How did Karpowership secure the agreement with Ghana's Ministry of Power to supply the country with two 225 MW Powerships?
Ghana suffers persistent and unpredictable shortages in power supply, which the locals call dumsor. The Ministry of Power was looking for a medium-term, fast-track solution to bridge this gap between demand and capacity. Karpowership's Powerships have the advantage of being quickly deployed. This is an ideal solution for the current power deficit, staving off the negative social or economic impact that power shortages would otherwise have on the country. The first Powership is located in Tema, while the other will go to either Sekondi or Ofosu.
What kind of infrastructure do you need for your ships to be able to operate here?
The main advantage of a Powership is its self-sufficiency. The Powerhips contain a full power plant, including the substation, which is unique among most of the rapidly deployed generation assets. The only infrastructural constraint is the transmission to land capability. Ghana has fairly robust infrastructure in this sense, not having suffered from a lack of investment or maintenance. Our transmission lines at the Tema site are already completed and in place, so the project will be operational within a few weeks of the Powership's arrival. The second Powership is expected to be delivered in the 2H2016.
What role have your partners played in Ghana and how is your relationship with them?
All of our stakeholders have been supportive and welcoming. The Ministry of Power has been helpful as our off-taker. This kind of relationship is a first for Ghana and also a first for Karpowership. There is always a learning curve in new partnerships, particularly when using a business model such as ours that many people do not yet understand. It is understandably difficult to grasp the concept of the Powerships without first seeing them in operation. The project will get a lot more support and understanding once Karadeniz Powership Aysegul Sultan begins functioning as a power station.
How big are these Powerships and how long will they be deployed in Ghana?
A Powership is about the size of a football pitch. A 225-MW power plant would require one and a half times that space. We have signed an agreement to work with the Ministry of Power for 10 years, which is a standard duration for medium-term projects. Most independent power producers (IPPs) work under 20-30 year contracts. As the portfolio in Ghana develops and as the government realizes its vision over the next 10 years, bringing in a 20,000-MW coal plant with an additional 1,200 MW from other stations, the Powerships will be uniquely positioned. When the Powerships are no longer needed, we can move our assets elsewhere. Implementation is often slow on projects like these, so contracts like ours are commonly extended, which is a possibility for us as well.
What fuel do your plants use?
Our engines can run on heavy fuel oil (HFO) and natural gas. This is a game changer for Africa, because HFO is not an option that is widely available in West Africa. HFO is cheaper than diesel and natural gas, so it offers a potential advantage in savings. Half of the price of electricity goes toward fueling the costs of operating a power plant. Significant savings can be achieved by using HFO, which can then be passed on to the Ghanaian consumer. In terms of price differentials, the spreads have actually increased over time, but right now there is about a 30% discount with HFO.
Will Karpowership extend its presence throughout the region beyond Ghana?
This is a part of our plan. We provide utility scale solutions, and the Powerships have the flexibility to be quickly deployed, making our value propositions a plug-in-and-play scenario. There is a shortage of affordable power in West Africa, as is the case throughout most of the continent. Karpowership's Powerships offer at least a partial solution to those challenges. Our strategy in West Africa is to make Ghana our power hub. Ghana is the sweet spot in this region and it offers easy access to other countries such as Cote D'Ivoire, Togo, Benin, Nigeria, Mali, and Burkina Faso. This is a major advantage, especially given the overall business environment and stability here. We expect to add more megawatts to our production capacity in Ghana over the next couple of years. West African economies are growing fast and they will need access to quick power before they can develop their own energy infrastructure. Ghana has the connections and grid strength to get things done from this country all the way to Nigeria to the east and Burkina Faso to the north.
Given the global potential of your business model, where will your fleet be deployed next?
Once we bring in our new 235 MW Karadeniz Powership Aysegul Sultan, our fleet capacity will exceed 1,500 MW. We are projecting to double our current size in 2016, and perhaps triple it by 2018. As of now, we have Powerships throughout Africa, Asia, and the Middle East. We anticipate that markets in Central and South America may soon call on Powership services as well. The Powerships were designed in accordance with our founders' “one world" philosophy to improve living conditions for people all over the world. Through Powerships, we can bring what people need wherever and whenever it is needed.
What are your expectations for 2016?
There is a lot of potential for further business opportunities in Africa due to widespread deficiencies in generation. We will continue to look into those markets and make headway. We are always looking for partners, and ideally we will work with a local partner in whichever market we enter.