An international company that has invested US$16million (T$36.8m) to increase Samoa’s renewable energy generation has threated “formal action” against the government.
The threat by First Solar cites “serious financial impact,” “ongoing loss of revenue” and the loss of confidence to invest further in Samoa.
A letter signed by Jack Curtis, Regional Manager - Asia Pacific First Solar, leaked to the Sunday Samoan, says the dispute is over the treatment of V.A.G.S.T in the existing Power Purchase Agreement (P.P.A.).
The company accuses the Electric Power Corporation (E.P.C), and the Office of the Regulator (O.O.T.R.) over a proposal to enforce new feed-in-tariff (FiT) regulations on existing projects.
“First Solar has lost confidence in Samoa as a stable and secure country for investment,” the letter reads.
The letter, dated 28 February 2017, is addressed to the Chief Executive Officer of the Ministry of Prime Minister and Cabinet, Agafili Shem Leo. Copied are Prime Minister Tuilaepa Sa’ilele Malielegaoi, Minister of Works, Papali’i Niko Lee Hang, Minister of Public Enterprises, Lautafi Fio Purcell, Minister of Communications and Information Technology, Afamsaga Rico Tupa’i and the Minister of Finance, Sili Epa Tuioti.
Mr. Curtis’s letter is a last attempt by the company to reach a constructive resolution with the government agencies involved.
“The aggressive approach taken by the O.O.T.R. on its proposed FiT regulations — despite SfS’s executed P.P.A. with E.P.C. — also presents an unmanageable risk for SfS and First Solar."
“Beyond the significant impact to our investment, which would not be feasible at the proposed reduced FiT rate of US$0.15 per unit, the proposed changes will negatively impact all existing renewable energy projects and unequivocally damage the future of the renewable energy industry in Samoa through the curtailment of private sector investment.
“Despite efforts made by SfS, the proposed regulations have been developed without consultation with key investors and/or financing corporations such as the International Finance Corporation (I.F.C), Asia Development Bank (A.D.B) and ANZ Samoa Bank.
“In all our dealings, we have never witnessed a Government regulator enforce legislative changes on existing projects that are in operation with a formally executed P.P.A,” the letter reads.
“The actions taken by E.P.C and O.O.T.R and the treatment of SfS by the Samoan Government (and its related institutions) has decimated our confidence in the country and raised sovereign risk concerns for current and potential investors from all industries vital to Samoa’s economy."
“We have no doubt this has caused irreparable damage to the credibility of Samoa and the Pacific region as an investment destination for multinationals."
“Unfortunately, and despite the initial success of the Project, the current issues validate the challenges and risks often perceived by private sector investors in Samoa.
“This is a clear signal that the investment environment is not stable. Given the importance of this matter for Samoa, we formally request that the Samoan Cabinet, E.P.C and the O.O.T.R:
1. Commit to the agreed PPA rate of $O.33USD exclusive of VAGST; and
2. Confirm that any regulations, including the draft FiT currently in development by the O.O.T.R, will not be applicable to existing renewable energy projects with formally executed PPAs (including SfS).”
Mr. Curtis wrote that if “confirmation of the above is not received promptly, First Solar will consider taking formal action.”
Contacted for a comment, the General Manager of E.P.C, Tologata Tile Tuimaleali’ifano, confirmed that the E.P.C board is “presently negotiating a contractual dispute with a local Independent Power Producer, Solar for Samoa Limited (“SfS”), an incorporated Samoan company of which First Solar is its majority shareholder.”
In a letter, he wrote:
“The EPC Board and Management has been requested by the Samoa Observer to comment on a letter that has been sent by Mr Jack Curtis, Regional Manager of Asia Pacific for First Solar FE Holdings Pte Limited (“First Solar”) Requesting a Directive regarding the Solar for Samoa Ltd Power Purchase Agreement (“PPA”) and Feed-in-Tariff Regulations.
The letter from Mr Curtis has been written directly to the Secretary to Cabinet/ CEO Ministry of Prime Minister & Cabinet and copied to the Honourable Prime Minister of Samoa and to certain Cabinet Ministers. As EPC is not a party to Mr Curtis correspondence, it is not appropriate for EPC to comment.
The EPC Board and Management can confirm that it is presently negotiating a contractual dispute with a local Independent Power Producer, Solar for Samoa Limited (“SfS”), an incorporated Samoan company of which First Solar is its majority shareholder. EPC & Solar for Samoa signed a 20-year Power Purchase Agreement (PPA) which came into effect 09 June 2014.
The contractual dispute between EPC and SfS is being negotiated in accordance with the dispute resolution process contained within the PPA. As the parties are directly engaged in attempting to resolve this outstanding commercial dispute in an amicable manner, it is inappropriate for EPC to discuss this matter publically.
The Government of Samoa, the EPC Board and Management of EPC take a strategic decision to invest in renewable energy and to partner with Independent Power Producers such as Solar for Samoa with the view of providing cheaper and more sustainable electricity to the people of Samoa. The Board and Management of EPC take their commitment to provide reliable, safe and affordable power for its customers very seriously and will continue to work in good faith with its Independent Power Providers to achieve this.
Manuia le weekend. Faafetai,
Tologatā Galumalemana Lupematasila Tagaloatele Togia Tile Leī’a Tuimalealiifano, General Manager
When the Sunday Samoan contacted First Solar for a comment, Aaron Hawkins
Senior Manager – Asset Management and Operations and Maintenance, wrote:
“Solar for Samoa and First Solar are currently working with E.P.C to clarify various terms in the existing PPA at the earliest possible time.
“Both parties are seeking a constructive resolution through these discussions. The Samoan Government is aware of this and Solar for Samoa’s ongoing participation in the consultation process being undertaken by the office of the Regulator with respect to it's proposed feed-in-tariff regulations.”