Why dispute between First Solar and the government matters
The simmering dispute between First Solar and the government is a complex matter. And one thing is crystal clear; it’s a tough, tough situation for the government.
Indeed, which ever way you look at it, it’s definitely a case of being caught between a rock and a hard place.
We say this because the government knows it has signed a bad Power Purchase Agreement (P.P.A) in as far as the benefits for Samoa goes. From the details we’ve seen so far, all electricity consumers in Samoa have a very real reason to be concerned.
You see, if the goal of promoting renewable energy is to reduce to cost of electricity, the deal signed between the government and Solar for Samoa (S.F.S), in which First Solar has heavily invested, is not going to achieve that.
Rather it’s only going to increase the cost of electricity, rendering the government’s renewable energy efforts absolutely useless.
The problem is that a deal is a deal – or that’s what we think anyway.
The government has already signed on those dotted lines and the idea that it is moving to shift the goalposts after it agreed to the details is uncomfortable.
From First Solar’s perspective, this is the government pulling the rug of from under their feet, which they have immediately reacted to with a threat in a bid to protect their investment. And that’s easy enough to understand.
Investors want a healthy return on their money. It’s a global rule in business. The idea that the government signed the deal without understanding details – if you like because that’s how it comes across now – is not First Solar’s problem.
The government was not under any duress to sign the deal. Whoever was responsible for it would have had plenty of time to iron out any details before the Prime Minister puts the final seal of approval on the P.P.A.
And now that problems have arisen, it is an issue for the government to sort out. But it’s not as easy as it sounds though.
This is not one of them backroom deal things where the government can iron out without major implications. We are talking about an issue that affects every household in Samoa, which relies on electricity.
To keep First Solar happy, someone will have to shoulder the burden of expensive electricity and that means you, me and all those silent submissive taxpayers. Electricity by the way is already expensive enough.
For years, the government has been promising cheaper electricity. And despite millions being pumped into efforts to increase Samoa’s reliance on renewable energy, that promise has yet to be delivered.
The deal with Solar first Samoa was supposed to be one of those steps taken to reduce the cost of electricity. Obviously that has not happened and it might not happen.
At the beginning of the month, a letter signed by Jack Curtis, Regional Manager - Asia Pacific First Solar, accuses the Electric Power Corporation (E.P.C), and the Office of the Regulator (O.O.T.R.) of changing the rules to enforce new feed-in-tariff (FiT) regulations.
“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.”
“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 P.P.A rate of $O.33USD exclusive of V.A.G.S.T; 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 added that if “confirmation of the above is not received promptly, First Solar will consider taking formal action.”
Well that’s quite serious, isn’t it? And without knowing the numbers, should Mr. Curtis insist with the threat, it’s safe to say we are talking about millions of tala that will have to come from taxpayers eventually.
Now we’ve heard the political response from Prime Minister Tuilaepa Sa’ilele Malielegaoi.
“This is what you call greedy,” he said. “His greediness led him to what he had done by writing to us, but he is not the person negotiating with the government.”
Tuilaepa said the party negotiating with the government is Solar for Samoa.
Okay then but that’s irrelevant, isn’t it? Whether its First Solar or Solar for Samoa, they are one of the same. First Solar is Solar for Samoa’s financial backer, which makes First Solar the controlling party in this matter because it is their investment on the line.
By the way, when this newspaper contacted Solar for Samoa in Apia, we were referred directly to First Solar for comments. What we got was a very diplomatic response.
The same as the one received the General Manager of E.P.C, Tologata Tile Tuimaleali’ifano.
“The Government of Samoa, the E.P.C Board and Management of E.P.C 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,” Tologata said.
“The Board and Management of E.P.C 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.”
Well good luck with that given the sticky situation on their hands now.
What’s important is that hard lessons are learnt from this nasty mess. One of those lessons is the need to get some competent officials to handle these deals to avoid the international embarrassment the government has once again found itself in.
Have a wonderful Wednesday Samoa, God bless!