Implementation agreements and 25-year power purchase agreements (PPAs) were signed on 19 December by project companies, the Ethiopian government and Ethiopian Electric Power (EEP) for the Corbetti and Tulu Moye geothermal plants in Oromia. Both multi-phase projects are 520MW and are expected to cost around $2.2bn to develop. The agreements are expected to be taken to parliament for ratification early next year and drilling is expected on the first production wells at Corbetti in 2018.

Some $150m has been committed in equity to the projects for the initial phases, which seek to demonstrate the resource and leverage debt funding for further development.

According to Corbetti Geothermal plc, the agreements are revised versions of contracts signed during a visit by former US President Barack Obama in 2015 after new regulations and laws were enacted by the Ethiopian government. The new agreements will see the plants operate for 25 years, at which point ownership will be transferred to EEP.

Corbetti has been under development since 2009. Iceland’s Reykjavik Geothermal began active development in 2011, with Berkeley Energy – as manager of the African Renewable Energy Fund – and the Iceland Drilling Company joining as sponsors in 2014. The Private Infrastructure Development Group’s InfraCo Africa became an equity holder in 2015, committing $15m to the project.

“Corbetti is a truly landmark project for Ethiopia being the country’s first independent power project to sign a PPA and the first large-scale project to harness Ethiopia’s valuable geothermal resource,” said Corbetti Geothermal chief executive Steve Meyer.

There have been a series of delays for the project as the government has put in place a legislative and regulatory environment capable of sustaining foreign investment into geothermal plants in the country. The most recent delays centred on difficulties setting up offshore special purpose vehicle required by lenders to facilitate foreign currency transfers via escrow accounts.

Power Africa has actively supported the project, which has also received funding from the UK government and the Geothermal Risk Mitigation Facility, which provided bridging finance. The East Africa Geothermal Energy Facility and African Legal Support Facility were also involved to build capacity at government institutions.

Corbetti is located on the Corbetti Caldera, 250km south of Addis Ababa in the Oromia region. It is expected to be only the second privately financed geothermal project in sub-Saharan Africa. The project will be developed over several phases, with the first phase seeing six exploratory wells drilled to feed a small 10MW power plant, commissioned in late 2019 or early 2020. This stage will be entirely equity financed and is intended to demonstrate the viability of the resource and the PPA in order to raise further investment.

A second phase will raise senior debt for the drilling of a further 9-13 wells and a 50MW commercial power plant. Depending on the success of the first two phases, further phases could expand capacity to 500MW over a period of around a decade and at a cost of roughly $2bn.

Tulu Moye

Tulu Moye is also located in Oromia, in an area around the Tulu Moye volcano. The project is a joint venture between Thierry Déau’s Meridiam and Reykjavik Geothermal. The area is believed to have one of the best geothermal resources in the world, potentially able to sustain more than the initial 500MW. The developers plan to develop 50MW by 2020 and the full 500MW by 2023.

EEP chairman Debretsion Gebremichal, who is also communication and information technology minister, said: “We believe Ethiopia has over 10,000MW of geothermal potential which provides baseload power and is a perfect complement to our over 50,000MW of hydropower potential”.   

EEP chief executive Azeb Asnake said that, “the additional 500MW that Tulu Moye will add to the Ethiopian energy mix will complement our hydro and wind resources making the system more reliable”. Geothermal power is seen as a useful technology for managing hydropower to avoid load shedding during droughts.

Reykjavik Geothermal is also working on the Abaya geothermal prospect, which the company believes may also be capable of supplying enough steam for a 500MW plant.