Koror -- Despite broad support from Palau congressmen, the Council of Chiefs, Governors and Speakers Association, the Senate rejected the much-touted power purchase agreement with Engie EPS.
In a 10 no and 1 yes vote, the Senate did not support the deal stating that it is “not convinced that this PPA is the best deal for Palau.”
Congress's support is needed to grant Engie a sovereign guaranty to discharge the liability to the government in case of payment default that could burden the citizens into paying the cost in the event of a default.
In an earlier statement, President Tommy Remengesau said the 30-year agreement would bring down the price of electricity and accomplish the renewable energy target the country set in the wake of the Paris Climate Agreement. Under the rejected agreement, the company would also shoulder all the entire cost of the construction of the project.
By 2025, Palau aims to achieve 45 percent renewable energy target, as well as a 22 percent reduction in its energy sector emissions below 2005 levels.
Nick Davis, CEO of Grid Market, in an earlier interview, said that the project would provide Palau with a “ great showcase and a great marketing benefit,” but will not be a great financial deal for Engie.
“Engie won’t see a dime of anything but marketing benefit for well over a decade, if that, and they are now struggling to even get a ratified commitment that the bills will be paid and the project won’t be nationalized."
Solar panels at the Capitol Building in Melekeok State Palau. Photo by Richard Brooks
"To be absolutely clear: no one involved in this process receives a bonus for convincing Palau to take a higher tariff or takes a penny of the PPA to buy a Ferrari the higher it is negotiated. The goal is and has always been to deliver the lowest possible cost to Palau,” Davis said.
In a report on Dec. 6, the Senate Committee on Public Utilities, Communications, and Housing Development said that although the lawmakers support clean and renewable energy, it should something that is affordable to the people.
The committee said the bill has many red flags, among them that the agreement did not comply with the law and was immediately accepted without it going through the competitive bidding process. “The committee is not persuaded that there was a competitive bidding process which resulted in the selection of Engie EPS.” the report stated.
The panel said that if the project went through a legal competitive process, “Palau would have received the best possible deal.”
The majority of the senators also did not agree to give Engie, the tax exemption for 30 years which the company sought, which would have meant a sizeable amount of revenue loss for Palau.
The offered rate of 20 cents per kWh for the 30-year duration is too high it said.
The committee also expressed concern for the Remengesau administration insistence on granting Engie a sovereign guaranty that could burden the citizens into paying the cost in the event of a default.
Earlier Palau said Engie will build a 100MW microgrid and although the companies behind the project have no background on solar energy, this project will showcase the country as having the “largest ever microgrid spanning diesel, solar and battery energy storage.”
But the Senate said the agreement had too “many unknowns.”
And in rejecting the agreement, the Senate has also taken a clear position that no deal is a better deal for Palau than what was being offered. Meanwhile, there has been no response from President Remengesau following the Senate rejection.
The Senate counterpart- the House of Delegates- gave its full support to the president and the agreement.
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