Saturday, September 13, 2008

Aggreko tragedy

Welcome to the Third World.

With a flip of the switch, Gov. Benigno R. Fitial added Aggreko's generators to Saipan's dilapidated power grid. Aggreko is the Dial Rent-to-own of the power industry, with booming sales in developing countries. I ran across this fascinating Newsweek piece after sorting through pages of Google listings on Aggreko contracts.

It's a proposal that has come up in neither President Nicolas Sarkozy's energy plans for France, nor President Vladimir Putin's power diplomacy for Russia, nor Britain's debate over nuclear plants. But then, it's hard to imagine temporary electric generators' being held up as a viable national energy plan.

In fact, that's exactly the plan in much of the developing world, as governments coping with inadequate infrastructure and the galloping energy demands of growing economies try to keep the lights on, whatever the cost. The portable-generator business is booming—already, temporary electric generators (not too far removed from what rural homeowners in the West might have in their basements) light towns and factories from Yemen to Venezuela, Sri Lanka to Mongolia. In Africa, diesel engines supply 50 percent of the power grid in Uganda, 10 percent in Kenya and similar proportions in Mauritania, Angola, Sierra Leone and the Democratic Republic of Congo. In nearly every market, the No. 1 provider of this power is a little-known British company called Aggreko, which makes electricity generators in Dumbarton, near Glasgow, and rents them to energy-hungry clients all over the world.
So, unlike many others, I think it's entirely possible this was a straight deal with no hanky-panky. Still, my BS detector blipped when Aggreko sales director Steve Dunlop was quoted as saying "It's been three years in the making." Hmm, the dusty Request For Proposal used for this contract was announced on Sept. 19, 2006. The following statements added more blips:
Aggreko was contracted to initially provide 10 megawatts of power today, but Dunlop decided to add 13.

“I realized the situation on the island, and I was quite keen to add more to help,” he said.
Well, it's nice Dunlop is civic-minded, but I'd still rather have someone else make the decision. From the Newsweek story:
"What politicians don't want are people complaining that the lights won't go on … so if you're Aggreko and you're on a six- or 18-month project, that often gets extended because of the dynamics of demand. Once you're part of the grid, you're part of the grid," says Wayne Gerry, an analyst at Dresdner Kleinwort.
It appears that, after lengthy consultation with, uhh, someone Fitial has decided that "a private company should do the power generation and CUC should continue with the distribution." Can you say "line loss"? How about "management"? There should be public discussion of the options, not closed-door discussions with the "experts" who got us into this mess. Those are probably the same experts who led him to this conclusion: "We don't need to wait for the engines to be totally rehabilitated,” he said, adding that most are unable to be repaired. Yeah, let's just move on to independent power producers.

If a private company is responsible for island power, it can make its decisions in private. Public decisions should me made in public.

Meanwhile, Agrekko stock keeps climbing on London's "Footsie" stock exchange. With rental power costing about three times more than permanent power, I'd still advise buying.

Italics in this blog are added for emphasis.

Oh, just got back to Frederick Prosser's excellent letter to the Saipan Tribune. While I disagree about privatization-- if it's complete and transparent-- he has three questions that must be answered by the Legislature if it hopes to keep a shred of its remaining integrity: "There have been three decisions made that have hurt CUC. First was the change in fuel from heavy oil to diesel. We all know who made that decision. Second was the removal of the electronic reclosures from the power distribution system. This left the power plant without any protection. Now every time there is a problem with any part of the distribution system, it is going to trip the power plant offline and we have “islandwide power outage.” It also increases the risk of damage to a generator (Who made this decision?). Third, the use of non-treated water to cool the engines in the power plant. The water used to cool those engines is supposed to be purified water that will not let slag deposit in the engines blocks, the pipes to and from the radiators and the radiators themselves. OK, what is slag? Take a pan and fill it with CUC water. Let most of the water boil off. All the white deposit on the inside of the pan is slag. That is what is building up in the cooling systems in the power plant every day now. (Who made this decision?) We need to know who made these decisions and hold them accountable for their actions."


Saipan Writer said...

I liked Fred Prosser's letter, too.

And thanks for digging up the Newsweek information on Aggreko.

I'm bothered that this is not a solution first-world countries embrace, but is a 3rd world country solution. I hate to see the CNMI looking and acting like the 3rd world.

I'm also confused--if this was 3 years in the making, why was it a sole-source contract? What is the emergency that means we can't have public bidding? It does seem that Aggreko would like win the bid since they seem to have the most experience, etc. Still, following procurement policies would be nice.

Bruce A. Bateman said...

Good sluthing, Ken. Thanks for the info.

Poser: Your old pickup breaks down. You've got to fix it up to sell it because no one will buy it ragged out. Meanwhile you have 50 friends and relatives who are counting on you to bring them (pick something...cold beer, watermelons, Depends)that you promised to deliver to them daily.

Do you rent a truck to get you by while the junker is being repaired or just let the contractees do without?

(By the way, the dumb bastards are paying you $50 per watermelon).


Jane, the claim is there was an open bid process and Aggreko was the winner. I haven't seen it so don't know for sure, but Muna said it was the result of a bid process 2 or 3 years ago. It would be worth checking out.

KAP said...

Dunlop's 'three year' statement may be faulty memory; the RFP was two years ago. Neither paper has explained the contract very well from my point of view, but there's an old Marianas Variety article that's adequate.

Prosser's argument that someone is trying to run the system into the ground for nefarious purposes needs to be addressed, though I usually don't buy into conspiracy theories.

And I'd like outside experts to look at the engines before we scrap them and go on a shopping spree.

I agree that we're painted into a corner, but shouldn't we take a look at the floor plan before we start on another coat of paint?