?
My first business was office equipment business. I spent only two weeks in Canada without work. After two years I was working on all kind of stuff. I was attending university full time. After completing my university education I joined Toshiba and went through the rank very quickly, then got a very senior position. I was distributor of Toshiba office equipment in Toronto with my partner. We had exclusive right to distribute Toshiba office equipment. In those days we used to distribute high-end copiers fax machines and so on. We did that business for a few years. We developed the business and then sold it. After that I developed different businesses. I am what you call a serial entrepreneur. I start doing a business and then after a few years I will sell and move to another new business. There are some businesses that you can’t do for long.
When did you come back to Ethiopia?
I came back to Ethiopia in 2006. After selling my company I was thinking of retiring and I said why don’t I visit Ethiopia. I just came for a visit. I had a dream to come back to Ethiopia and do good things like building a school. But I never thought of business in Ethiopia. After coming to Ethiopia in March 2006 I loved it very much. I went back to Canada and came back after a month and started working here.
What type of business did you venture into?
I started mining business. Because my background is finance and I was doing business in Canada for years, I know many business people in Canada. When I came to Ethiopia some people were telling me to build a hotel and some other people were advising me to start other types of businesses. But I wanted a different one. I needed an exciting and more challenging business.
Mining is a high risk business. It is capital-intensive. It requires knowledge. It is challenging; but it is also rewarding. When I came here there were not many companies engaged in the mining sector. Then I decided to work in the mining sector. I took a large land in the country and started working on gold exploration.
What is the name of the company that you first established here?
Ethio Gibe. Gibe is Jimma. Even though I am a Canadian I was born in Ethiopia. Jimma is my hometown. That is why I called the company Ethio Gibe. We put that asset in my company listed in Toronto, Aberdeen International. Mining is a high risk business; so you work with partners. Even if you have a trillion dollars you do not want to do it all on your own. You need to diversify the risk.
After establishing Ethio Gibe you started working on gold exploration projects. Where are your concessions?
In different parts of the country. In Oromia, Tigrai and Benishangul Regional States.
What were your findings? What did you discover so far?
We have achieved interesting results. I was told that after twenty something years I was the first person to conduct airborne geological surveys in Ethiopia in 2007. At that time we spent well over nine million dollars just gathering information. Then I gave the data to the Ministry of Mines.
What were the results?
The result was good. Exploration is a pretty long process. So you identify something; then you test it; and then you drill. You do airborne surveys and lots of work that takes years. It involves geophysics and geo-chemistry. You drill and test and then you drill and test again. It is a long process. We have a large concession by doing different geological surveys. We narrow our concessions on the most resourceful areas. We are trying to establish a large- scale gold mine, not a small one. We are looking at primary gold. We are looking for the elephant; we are not looking for small deposit.
So tell me the results you obtained so far?
The results are encouraging. If it were not encouraging I would have left. I have been working here for seven years. If it were not encouraging, why will I be wasting my time here?
Can you tell me the amount of gold you discovered? The prospects you have.
I cannot tell you now. Unless I have concrete and complete information I do not speak out.
Do you have a partner in your gold project?
Yes I have partners working in good faith with me. In some of the projects I have joint venture partners. I have Canadian companies.
You started the gold exploration project in 2007. Did you launch the potash exploration project at the same time?
You know what happened? The price of potash sky-rocketed in 2008. At that time everyone was looking for a potash mine. And I was reading about potash and I thought that there could be some potash in Ethiopia. Canadians have all the info about global minerals in the world. I called my office in Toronto and spoke to our geologist. I asked whether Ethiopia has potash? He looked at the global data and said to me yes Ethiopia has potash. I asked the Ethiopian Ministry of Mines if there is a potash mine. They told me that they gave it to an Indian company. I asked why to the Indians? They said they came and asked for it first. I was very curious about it. I came with geologists and asked the Ministry of Mines who took what? At that point I learnt that the Indians took the old mine and there were still other places where there was potash. There was plenty of land to be explored. I took an exploration concession and started prospecting for potash as well.
In 2009 I set up a new management team and listed the company in the Toronto Stock Exchange.
Is that Ethio Gibe?
No, no Allana Potash. Then we raised money and started working.
How did you come up with the geothermal project?
In 2009, engineers came to do prefeasibility study and they told me that electrical power would be an issue. There is power shortage and it will be a challenge for the potash mine project. We have a plan to build a potash processing plant and you need power to run it. The engineers advised me to look at the geothermal energy. The consultants that we hired to conduct prefeasibility study recommended that we should either consider solar or geothermal energy to satisfy our power demand. That is how we started thinking of generating electric power from geothermal energy for the planned project just for ourselves. We discussed the possibilities. You can generate electricity from solar energy when you have sunlight during the day. It’s reliability is low. So we opted to work on the geothermal energy. Then I hired a geologist consultant and assigned him to search for the place where there is a high amount of geothermal potential. He said Ok; but he said it is going to be very expensive. I said well it could be very expensive but I need it for my potash project. That was all I was thinking about.
As a businessman, power shortage worries me. So I started thinking of generating power and selling to the national grid. Establishing a company that will work on the geothermal energy list in the Toronto Stock Exchange and raise capital, that is the evolution of the business.
The signing of the geothermal development is dramatic. I was thinking of generating power only for my project but that evolved to generating and selling power to the Ethiopian Electric Power Corporation. I looked at the law and other things. In 2010 the stock market collapsed. When President Barack Obama took office renewable energy was a hot item. Then the market went down. We had to look at another option. I started looking for joint-venture partners instead of listing in the Toronto Stock Exchange. I started talking to two different companies on the possibility that we could establish a JV. Then out of the blue, I received a phone call from the Icelanders.
I met the Icelanders and discussed the issue. They told me about their experience in the geothermal business. They did a due diligence on me. I did a due diligence on them. They gave me their information; I checked and cross-checked. They did the same thing. They seem to be reliable and knowledgeable. So we established a joint venture and started working in partnership.
Is that when you established the Rift Valley Geothermal?
I established Rift Valley Geothermal in 2009 and partnered with Reykjavik Geothermal in 2011. Before they came we did conduct different studies and collected data. We did a field work, together assessing the geothermal potential. We continued working. We identified target areas and submitted a report to the Ministry of Mines. And the ministry gave us a go ahead. We started negotiations with EEPCo. After negotiation with EEPCo for a year and a half we arrived at an agreement.
Tell me about the exploration work you conducted on the geothermal project?
We identified that there is a huge geothermal energy in the country. We are talking about a minimum of generating 10,000 MW of electricity from our area.
Is that only from your concession? Is your concession in the Oromia and SNNPR?
Our concession is mostly found in the Oromia region, in Shashemene, Tulu Moye and Corbetti localities. 10,000 MW can be generated from our license area. It is a huge potential. There is a huge geothermal energy in the Rift Valley starting from the south all the way to the Afar region. In total we think that Ethiopia can generate 15,000 MW from geothermal energy. That is a huge amount. What we signed on Wednesday is for 1000 MW that ten percent of the global energy generated from geothermal energy.
It is a clean energy. It is reliable. It is true that it is capital-intensive. You spend four million dollars to generate 1 MW. It is also knowledge-intensive. But it is a big spin-off. A number of industries can be created out of that. A number of jobs would be created. Hydro depends on rain. Solar depends on sun. Wind power depends on wind. Wind farm works in the evening. Solar works during the day. Hydro power plants generate when you have enough water. Hydro power plants work effectively when you have rain and the rivers are full. But geothermal energy plant works all the time. The only time it is down is when you stop for cleaning. Nuclear power plant is risky. It is a threat to the environment. So we are very fortunate people to have such a huge geothermal energy.
Tell us about the agreement you signed on Wednesday with EEPCo.
It is a power purchase agreement. We agreed on so many technical matters. From here on there are some legal issues that we have to negotiate and that is it.
So is it a final agreement?
Well there is nothing final until it is final because there are so many technical details that we have to discuss.
Can you tell me about the financing of the project? A four-billion-dollar investment is huge and some people say it is too ambitious. They have doubts.
It is a big number. It is a big number especially for a country like Ethiopia. But we believe in ourselves. We have the capability and the experience in raising money. We know how to mobilize resources. I trust the integrity of the Ethiopian government. The Ethiopian government officials have been very cooperative to us. Therefore I do not see a big challenge. We were thinking of 300 MW project with a billion-dollar investment and it is Dr. Debrestion Gebremichael who told us to push the number to 1000 MW. That changed the whole equation . We asked our technical people. We asked our financiers first. They said it is risky and so on. We said to them we agreed on the one billion dollar investment, why not four billion. Finally we convinced them. It is all about trust. We did a lot of work to change the image of this country. Investors need to have confidence. When I started work on the gold exploration project in 2007, people were saying that they are not going to invest there. They were reluctant to invest here. But I tried my best to explain to them that things have changed in Ethiopia. I did a lot of work to convince financiers to invest. Now I do not have to do much. We have done very well. I never failed my partners in the past. I am sure we will be able to raise the capital required for the project.
Where will you raise the money?
There are investment banks. There are venture capitalists. There are pension funds. There are trillion and trillion dollars looking for good home. Good home means somebody looking after your money and giving you good profit. As long as you have integrity, people trust you and you do not breach that trust. People give you money. It could be a thousand or hundreds of millions of dollars. It is possible.
I have read a media report that says that this project would be financed by Obama’s power Africa’s fund.
Obama does not give us a penny. No government will give us a penny. What they do is lend us money. They could facilitate credit, that is all. This project is financed privately. It will be financed by private investors. Pension funds and development banks will finance the project. Obama’s fund could be one of them; but it is not free money. It is a loan.
So you will secure some amount of loan from Obama’s power Africa fund.
Yes, but it is not a gift we may get some kind of loan. There is no donation. We may get a small amount of grant for risk mitigation. But as to Obama’s fund, they will make fund accessible for you to tap it in that money to do some more work.
Tell me about your negotiation with EEPCo on the power purchasing agreement. Have you reached an agreement on the pricing?
It was a very painful negotiation because we are the first to negotiate on power purchasing agreement. This project is the first of its kind. So it took us a long time. It was a tough negotiation. It is complicated. But now we are almost done. We agreed on price and all those things but, as I said earlier, there are still some technical details that we shall discuss.
When do you plan to start construction?
We shall start mobilization and construction next year. In March next year we will start to drill. We will drill down to 3000 meters. We will have a big mobilization of resources. In 2015 we will start generating 20 MW. By 2018 we will be generating 500 MW. In the second phase we will generate additional 500 MW by 2021.
What are the challenges you are facing?
I am not the type of person who wants to complain. When I face a challenge I think of the way of overcoming it, instead of sitting and complaining. There could be some issues but I discuss the matter and resolve the problem. When somebody says no to you it is not because of adversary motives but he or she wants to understand what you are trying to do. And it is my duty to explain my work and convince them to give me permission.
Do you have another investment project in the pipeline?
There are other projects I am working on but I do not want to talk about that now. I will make an announcement when the right time comes.
Do you have any final words?
Ethiopia is endowed with so many natural resources. So much has changed in this country. It is moving fast forward. Now Ethiopia is one of the fastest- growing economies in the world. We have the potential. If we concentrate and work hard we achieve much more than this. We have lots of good things. We are talking about becoming a middle-income country; but we can go further if we utilize our resources.