Negotiations to acquire Areva plant yet to start

Formal negotiations for the sale of the only desalination plant in the country, the Erongo Desalination Plant, which is owned by mining giant Areva, are yet to start two years after government was given the pre-emptive right to buy the facility for US$200 million (some N$2.9 billion).

Government has however made it clear that it is close to acquiring the desalination plant, located 65 kilometres outside Swakopmund, despite roping in German consultancy firm, Fishner, to carry out a due diligence exercise of the facility a year ago.

The German firm, which was initially hired to consult on the possibility of government building its own desalination plant, compiled a report which was handed to government with recommendations. The document, which was completed in November last year, is said to be before Cabinet who is expected to provide terms of reference to the negotiation team to engage Areva on the planned acquisition.

NamWater Chief Executive Officer, Dr Veino Shivute, is expected to lead the negotiations while Areva’s Managing Director, Hilifa Mbako, is the main negotiator for Areva. It is understood that communications between the two parties have been ongoing after government established its negotiating team. This team had to establish the plant capacity, life-span, possible challenges as well as environmental hazards.

Role players and water watchdogs this week told New Era Weekend that it is important that this transaction is quickly concluded. Government had the first right of refusal to its offer, considering the country`s precarious water situation. It was reported earlier this month that Minister of Agriculture, Water and Forestry, John Mutorwa, submitted a proposal to buy the plant to President Hage Geingob after the government negotiating team drafted and handed their report to him as the line minister.

“After the report was given to us as the ministerial committee, I forwarded it to the president, because he must have an insight into the report,” Mutorwa said. Once Cabinet considers the report, it will make a final decision on the recommended options, including the option of buying the existing desalination plant or building a new plant.

Mbako was however quoted at a recent media conference as saying he does not understand what is delaying this process as several attempts have apparently been made to obtain an audience with the government negotiating team to get clarity. However, the standard response so far has been that the offer is under consideration. Fears have now been expressed that the continued uncertainty surrounding the deal was impacting on the Areva’s time lines to disinvest from the water business. Areva started the disinvesting process with the intention to no longer be part of the bulk water supply business. Areva notes that it is a strategic resource and must be in the hands of government.

Areva has also clarified its commitment to government’s right to have the first option and “because Areva understands government’s pronouncement on assets of a strategic nature, such as this one, that they should not be in the hands of a private enterprise. We therefore do not feel comfortable handing it over to a private enterprise.”

Information also came to the fore that with the current maintenance plan the plant can exist in perpetuity. Only some components of the plant carry an expiry date. “A utility is different from a mine; its infrastructure and the design allow it to function for as long, as you maintain it, but if you bring in a weak operator, who is not able to maintain the plant, then you will have challenges,” said Mbako.

New Era Weekend confirmed that water from the desalination plant is sold at N$42 per cubic litre, compared to ground water, which is sold at between N$10 and N$15 per cubic litre, were unfair considering the high costs incurred in the water production process. Experts say there is a price for desalinated water and there is a price for normal underground water and those two prices are not the same globally. It’s not unique to Namibia; the price of desalinated water is the same all over the world, because of the costs of producing the clean water fit for human consumption. All, the more desalinated water is purchased, the cheaper the price, because the cost of production becomes less.

The Areva desalination plant has a capacity to produce 20 million cubic litres of water and is currently only selling five million cubic litres, mainly to three mines in the region and the Swakopmund Municipality, with the facility’s water constituting 75 percent of the town’s supplies.

Desalination involves the removal of salt from seawater and the purification of it so that it can be safe and fit for human consumption. The desalination plant was originally built to supply water to Areva’s Trekkopje mine and is the first to be constructed in southern Africa. It is located some 30 km north of Swakopmund. It can be upgraded to produce 26 million cubic metres within the existing infrastructure. The plant is currently connected to and supplies water to NamWater through a pipeline feeding from the Omdel aquiver that was completed in August 2013. The current water supply to NamWater from the plant is 5.04 million cubic metres per year.

The plant supplies high quality reverse osmosis water, using advanced membrane water technologies and produces better quality water than the existing underground water resources.

The plant has over the past two years helped relieve the increasing pressure on scarce water resources and guarantees a sustainable water supply to mines and nearby communities during any hydrological drought at the coast. If the Namibian government opts to buy Areva’s plant, the said mines would still have to be supplied with sufficient water, officials have confirmed.

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