Interview with Mr. Michael Wehinger, Head of the Department West Africa at the KfW Group, Frankfurt am Main
SenGermany: Mr. Wehinger, since when have you been responsible for West Africa at KfW?
Wehinger: I have been responsible for West Africa since early 2015. Previously already, I had numerous points of contact with Africa within the scope of my professional activity in the business segment 'KfW development bank' extending over more than twenty years now.
La SenGermany: Then let us talk about Senegal today. What projects has the KfW Group completed in Senegal in the last five years?
Wehinger: KfW is in charge of establishing the financial cooperation with developing and emerging countries on behalf of the German government. Previously the cooperation with Senegal extended over a larger number of areas. We had projects in the area of decentralization, peace promotion, primary education and employment support for young people. After the tragic ferry disaster (Le Joola) on 26 September 2002, we additionally financed on behalf of the German government a ferry for the access to Casamance. Apart from that, several measures were taken in the energy sector. Both governments decided a few years ago to focus the German-Senegalese cooperation on the energy sector, where the emphasis is placed on the renewable energies, the energy efficiency and the supply of electricity to rural areas. This is the reason why new projects were exclusively started in this sector in the last few years.
SenGermany: A call for tenders has just been issued in the energy sector, which has already been published on the website of GTAI (German Trade and Invest). Can you give us more detailed information in that respect?
Wehinger: The tender concerns deliveries and services for our project to promote the renewable energies, and here primarily photovoltaics. The project covers a grid-connected photovoltaic (PV) system of 15 MW in the region Diass and seven other solar PV hybrid systems in medium-sized and small island grids in rural areas of the country. With this project we support the policy of the Senegalese government, which intends to increase the share of electricity generation from renewable energy sources to 20% of the total generation until 2020.
SenGermany: Rural areas actually means: small needs. However, many industrial enterprises are planned to be established in one of the regions (in the vicinity of the new airport of Diamniadio), where one of the power plants shall be constructed with a capacity of 15 MW. How do the small power plants fit in well with the industry?
Wehinger: That is quite true: Small power plants for small consumers, such as small businesses. We have observed a considerable improvement in the business activities of small enterprises in the rural area, and also in small-town structures, in cases where the access to electrical energy is enabled. Smaller photovoltaic systems, which can be used to operate island grids and at least partially make it possible to switch off expensive diesel generators, thus make a big difference for the small business and trade. The photovoltaic plant located in the vicinity of the airport supplies the local free-trade zone with electricity, and also feeds power into the integrated grid. This will also deliver benefits to bigger, partially industrial enterprises.
SenGermany: How are your services subdivided in the energy sector?
Wehinger: Please note that in the energy sector we developed an approach heading for multiple directions. First, the installation of photovoltaic systems. Secondly, we support the government in upgrading the power grid and lowering the loss of efficiency. Then we promote rural electrification through island grids and the further expansion of renewable energies. Not least, we are also involved in the expansion of a regional integrated grid with the neighboring states Guinea, Gambia and Guinea-Bissau. The power fed into this grid will primarily be electricity from hydropower.
SenGermany: You say 'regional', which means Senegal and its neighboring countries. That is certainly a major project. What progress have you made?
Wehinger: It is indeed one of the biggest projects in that region, which has been prepared jointly with other investors and several states. The project is supported by the OMVG (Gambia River Development Organization). Currently the project is going to enter its implementation phase. The overall financing could be secured by contributions from seven international investors and the OMVG member states. All financing contracts have meanwhile been signed. These days, the tender procedures for the deliveries and services pertaining to the individual batches and components of the integrated grid are in progress.
SenGermany: Can you already specify an amount of financing?
Wehinger: KfW contributes an amount of just under 25.6 million EUR out of funds of the German government.
SenGermany: Where will the electricity come from?
Wehinger: One of the power plants intended for feeding power into the grid, namely the hydroelectric power station Kaléta in Guinea, has meanwhile been completed to such an extent that it generates electricity. A further hydroelectric power plant located at the border between Guinea and Senegal will be realized in parallel with the works on the regional integrated grid. This power station will be linked to the even bigger transmission grid of WAPP (West African Power Pool), which will extend from Nigeria to Senegal, Mali and Mauretania. Therefore your question has actually not yet been answered by making reference to the aforementioned power plants.
SenGermany: How does the technical configuration look like?
Wehinger: The fact with renewable energies is that changes in the wind force or in the channel flow of rivers, or in solar radiation lead to fluctuations in the electricity generation at the respective locations. This is a problem we also have in Germany. Let us assume that Island grids are installed everywhere. In such event a solar-based island grid would have no electricity, when the sun is not shining during longer periods. However, the existence of an integrated grid makes it possible to connect sun-intensive locations with locations for wind and hydroelectric power. Periods with a lack of sun exposure at one location can be much better bridged through the network, as it is likely that just now the sun is shining elsewhere, or the water reservoirs are full due to the rainy season, or the wind is blowing. That is the advantage of a regional integrated grid: No matter where electricity surpluses are just now generated, they can easily be exported to the neighboring countries, and will improve the power supply there. It is therefore a process of 'give and take', where all parties involved will be on the winning side.
SenGermany: Senegal will cover 20% of the electricity demand with renewable energies. What percentage of electricity needs will be covered by your project? Can you specify any figures?
Wehinger: Based on the current production capacity, our solar project represents a share of around 3%. On the other hand, it is difficult to ascertain the share of renewable energies generated by the regional integrated grid, as the answer depends on where and how much electricity is demanded, and how much money is invested into production at specific locations. One piece of information is, however, important: In Senegal, electricity is at this moment especially generated by burning diesel and fuel oil. This method is very expensive and has a severe impact on the climate. The new integrated grid and the investments in photovoltaics will make it possible for Senegal to purchase more climate- and environment-friendly electricity, which moreover will be produced and purchased at considerably lower prices in the near future. On balance, the resulting figure will at any rate be more favorable for Senegal.
SenGermany: Partially the electricity shall also be generated through coal from South Africa. I wonder how a country like Senegal, which has no experience with coal-fired power generation, might be able to also protect the environment. Did you raise this question prior to financing?
Wehinger: Our projects do not serve to promote coal-fired power plants. In this context the German federal government formulated a general position, which is not only aimed at Senegal and says that the German state is no longer willing to support the coal industry with financial investments. KfW follows this rule. In the light of these objectives, we consider our cooperation with the Senegalese government in the expansion of renewable energies, the promotion of energy efficiency and the regional integration through an integrated grid to be a good approach.
SenGermany: You have the electricity company Senelec (a state-owned power corporation) as partner for the existing call for tenders in Senegal. How well has this collaboration worked so far?
Wehinger: The state-owned energy supply company Senelec represents the key actor in the grid-connected power supply system of the country and, in its capacity as grid operator, is also an important partner for the regional transmission systems. The interaction is cooperative and trustful. All projects have currently reached the level of concrete implementation on site. Of course, a project of this order of magnitude implies new challenges, even for an experienced institution like Senelec. With regard to project conception, Senelec itself has therefore attached great importance to consistently developing its own know-how. We gladly support these efforts. I am therefore confident that Senelec will remain a good and competent partner.
SenGermany: Do you also have other partners?
Wehinger: An important partner of the German development cooperation, whom we should not forget, is furthermore the state agency for rural electrification (ASER), which is responsible for the electrification of rural areas. For several years now, we have been cooperating with ASER as regards the concession model for rural electrification, and in this field we finance the electrification activities in the regions Kaolack, Fatick, Nioro and Gossas.
We are happy about the good cooperation with Senelec and ASER!
SenGermany: Another priority from the perspective of German entrepreneurs is Euler Hermes. As Dr. Norbert Kloppenburg, member of the KfW Board, said at the event "Africa meets Business" in the German Bundestag on 16 March: Apart from Euler Hermes, there are further collateral instruments. What other assistance services can the German companies expect?
Wehinger: Another intensively usable guarantee instrument presenting itself for medium-sized enterprises is the "direct investments abroad" cover (DIA) provided by the federal government, which hedges equity capital against political risks.
SenGermany: Let us come back to the energy issue: Can you explain the decision-making procedure, based on the example of the call for tenders published for Senegal at GTAI in May 2016?
Wehinger: Normally all projects financed by us, just as deliveries and services going beyond a specific size category, are publicly advertised for bids at international level. All international calls for tender are published on GTAI's homepage and, of course, by the project executing organization. This leads to the memorandum issued by GTAI. The project executing organization remains in control of the process, but KfW reserves co-determination rights at different levels of the tendering procedure, so as to ensure a transparent process and appropriate technical solutions.
Michael Wehinger and Ibrahim Guèye
SenGermany: The pre-qualification procedure has just been initiated for the project?
Wehinger: Correct. Let us assume that an entrepreneur says: "I'm interested in Senegal. I have competencies in the area of tendering and believe I can meet the criteria listed in the tender documentation." Then the entrepreneur submits his pre-qualification documents to the project executing organization. The candidates are assessed in accordance with the agreed criteria, thereafter a preselection is made. Those candidates, who do for instance not meet the set of criteria due to little relevant experience, will be excluded in the further process. The other candidates are requested to submit a bid in accordance with the tender specifications. These bids are then evaluated by the project executing organization in its capacity as tendering body. Thereafter the institution makes a proposal for the award of contract. We at KfW have the task of acting as professional coach during the entire awarding process, and to check the process in terms of transparency. Unless we raise objections, the project executing organization can award the contract.
SenGermany: And how long does such a procedure last?
Wehinger: A lot depends on the legal framework conditions existing in Senegal, which are unknown to me in detail. But I think that the procedure for an investment of this magnitude will extend over a few months.
SenGermany: In Senegal, many people say that although it is a good thing to promote the energy sector, the country is in urgent need of having other areas promoted, such as waste incineration or the processing of fruit and vegetables. They wonder why these areas are not considered by the German EZ (development cooperation)? Let us take the mango as an example: Of 150.000 tons harvested each year, 15% are exported and 3% are consumed locally. 82% rot under the trees. So the experts wonder why such an expensive commodity is not processed. Are these issues being discussed at KfW?
Wehinger: We are certainly very familiar with Senegal and know that this country has a lot of potential in the agricultural sector. The fishing industry has likewise a solid growth potential. And there are also competitive commercial enterprises manufacturing good products. But: Even if the German EZ contributes considerable resources to the cooperation with Senegal, it is still necessary to focus on specific target areas, in order to obtain good effects. The target areas of cooperation are determined between the two governments. In my personal opinion it makes sense that the German EZ kept focusing on the energy sector. Because, on the one hand, energy is a major bottleneck factor for the economic development of Senegal. And, on the other hand, Germany as a whole and KfW in particular can contribute a great deal of experience and specific know-how to that cooperation. Ultimately even the facilities mentioned by you need "electricity" for processing the agricultural products.
SenGermany: Let us get back to the 'waste disposal' topic, as Dakar sinks into waste and, with a population growth of approximately 3% per year, the 2.5 million inhabitants of this city will be twice as many in 20 years. In other words, nobody can imagine how waste disposal is to function under such circumstances, as Dakar is a peninsula which cannot become larger. Since the technology is available in Germany, have you conducted similar projects in other developing countries already?
Wehinger: Absolutely! In the waste sector, we gained experience in a number of partner countries. Senegal is not alone with that problem. Besides, our experience shows that it is by no means easy to implement a regulated waste disposal, as there is not only a need for the waste incineration plant or a recycling system, but also for logistics making it possible to collect and sort the waste. There are, however, encouraging examples showing that the system can work in developing countries. But we really must set priorities and, in the next few years, energy is the paramount topic for us. And at the end of the day, the challenges to be met in the future energy supply will not become smaller for Senegal.
Mr. Wehinger, thank you so much for this Interview.
Interview conducted by Ibrahim Guèye