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Power Plant and National Electrical Grid 2011-13
Mega-project or mega-problem?

Sentral Eletrika no Rede Eletrisidade Nasional 2011-13
Projeitu boot ka Problema boot?

Updated 5 August 2014

Atualiza iha 3 Junu 2011

This page includes information from 2011-2014. Click here for 2008-2009 and here for 2010.
Pajina ida ne'e inklui informasaun husi tinan 2011-2014. Click iha ne'e atu hetan informasaun husi 2008-2009 ka iha ne'e husi 2010.

Skip down to project status in January or April 2011, or for current information on this page.

This web page will be updated regularly as we obtain new information, which is usually added at the bottom of the page. Click here to skip to sections below on:

Pajina web ida ne'e regularmente sei hetan atualizasaun wainhira ami hetan informasaun. Click iha ne'e atu hetan sesaun sira iha okos ne'e:

Documents and links (in reverse chronological order)

Dokumentu no ligasaun sira

2011 State Budget

The proposed State Budget for 2011 allocated $166 million for this project for 2011 alone, comprising more than half a new Infrastructure Fund which will be difficult to oversee and can be carried over between years or moved between projects without Parliamentary approval. However, this is far less than the $380 million Timor-Leste is committed to pay for this project during 2011.

La'o Hamutuk asked the National Parliament not to "approve more money for the Heavy Oil project and national electric grid until the Government has provided accurate, comprehensive information about the project’s many problems, ...." In a follow-up letter, we explained the contradiction between the $166 million allocated for this project in the 2011 budget and its contractual obligations.

On 27 January 2011, during the plenary debate on the 2011 State Budget, Parliament increased the electricity project allocation by $282 million (to a total of $447 million in 2011). The following day, the Deputies increased the authorized withdrawal from the Petroleum Fund for this year to $1,055 million, a $321 million increase in excess of the Estimated Sustainable Income. Three-quarters of the $599 allocated to the new Infrastructure Fund for 2011 will pay for this one project.

Orsamentu Jeral Estado 2011

Proposta  Orsamentu Jeral Estado 2011 aloka tokon $166 ba projeitu ida ne'e ba tinan 2011 deit, liu metade Fundu Infraestrutura ne’ebe sei difikulta atu tau matan no implemeta durante tinan barak ka muda ba projeitu seluk sein aprovasaun Parlamentar. Maske nune’e, montante ne’e menus liu montante tokon $380 ne’ebe Timor-Leste iha komitmentu atu selu ba projeitu ida ne’e durante 2011.

La'o Hamutuk husu ba Parlamentu Nasional atu "La bele aprova orsamentu tan iha oin mai ba projeitu Oleu Pezadu no Linha Transmisaun, too Governu fo informasaun ne’ebe los no komprehensivu kona-ba projeitu ne’e nia problema sira, ...” Iha karta esplikasaun tan, ami esplika kontradisaun entre tokon $166 ne’ebe aloka ba projeitu ne’e iha orsamentu 2011 no projeitu ne’e nia obrigasaun kontraktual nian.

Iha Janeiru 2011, durante debates plenaria nian kona-ba Orsamentu Estadu 2011, Parlamentu hasae alokasaun ba projeitu eletrisidade nian ho tokon $282 (total ba 2011 tokon $447). Hafoin loron ne’eba, Deputadus sira aumenta atu fo autorizasasun hodi foti osan husi Fundu Petroleu ba tinan ida ne’e ba tokon $1,055, liu tokon $321 ba Rendimentu Sustentavel Estimadu. Tres kuartus husi tokon $599 ne’ebe aloka ba Fundu Infraestrutura foun ba 2011 sei selu mos projeitu ida ne’e.

On 10 January 2011, the Finnish company Wärtsilä announced that it had received a major power plant order from Timor-Leste via Puri Akraya Engineering, for seven Wärtsilä 18V46 generating sets with a gross output of 120 MW for the Hera plant, and were expecting another order for Betano. Wärtsilä  says that 50 MW of Hera is to be operational by the end of 2011, with the rest by the first quarter of 2012, with Betano following six months later. This is a more ambitious timetable that PAE's November project plan -- perhaps political factors, rather than technical ones, are setting the dates.

The January 2011 report from ELC/Bonifica portrays a drastic deterioration in the quality of the work, although the pace has picked up slightly. A contract was signed with the Indonesian company Tehate for the Liquica-Maliana-Suai-Cassa-Betano part of the grid, after negotiations with DCP fell through. Wärtsilä has begun work, and invited EDTL to send people to Finland and Italy in March to observe factory testing of the first three generator sets.

 Here are a few telling quotes from the January report:

  • "[EDTL] was disappointed during the visit made in Dili substation on January 20th to see the site in a state of neglect."

  • "with the present trend we believe that the Contractor is not able to meet the completion dates given to H.E. the Prime Minister."

  • "From Liquica substation up to Lospalos substation ... no substantial progress is visible. The number of towers in this north part of the Power Grid is 554, at the end of January a total of 249 towers were erected, but many of them have missing pieces, are incomplete and require additional time to make an overhaul."

  • "The situation which seemed had improved as far as the quantity of the work is concerned had been badly darkened and affected by the quality of the workmanship. A lot of reparation works are required and therefore towers can not be considered completed."

  • "The Contractor is invited once again to take action on the issue of the Timorese workers to be trained as tower erectors."

  • "The conductors strung in the section of 10 towers in Hera-Manatuto has been heavily damaged and must be dismantled and done it again."

  • "The heavily deterioration of the quality of the workmanship in the transmission line, the tower erection and the stringing of the conductors are carried out in a manner which do not have a proper word to be described — ghastly — horrible, the photos produced as evidence of the quality of the work show that workers are not at all qualified rather they are common labourer. The Contractor is warned that all the towers with defects and conductors damaged will not be paid for till all adequate reparation is carried out. The Consultant had shown a lot of tolerance collaborating in order to have the work done fast, but there is a limit to be tolerant .... Those workers responsible of this situation are incompetent and should be sent back to China and replaced."

  • "Attending this meeting [two weeks later] are also the Leaders of all the Tower Erectors Teams (previously requested by the Consultant) to give them a strong warning that if they continue to produce such disgusting quality of the works all of them will be dismissed and sent back to China. The photos produced as evidence left them astonished. We hope that the lesson taught them something. The Contractor is warned for the last time that drastic measures will be adopted."

  • "Pollution and environmental problem. Once more the Contractor is reprimanded for the fact that in the weekly report it is mentioned that is taking good care of the situation, but in the reality it is a mess in every working place.
    Yesterday the sea side and the beach in Dili were scattered with hundreds of pieces of red plastic sheets used to wrap up the steel structures bundles for protection during transportation, so it means that in Hera-Manatuto-Baucau all the waste are dumped in the sea and from there the current transported all these polluting waste up to Dili. Fisherman made a lot of complains for the fishing area polluted and all these plastic trapped in the fishing nets.
    CNI22 does not make a good reputation of itself."

  • Two weeks later, CNI22 objected: "The Contractor considers the statement made by the Consultant exaggerated, but it is not because photos are there as evidence and fishermen can be questioned all the time."

  • "The Contractor in the weekly reports always states that is taking good care of the [environment] situation keeping all the places clean and under control, but in the reality it is not like that, nothing or very little is being done concerning the protection of the environment."

  • CNI22 and EB pointed fingers at each other about approval of drawings for transmission line materials, with EB calling CNI22's claim that EB is holding up purchasing by failing to sign off on drawings "totally groundless."

  • "The Consultant reminded once more that the quality of finishing works [at Dili substation] must be improved. ... In the 20Kv building the concrete floor done is not in accordance to the drawing and must be demolished and removed."

  • "Unprofessional handling of the materials during loading, unloading and transporting from the year to the site that causes minor to heavy damages of the materials."

  • "Coordination to local residents around the work sites is not properly handled."

The January report reiterates concerns in previous reports about worker safety, health, pollution, littering, sanitary facilities, lack of required permits, and failure to report or monitor environmental issues are reiterated again.  "To date, [CNI22] has yet to commence the implementation of the [March 2010] Environmental Management and Monitoring Plan."

The Government's oversight of the project is lackadaisical, with only a few EDTL representatives in project meetings. Although "by instruction of the Prime Minister, no compensation should be paid for the land," several land disputes have been left to the companies to work out. CNI22 blames EDTL for delays in clearing material through the port and customs, although ELC/Bonifica says it is the forwarding agent's fault.

In the February 2011 report from ELC/Bonifica, not much had changed.

Iha Janeiru 2011, Kompania Finlandia Wärtsilä fo sai avizu katak kompania ne’e hetan ona ordem ba sentral eletrika boot husi Timor-Leste liu husi Puri Akraya Engineering, ba jerador Wärtsilä 18V46 hitu ho output bruto 120 MW ba sentral Hera, no hein hela atu hetan ordem ba Betano. Wärtsilä hateten katak 50 MW ba Hera sei la'o iha fin de 2011, ho restu sei halao iha trimestre primeiru 2012, ho iha Betano sei tuir fulan ne’en tan. Ida ne’e orario ida ne’ebe ambisiozu liu husi planu projeitu PAE nian iha Novembru — karik fator politiku, duke tekniku nian, mak deside tempu ne’e.

Iha relatoriu husi ELC Bonifica ba Janeiru 2011, hato’o deteriorasaun ne’ebe drastiku ba kualidade servisu, maske ritmu servisu aseileira oituan. Kontratu ida asina ona ho kompania Indonezia ida, Tehate, ba parte linha transmisaun husi Liquisa-Maliana-Suai-Cassa-Betano, hafoin negosiasaun ho DCP failha. Wärtsilä hahu’u servisu, no konvida EDTL atu haruka nia ema ba Finlandia no Italia iha Marsu atu observa fabrika ne’ebe halo teste ba jeradores tolu primeiru ne’e.

Iha kuotasaun balun ne’ebe hateten sai husi relatoriu Janeiru nian:

  • "[EDTL] la satisfas durante vizita ne’ebe halao ba iha substasaun Dili iha loron 20 Janeiru atu hare fatin ine’ebe nia kondisaun abandonadu."

  • "ho tendensia atual ami fiar katak Kontraktor la iha kapasidade atu tuir loron remata nian ne’ebe Ex.mo. Primeiru Ministru fo."

  • "Husi substasaun Liquisa to Substasaun Lospalos…. Laiha progresu substansial ne’ebe hatudu sai. Numeru tore ba Linha Eletrisidade iha parte norte ne’e iha 554, iha fin de Janeiru total tore 249 hari tiha ona, maibe tore sira ne’e barak mak falta iha parte balun, la kompeltu no presiza tempu adisional atu ba hare didiak liu tan.”

  • "Situasaun hare badiak, tantu kuantidade servisu ne’ei at liu tan no hetan implikasaun husi kualidade servisu ne’ebe halao. Servisu rehabilitasaun barak mak presiza atu halo no tamba ne’e tore sira ne’e labele konsidera kompletu ona."

  • "Kontrator hetan konvida dala ida tan atu foti asaun kona-ba trabalhadores Timor-oan hodi hetan treinamentu atu sai ema ne’ebe atu ba hari tore."

  • "Fiu kondutor nian iha sesaun tores 10 iha Hera-Manatutu hetan ona estragus at no presiza atu sobu no monta foun tan."

  • "Deteriorasaun maka’as ba kualidade servisu trabalhadores sira iha linha transmisaun, atu harii tore sira no dada fiu kondutor nian ne’e, sira halao ho maneira ida ne’ebe ita labele esplika ho liafuan ruma - at liu tebes - imajem sira ne’ebe sira produs nudar evidensia ba kualidade servisu nian hatudu katak trabalhadores sira ne’e laiha duni kualifikadu, dok husi n trabalhadores bai-bain. Kontrator hetan ona atensaun katak tore sira hotu ne’ebe hetan estragus no kondutor ne’ebe destroi ona Sei la hetan pagamentu, to’o sira halo reparasaun ne’ebe adekuadu. Konsultan hatudu ona kolaborasaun ba toleransia ho hanoin atu halao servisu lao lalais liu, maibe mos iha limitasaun ba toleransia nian…. Trabalhadores sira mak sei responsabiliza ba situasaun ida ne’ebe inkompetente no sei haruka fila ba Xina no sei troka mos."

  • "Sira ne’ebe atende enkontru ne’e [semana rua depois] mak Lideransa husi Ekipa Ema ne’ebe hari tores sira mos (molok ne’e, Konsultan mak husu) atu fo atensaun ida ne’ebe maka’as katak karik sira kontinua servisu ho kualidade at, entaun trabalhador sira hotu sei haruka fila ba Xina. Imazem sira ne’ebe produs no nudar evidensia halo sira hakfodak. Ami espera katak lisaun sei hanorin buat ruma ba sira. Kontrator hetan ona atensaun ba dala ikus katak medida maka’as sei adopta."

  • "Problema polusaun no ambiental. Dala ida tan Kontrator hetan atensaun ba faktu katak, iha relatoriu semanal nian mensiona katak, sira sei kuidadu ambiente, maibe realidade iha buat at barak mak akontese iha fatin servisu."
    "Horseik iha tasi no tasi ibun iha Dili iha foer barak husi plastiku mean sira ne’ebe uza atu falun besi nia strutura hodi fo protesaun durante transportasaun, no ida ne’e signifika katak iha Hera-Manatuto-Baucau iha foer barak mak butuk iha tasi no sei lori foer sira ne’e mai to Dili. Peskadores sira halo preokupasaun barak ba area peskas nian ne’ebe iha polusaun no iha plastiku barak mak kait ba sira nia rede peska nian.
    CNI22 la halo reputasaun diak ba sira nia an rasik."

  • Hafoin semana rua, CNI22 hato’o sira nia protesta "Kontraktor konsidera relatoriu ne’ebe hasai husi Konsultan ne’e demais, maibe iha ne’eba la'os foto mak nudar evidensia no bele husu ba peskador sira iha kualker tempu."

  • "Kontrator nafatin hateten iha relatoriu semanal katak sei proteze ambiente, proteze kondisaun ne’ebe mos ba fatin hotu-hotu no kontroladu, maibe realidade lahanesan nune’e, laiha buat ruma ka buat kiik liu mak sira halo atu preokupa ba protesaun ambiente nian."

  • CNI22 no EB hatudu liman ba malu kona-ba aprovasaun atu dezeinha material linha transmisaun nian, ho EB ne’ebe hatan ba CNI22 nia alegasaun katak EB iha seguransa atu sosa hodi la tuir dezenhu ne’ebe iha "nudar argumentu ne’ebe laiha baze."

  • "Konsultan fo hanoin dala ida tan ba kualidade atu remata servisu [iha substasaun Dili] tenke hadiak…uma ho semente uma laran [Lantai] 20 KV ne’ebe halo ne’e la hanesan ho dezeinhu no tenke sobu no soe."

  • "Laiha profesionalismu atu kontrola material sira durante tula, hatun no lori husi durante tinan ida ba fatin projeitu ne’ebe hamosu estragus kiik to estragus boot ba material."

  • "Kordinasaun ba rezidente lokal ne’ebe hela bes-besik fatin projeitu nian la halao ho diak."

Relatoriu Janeiru nian repete preokupasaun sira iha relatoriu anterior kona-ba protesaun trabalhadores, saude, polusaun, lixu, instalasoens sanitarias, falta lisensa ne’ebe nesesariu, no failha atu fo relatoriu ka monitoriza assuntu ambiental ne’ebe koalia fila-fila. "Ate momentu ne’e, [CNI22] la hahu atu implementa Planu Jestaun Ambiental no Monitoriamentu [Marsu 2010]."

Governu iha frakeza atu tau-matan ba projeitu ida ne’e, iha deit reprezentante oituan husi EDTL iha enkontru projeitu nian. Maske “ho instrusaun husi Primeiru Ministru, atu laiha kompensasaun ba rai,” problema balun ba rai entrega ba kompania atu responsabiliza. CNI22 fo sala ba EDTL tamba tarde ba remosaun material liu husi portu no alfandega, embora ELC/Bonifica hateten kulpa husi ajensia transportador.

Deloitte audits EDTL

On 27 May 2011, Prime Minister Xanana Gusmão provided Parliament with an 87-page report (English Executive Summary) by Deloitte from an audit of EDTL's activities during 2009 and 2010 (Portuguese, 6 MB), which discusses important aspects of the national electricity project. La'o Hamutuk scanned this document and converted it to text (English or Portuguese, 1 MB each). It makes these key points related to the power plants and national grid (parenthesized numbers are sections in the report):

  • Inadequate time planned to train EDTL to operate the new grid (3.4.4)

  • No plans to connect new grid and substations with existing distribution systems (3.4.5)

  • Too few circuit breakers in new Dili substation (3.4.5)

  • Comoro generators being expanded while being obsoleted (3.4.6)

  • Not enough reserve transformer capacity in substations (3.4.7)

  • Outdated contract with CNI22 and inconsistencies with Puri Akraya contract (4.2.1.1)

  • Puri Akraya contract awarded to newly-created entity with “significant difficulties” and no multi-supplier consultation (4.2.1.2)

  • Shortage of qualified government engineers to oversee the project (4.2.2)

  • Puri Akraya Engineering (PAE) directors are Indonesians Eng Ho Tan, Dany Subrata, Raul Puri and Chander Vinod Laroya.(Annex I)

  • The first two shareholders in PAE, in July and August 2010, were Full Blossom Limited (Hong Kong) and Pearl Energy Worldwide Limited (British Virgin Islands).

  • 69% of shares in PAE are now held by Dooks Group Holdings Limited of the British Virgin Islands, with the balance equally divided between PT Puri Energi Kenchana and Akraya International PT, both of Jakarta Selatan. Total value of shares issued is $7.8 million. (Annex I)

  • CNI22 has subcontracted to Sichuan Electric Power Design Institute, Central Southern China Hubei Electric Power Engineering Consultation & Supervising Co. Ltd, Xi’an Marine Equipment Engineering Research Academy, Xi’an Tianhong Electric Appliance Co. Ltd. and Ningbo Huyong Electric Power Material Co. Ltd. (Annex J)

  • PAE has subcontracted to Wärtsilä Finland Oy, P. T. Wärtsilä Indonesia, P.T. Wijaya Karya insan Pertiwi, P.T. Rekayasa Industri, P.T. ABB Sakti Indonesia, P.T. Samapta Nusantara, and IOT Infrastructure & Energy Services Limited (Annex J)

Fretilin raised concerns about Deloitte's audit, observing that it did not examine EDTL's finances.

In February 2011, the EDTL project manager noted that by enacting the state budget Parliament has "announced officially that the project will be completed within the year 2011."  He asked "is CNI22 in the position to guarantee this time schedule?"

 

April 2011 Bonifica report

ELC/Bonifica's April 2011 report shows that the involvement of Wärtsilä and Puri Akraya Engineering has changed a few things, but many serious problems are still not resolved, including scheduling, environment and worker safety. Among its most interesting points:

  • Total progress by CNI22 on the power grid is 29%, compared with 50% planned. Although the rate of progress on the grid remains slow, the quality of workmanship has improved somewhat.

  • However, EB continues to ask CNI22 to allow towers to be inspected before stringing wires, as "the last inspection shows very clear that towers cannot be certified as ready for stringing, many important major pieces are missing."  EB is dissatisfied with the lack of professional workers on the second tower team, "and if the quality will not improve the Consultant will ask for replacement."

  • The number of workers has increased to 470 Chinese and 960 Timorese.

  • Following the visit by President Jose Ramos-Horta to Dili substation, "Consultant advised the Contractor to expect from now on more Visits on the project by high rank Political People, the project is now entering a crucial phase with only 7 months left to the completion date and therefore members of the Government want to ascertain directly that the progress is satisfactory. The situation seems to be not very easy, the quantity of works remaining to be done is too much in particular the civil works of the substations."

  • A problem has been identified with draining oily water and other environmental protection regarding fuel tanks at Hera Power Plant. PAE convened a special meeting on these tanks to deal with several technical issues, and necessary changes are expected to add around $22 million to the project cost.

  • Many reports from the Chinese company and its subcontractors "is not reflecting the reality" or "show low attention."

  • A pedestrian was killed near Baucau by a truck transporting construction material.

  • Land disputes continue to obstruct work on the Cassa and Suai substations, as well as transmission lines in Becora, Dili. "The intervention of the VETERANS to solve such problems did not obtained up to now any positive results. The intervention of the Authorities with strong determination is highly sought to solve this problem once and for all, otherwise Dili Substation shall not be connected to Hera power Plant and to Liquica Substation on due time. This problem is now dragging on more than six months."

  • "The Prime Minister in person had to intervene with [Dili] port's Authority to obtain a quick release of the goods" arriving for Dili substation. Some shipments are now coming through the Hera naval port.

  • Four engine-generator units were tested in Finland and Italy, observed by a delegation from Timor-Leste, and three more will be tested in May.

  • Payments continue to the companies, with gross amounts of $104 million having been paid to CNI22 and $88 million to PAE. 

  • Due to adding $28 million for Switchyards, and to exchange rate changes, the cost of the Hera plant has increased from $165 million to $186 million, and the Betano plant from $188 million to $220 million.

  • EB expects additional cost increases from other necessary additions not foreseen in the contract: a jetty to unload and pump the fuel, as well as $22 million in protection walls, embankments and drainage canals for the Hera fuel tanks.

  • The Government signed a $31 million contract with China Shandong International (CSI) in December 2010 to add 24 MW capacity to the existing Comoro power plant. (Deloitte's audit questions the need for this expansion.)

  • For six months, CNI22 has "not complied with" EB's recommendation to hire an English-speaking Environmental Specialist "in view of the minimal accomplishment and non compliance of the Contractor to the Environmental Management and Monitoring Plan since commencement of works."

  • Human waste is still dumped directly into the sea from Vemasse and Baucau-Manututo camps, a "highly unacceptable" situation which EB instructed CNI22 to remedy last December.

  • CNI22 has never submitted the required monthly environmental reports, or obtained the requisite environmental permits, or complied with many other directives issued last year by ELC/Bonifica. "To date, the Contractor (CNI22) has yet to commence the implementation of the EMMoP. As such, they are not fulfilling the agreement as it is their contractual obligation to implement this as part of their works by virtue of the Commitment Letter they signed in March 2010."

  • The absence of a CNI22 on-site safety engineer "has led to a deterioration in the safety implementation in all sites," including no protective equipment for the hazardous work of stringing towers. "What good would it be to have it completed but with people's lives snuffed out due to negligence and which could have been prevented if safety was given due diligence?"

 

Strategic Development Plan highlights electricity

In July, the Government published its 20-year Strategic Development Plan, including eight pages on electricity. The plan promises that "By 2020, at least half of Timor-Leste energy needs will be met from renewable energy sources," but the Hera and Betano heavy oil power stations are its centerpiece.

The timing of the plan's targets is unclear:

  • By 2015 "Everyone in Timor-Leste will have access to reliable electricity 24 hours a day."

  • By 2030 "All households in Timor-Leste will have access to electricity either by the conventional expansion of the electricity system or through the use of renewable energy."

La'o Hamutuk gave a preliminary analysis to Parliament in the one week they had to consider and approve the plan. Regarding electricity, we wrote:

The plan has some good ideas about environment,
but is inconsistent with recent legislation
and actions.

The national electricity project – by far the largest project in the history of Timor-Leste – is being undertaken without any Environmental Impact Studies or Assessments, notwithstanding major ecological impacts from construction of the Hera and Betano power plants, Behau port, substations, and nearly a thousand kilometers of power lines. Contractors are not being held to environmental or health and safety standards, and there has been no public information or discussion about the environmental impacts of the system's operation once it is built.

We are puzzled by spending close to a billion dollars on the heavy oil-fueled system currently under construction, and by the reluctance to publicly distribute the Martifer “Electrification Plan of Timor-Leste based on Renewable Energy,” the source of four illustrations in the SDP. Although the Plan mentions that it could be technically possible to convert the Hera and Betano power plants to diesel or natural gas, there is no date for this action, if it is ever to happen. Similarly, the national electricity grid currently being built should be designed differently if its main long-term purpose is to distribute renewable energy from decentralized sources. Since the national electricity project has absorbed 56% of all government expenditures ($281 million of $501 million) to date in 2011, it needs to be integrated better into planning.

The July 2011 Timor-Leste and Development Partners Meeting included a round table discussion on infrastructure, kicked off by Minister Pedro Lay reading from the Strategic Development Plan. La'o Hamutuk asked how Government and donors will ensure that future infrastructure projects don't repeat the experience of the heavy oil project, which was done illegally without any environmental assessment, with huge cost overruns, schedule slippages, and other problems. Vice Minister for Finance Rui Hanjam responded that it was incorrect to call the project "illegal" because the Prime Minister has not been sent to jail.

Members of Parliament and others raised concerns about future costs related to this project, pointing out that annual infrastructure maintenance expenses are typically around 10% of capital investment costs, and that fuel subsidies will be needed if electricity is to be affordable. It will probably cost Timor-Leste's Government $100-$250 million every year just to keep the Hera and Betano plants operating. However, in a TVTL interview in late September, Secretary of State Januario Pereira downplayed the need for maintenance, claiming that the Wärtsilä generators would not require much maintenance during their first few years of operation.

 

 

 

Transparency improves, but not enough

In August, Timor-Leste hosted a regional conference on the Extractive Industries Transparency Initiative (EITI) and opened a Procurement Portal on past and pending government contracting processes. La'o Hamutuk distributed some thoughts to EITI conference participants, including:

The huge national "heavy oil" electricity project begun three years ago will cost nearly a billion dollars, and is done without transparency. According to the Transparency Portal, more than half of all state expenditures during the first half of 2011 went for this project.

There was no public consultation process, cost/benefit analysis, or legally-required environmental impact analysis by the Government or the companies implementing this project. The tendering process, contract changes, design changes, budget opacity and mammoth cost overruns raise doubts about transparency. The public doesn't know the impact of this project on their lives, there is no explanation of the risks of acid rain to ground water, and no public plan to mitigate or avoid these impacts.

The Procurement Portal includes some information about signed contracts, but little about open tenders (such as the one for an environmental assessment for eleven Tasi Mane petroleum infrastructure projects), and confirms that eight of the most valuable contracts in recent years have been for electricity. Click on links to vendors and contracts in the following list of the eleven largest contracts for the Procurement Portal's information about them, or here for an Excel file listing 288 contract awards over $250,000.

 

Date signed

Vendor

Contract

Amount

15-Sep-10

PURI AKRAYA ENGINEERING

Contract No. 10004115.   Engineering, Procurement and Construction of 119.5MW Hera Power Plant & 136.6MW Betano Power plant.
Original Contract $330,420,600.  Amendment for addition of 150kV high voltage outdoor. Amended $406,171,322

$406,171,322

21-Dec-09

CHINA NUCLEAR INDUSTRY 22nd CONSTRUCTION CO.

Contract RDTL-812931.   Construction of Nationwide Electrical Power Grid and Power Plant and its facilities.
Original Contract  $367,131,224.   Current Contract after amendments $298,496,192

$298,496,192

23-Dec-10

CSI COMPANY LDA

Contract RDTL-100053.   Engineering Design, Supply and Installation of the Extension of the Comoro Diesel Generating Power Station

$30,900,000

3-Feb-10

SUNSHINE PETROL GROUP

Supply of High Speed Diesel for EDTL Generators

$28,855,288

1-Mar-11

ESPERANCA TIMOR OAN

Contract STA-MoI-20/2010.    Supply of High speed diesel fuel to EDTL Amendment 1

$26,980,915

18-Feb-10

NORTHERN FOODSTUFF COMPANY (FONEXIM)

Supply of 30,000 tonnes of latest harvest of long grain 15% broken white rice 

$16,740,000

29-Jun-07

MANITOBA HYDRO INT'L  (MHI)

Contract RDTL-96343.    Provision of management Services for EDTL

$11,003,071

1-Sep-10

ESPERANCA TIMOR OAN

Contract STA-MoI-20/2010.    Supply of High speed diesel fuel to EDTL

$9,148,124

11-Sep-10

BRAVO INT'L

STA 10PR2000119A.   Compra de veiculos categoria Capital Minor ano civil 2010, para comprar maquinas pesados

$9,088,888

22-Sep-08

UNITED GENERAL CONSTRUCTION

Contract RDTL-87483 and RDTL-92495    Rehabilitation of Watulari I Irigation Scheme

$8,977,543

16-Jul-09

BONIFICA S.P.A

Contract RDTL-92896.   Construction Supervision Services for the Building of a national Electrical Power system for the Timor-Leste

$8,595,400

We have updated our web pages for 2008-2009 and 2010 to include newly available information on the contracts with CNI22, Bonifica, PAE and CSI.

Page 521 of the mid-year Budget Execution report shows that $244m of the $449m allocated for the national electricity project in 2011 had been spent by the end of June, and another $150m obligated. The State had spent a total of $443 million by mid-year, of which the 55% spent on the heavy oil power stations and grid was more than all other expenditures put together. The third-quarter Execution Report shows that $334 million of the $699m spent by the end of September 2011 was from the Infrastructure Fund, and $316 million of this was for the national electricity project (the transparency portal reveals that this includes $4 million spent by EDTL that was not in the 2011 State Budget approved by Parliament). 

 

June 2011 Bonifica report

The June 2011 Monthly Progress Report by the ELC/Bonifica company supervising the construction of the power plants and national grid showed some improvements as Puri Akraya's and Wärtsilä's engagement increased, although EB concluded that "the performance of the Contractor CNI22 in the overall is poor."

Although more Chinese workers have been sent to accelerate construction of the transmission lines, "the majority are common labourers without professional skill and the result is a very poor workmanship. In general the works being done along the transmission lines and in the substations are classified of very low quality."  Many land conflicts continue to inhibit installing the 150kV lines, and with the "road condition from Manatuto to Baucau and Lospalos it is not possible to transport the transformers and the electromechanical equipment to those substations." Although CNI22's work at Dili substation was to be completed by the end of June, "a lot remains to be done."  Some of the equipment is beginning to rust as it waits for installation, and many problems relate to the quality of materials and workmanship.

Nearly all of the wires have been strung for the Hera-Dili portion of the 150kV national grid, but much remains to be done in the other parts, with about half of the Manatuto-Baucau and only 1/3 of the Dili-Liquica wires in place. One third of the towers on the Baucau-Lospalos segment have not yet been erected, and no towers at all are in place in Liquica-Maliana or along the south coast. The Government informed E/B and CNI22 that "it is of utmost importance that Liquica, Dili, Manatuto, Baucau and Lospalos Substations be ALL energized by November 28, 2011. The Government Representatives will accept no excuses if these substations are not completed on time. The Prime Minister and the Secretary of State also visited Baucau, Lospalos and Dili Substations during the past period. They were dissatisfied by speed of work and the number of workers on the sites. They requested that CNI22 immediately provide twice or three times as many qualified workers, in order to speed up the work." CNI22 promised to provide 70 more workers in July, adding to the 759 Chinese and 429 Timorese they currently employ on this project.

Puri Akraya Engineering has staffed up, with 219 international and 76 local workers, and expects to receive 100 containers of equipment in early July for the Hera power plant. They are ahead of schedule for Hera, with 45% of the "Foundation and Building Works completed, or 30% of the overall project. In Betano, the 16-hectare power plant site has been cleared of trees, bushes and topsoil. E/B gives PAE a "good" overall performance rating.

ELC/Bonifica also reported on CSI's expansion of the Comoro (Dili) power station by 24 MW, which employs 39 Chinese and 35 Timorese workers. They consider CSI's overall performance "satisfactory."

Most issues have not been resolved regarding environment, insurance, and occupational safety and health, especially in areas CNI22 is responsible for. E/B sees "no improvement," and CNI22 has yet to keep their 2010 commitments to implement environmental management, monitoring and reporting; pollution control; waste treatment and disposal; water supply for workers; environmental land use clearances; baseline surveys; complaint handling and emergency response plans. "[CNI22] are not fulfilling the agreement as it is their contractual obligation to implement this as part of their works by virtue of the Commitment Letter they signed in March 2010."

"After two fatalities, we are seeing a small degree of improvement on the part of the CNI22 management as their safety personnel are now inspecting the substation site upon constant prodding to instill discipline on their workers, subcontractor's and we will continue to push them until they will have it among themselves as a part of their responsibility to manage occupational safety and health and have an incident and injury free workplace."

In contrast, E/B reports that PAE has an "exemplary attitude" and is "doing an excellent job in safety implementation and compliance."

 

Generators (mostly) arrive for Hera power station

Click on any of these photos to see them larger.

As the mammoth engine-generator machines were being prepared to travel from Finland and Italy to Timor-Leste, the project's contractors realized that they were too large to come in through Dili port and go by road to Hera, and that the beach and mangroves across from the Hera site would not support them. Without any environmental impact assessment and negligible community consultation, they built a temporary floating port in Behau, (Manatutu district), 24 km east of Hera. This is a prime tourism area with beautiful beaches and coral reefs which attract scuba divers, and many were concerned that the environment is being unnecessarily endangered for short-term benefit.

On 24 August, Timor-Leste proudly received seven generators for the Hera power station at the temporary Behau port. Moving the heavy generators to Hera proved more difficult. For several days, the principal east-west road in Timor-Leste was closed for many hours.

An August TV report by Al Jazeera discussed the environmental impacts of the Behau port, while a September article by the UN news service IRIN lamented the lack of community consultation. Unfortunately, many international and local media are confused, relying on outdated information, citing uninformed sources, or mixing up the electricity project with the Tasi Mane petroleum infrastructure proposal. Officials frequently said the heavy oil generating stations were necessary for industrial development, not understanding that major 24-hour petroleum facilities such as an oil refinery or LNG plant will generate their own electricity, not wanting to depend on unreliable external sources.

On 6 September, one of the 270-ton generators fell off a truck while being transported from Behau to Hera by the Samata Nusantara Company. Timor-Leste officials were quick to disown responsibility and declare that Timor-Leste will not accept the damaged generator or pay for the accident. They insisted that the companies involved must pay to replace the fallen equipment, and that the accident will not affect the project schedule or budget. Several weeks later, the huge generator was still lying in a roadside gully, as no available equipment could lift it.

Another incident plagued the Hera electricity project in mid-September, when an unknown person cut and stole large electrical cables from a switching station construction site in Becora, Dili. CNI22 and others called for increased police protection.

The inability to use the Behau port and road required the contractor to change their plans, and to bring the heavy equipment on shore in Hera.

In October, land clearing began on the beach across the road from the site, to build a port which can receive the engines and fuel for the generators. Unsurprisingly and unfortunately, there was no environmental impact assessment or community consultation.

The first engine was transported to the Hera site on 7 November, two months after the failed attempt in Behau, and was tested on 18 November. Three others followed within a week.

Electricity dominates 2012 State Budget

In September 2011, the Government proposed a $1.76 billion state budget for 2012 to Parliament, including $282 million for capital expenditures relating to electricity (less than the $449 million budgeted for 2011, of which $409 million was expended), and $89 million for generator fuel (up from $58 million spent in 2011). After extensive debate, Parliament reduced the total budget to $1.67 million but left the electricity part unchanged.

La'o Hamutuk's submission to Parliament on the Budget observed that the total capital cost of the national electricity project will be more than $950 million. We wrote:

   "the proposed 2012 budget shows no increase in salary allocation for EDTL staff to learn, operate and maintain this new infrastructure, (although they plan to begin installing prepaid meters in the districts), and a reduced allocation for equipment maintenance. No money is foreseen to build or rehabilitate medium and low-voltage power lines after 2012, and EDTL fuel usage (budget allocation divided by expected oil price) is projected as constant from 2012 through 2016. Although generating capacity and paying customers will increase greatly, EDTL gross revenues are projected to go up only slightly, from $14.5 million in 2011 (of which $12.3m was received) to $16.1 million in 2012. By 2016, EDTL projects revenues of $41.6 million, for which it will spend $102 million on fuel."
    "In 2012, the budget requests a $73 million subsidy (not including hundreds of millions of dollars in capital costs) for this autonomous agency. Why spend nearly a billion dollars on generating capacity if it’s not going to be used?
    "La’o Hamutuk wishes that the subsidies for EDTL were an investment which would generate returns for the state. Unfortunately, it is a losing proposition, and the required subsidies increase as generating capacity grows, more customers are reached by power lines, and fuel and maintenance expenses mount. Few Timor-Leste consumers can afford the actual costs of the electricity they use (about five times higher than current meter rates), and we regret that so much of the state’s resources are directed to furnishing many kilowatt-hours for wealthy users with air conditioners and many appliances. Although some policy-makers believe otherwise, we doubt that large industrial users who require 24-hour power (such as an LNG plant or oil refinery) will rely on EDTL-produced power, and expect them to generate their own.
    "This is bad news for Timor-Leste’s economy. When our petroleum reserves are used up and revenues drop, we will not be able to provide electricity for our people, with no money for maintenance, fuel and other operational costs. The high price of electricity will fall heaviest on poor people."

Betano power station encounters community opposition

In June, contractors cleared land for the Betano power station along the south coast in Same subdistrict, Manufahi district. Although the community had agreed to donate four hectares to the project, 16 were leveled, provoking a community protest on 31 August.

On 12 September, Justice Minister Lucia Lobato, Secretary of State for Environment Abilio Lima and Francisco Monteiro (from the State Secretariat for Natural Resources) met with the community in Betano to explain the state's policies on land, environment, the heavy oil electricity project, and the Tasi Mane oil refinery project. Click here for photos and a description of that meeting.

La'o Hamutuk produced the map at right from information shown at the 12 September meeting. The eventual impact on Betano from the power plant and oil refinery will be much larger than the community has been told.

According to Bonifica's November 2011 Progress Report, preliminary drawings of the Betano power plant "are under preparation."

Hera Power Plant begins operation

Thousands of people gathered in front of the Government Palace in Dili on 27 November 2011 to celebrate the switching on of the first Hera generator. After music, dance, a film and a speech by President Jose Ramos-Horta, 24-hour/7-day electricity was turned on at midnight, accompanied by a fireworks display. The next outage, about 9 hours later, lasted only 15 minutes.

Outages, voltage surges, and polemics continued for the next few weeks, although Dili service gradually improved in December. High-voltage transmission towers, festooned with holiday lights substituted for traditional Christmas trees in front of the Palacio and at Mercado Lama during the end of the year.

In mid-December, project supervisors Electroconsult and Bonifica circulated their November 2011 Monthly Progress Report to a few people in Government and Parliament. In addition to celebrating "energizing" of the plant, congratulating all involved, the consultants breathed a sigh of relief that "all activities were done and completed and the goal was realized without having any injury or lost day cases [during November] considering the number of workers involved and it can be considered an extraordinary feat to accomplish it."

Bonifica is proud of PAE's achievement: "The most important event to be recorded for the month of November is the achievement of the target < Inaugural Ceremony of Hera Power Plant on 27th November 2011>. This historical ceremony was attended by all Authorities, foreign dignitaries and the Guest of Honor was H.E. the President of RDTL Dr. Jose Ramos Horta who at midnight pressed the button to connect Hera power Plant with Dili distribution network , for the first time about 50% of Dili was illuminated with electricity produced by Hera Power Plant." The report apparently indicates that the Hera Plant is running on Light Fuel Oil (Diesel), as no mention is given of the arrival of Heavy Fuel Oil to the Hera plant. We are not aware of any tender by the Ministry of Finance to purchase less expensive (but more polluting) Heavy Fuel Oil.

The report continues to identify problems with the work of CNI22 on the national grid, including worker safety, not meeting schedules, poor communications, environmental damage, unprofessional work procedures, "very poor" quality of workmanship,  and improper coordination with local residents.  After nearly three years, CNI22 has still not prepared an Environmental Management Plan, and the one prepared by Puri Akraya Engineering (for the power plants) has not been made available to La'o Hamutuk. Although PAE's work is better than CNI22's ("Very good" rather than "poor"), it is also very expensive.

Great priority was given to meeting the November 27 date for turning on the plant, with many safety and other activities deferred. The grid from Hera to Liquica was operational on 27 November, extended to Manututo on 30 November. The report indicates that "from Baucau to Lospalos shall be energized (maybe) by Christmas time and the section from Baucau to Viqueque is now shifted to end of March 2012." The South Coast grid  will come on line until after that, as few towers and no wires are in place. Due to conflicts with local landowners, construction of the Suai substation has not yet started, and the Contractor may ask for more money due to the delay.

The engine which fell off a truck in early September and remained in the road for several months created unresolved problems with insurance, but Bonifica's main concern was political: "The removal of the engine from the accident place has to be done in the shortest time possible to avoid continuous negative comments from the media and from Members of Parliament." It was removed just before Christmas.

 


Fits and starts in 2012

Although Dili electricity service was a little better during the first few months of 2012, outages increased in March, and some additional information became available.

UNMIT's monthly reports on Local Governance began reporting on electricity generation and distribution from Hera and in each district; here are relevant excerpts from the December 2011, January 2012, February 2012, and March 2012 reports.

The January 2012 report from project supervising consultant ELC/Bonifica (E/B) reports monthly information about construction of this project, including:

  • "The overall performance of the Contractor CNI22 [Chinese Nuclear Industry Construction Company No. 22 [responsible for the high-voltage national transmission grid], remains poor in particular for the quality of finishing works. Despite of continuous warnings done by the Consultant [E/B], the situation does not improve."

  • Three (out of seven) generating sets from the Hera plant are operating, using diesel fuel unloaded at Tibar port. During January, the Hera plant consumed 3.7 million liters of high-speed diesel fuel, with around 100,000 liters being trucked across Dili to Hera almost every day.

  • The north coast high-voltage power grid from Dili to Los Palos is operational, as are the medium-voltage lines to Aileu and Gleno.

  • In the rush to begin operation, many shortcuts were taken. "The Contractor [CNI22] is constantly reminded that safety condition of the power grid now in service is not at all satisfactory, but there is no action to improve it."

  • Many sanitary and fire protection systems and other safety measures have not yet been installed in the generating plants, substations and high-voltage towers. None of the towers have "Anti-Climbing Devices and Danger Plates installed. ... The Contractor is advised that should any accident happen (children climbing up) he will be held responsible and face all the consequences."

  • Work on the Suai substation still has not started due to a land dispute, and CNI22 will ask for additional money due to this delay. Work on the Liquica-Maliana and south coast (Maliana-Suai-Cassa-Betano-Viqueque-Los Palos) power line segments is far behind schedule; fewer than half the towers have been erected and no wires have been strung. Progress "slowed down considerably" during January because Chinese workers went home to celebrate Lunar New Year.

  • No EDTL staff attended the one progress review meeting held in January.

  • E/B rated the overall performance of the companies building the Hera and Betano power stations, PAE [Puri Akraya Engineering] and subcontractors Wärtsilä/Vika/ABB, as "good," down from "very good" in the November report.

  • In November, E/B had assessed the work of CSI (China Shandong International, upgrading the Comoro Power Station), as "good," but no longer: "The performance of the Contractor CSI and the quality of the workmanship during last couple of months has deteriorated badly, no care at all is given to house keeping and environment protection, instructions given are not at all kept in consideration. Commissioning test of the first two Gen Sets scheduled by mid January 2012 have been postponed to a new date to be established because protection system is not ready."

  • The national electricity project employs many more expatriate (Chinese and Indonesian) workers than Timorese, with 340 Timorese (35%) of the total of 963 workers. "Quality of the workmanship in general is very poor. A lot of unqualified Chinese workers are used as subcontractors who do not care of the quality and of the finishing up."

  • Although the "Operation & Maintenance contract between PAE and Government of Timor Leste has not yet been signed, but in any case the commencement date remains fixed, as previously stated, December 1st 2011 with the first 3 units in service. The O&M team consists of 20 Expatriate and 25 Timorese technicians (trainees) divided in three shifts of 8 hours each. Number of people will be increased once all 7 units are operative."

An Environmental Monitoring and Audit CNI22 and PAE is included in the E/B January report, with photos. La'o Hamutuk remains concerned that no attention is given to the environmental impacts of plant operation (air and water pollution, spills, ground water contamination, public health impacts, long-term effects, etc.). The recent Environmental Audit looked at the construction process (but excluded the north-coast power lines) and found many problems:

  • Contractors have not gotten the required environmental clearances and permits.

  • Contractors are not submitting requisite monthly reports.

  • Although PAE agreed to submit an Environmental Management and Monitoring Plan (EMP) for the Hera power station "as soon as it becomes operational," including measurements of air and water quality and noise, it has not done so.

  • Work on the Betano power plant has begun "without the required EMP for the construction phase as per requirement and agreement."

  • Many workers do not have proper hard hats and safety shoes (Personal Protective Equipment - PPE) needed for occupational safety. "PPE noncompliance is still prevalent at substation construction work sites and CNI22 HSE department needs to be reminded to do corrective actions on these lapses."

  • Many worksites, especially the Betano power station, are unsanitary and full of litter, with garbage dumped on site or on nearby private land (without permission)

  • CNI22 has not complied with their commitment to plant grass and flowers (rather than spread gravel) in designated "landscape areas" around many substations.

E/B recommended that projects not be accepted, and "payments should be held in abeyance until the Contractors rectify/comply with the cited deficiencies." Although that would be a good idea, La'o Hamutuk believes that it was illegal to begin construction without Environmental Impact Assessments, EMPs and environmental licenses already in place. Indonesian environmental laws were in effect here until Timor-Leste enacted Decree-Law No 5/2011 of 9 February on Environmental Licensing which came into force on 24 February 2011, long before construction of the Betano power plant began. This is a "Category A" project, and Article 23.5 states that "No project can proceed to implementation without having the final decision of the evaluation procedure adopted, the issue of environmental license and payment of the environmental license, in accordance with the provisions of this Decree-Law."  Article 29 of this Decree-Law applies to projects which were in process before it came into force, requiring them to register with the Environmental Authority with 240 days of the law coming into effect (October 2011) if they already had a license, or within 120 days (June 2011) if they did not, as is the case here. We are not aware of any steps to comply with or enforce this law for the national electricity project.

Spending

In early April, the Government initiated a Government Results Portal website, which includes a page (downloaded) on the Hera power plant and several photos. According to this page, the project was 82.7% complete, and "During the construction phase this project will result in many direct, indirect and induced jobs and business opportunities. In medium term, this project will result in employment, economic and government revenue growth."  The Results Portal also has pages on the repair of low-voltage and medium-voltage power lines, both of which are shown as 0% complete.

The Budget Execution Report for full year 2011 released in April 2012 reports that $428.8 million of the $448.7 budgeted for capital expenditures for electricity from the Infrastructure Fund were spent during 2011, with $17.6 million still obligated. EDTL revenues during 2011 were $12.4 million, less than the budgeted $14.5 million. EDTL was better at spending, executing 98.6% ($71 million) of its $72 million budget, which had been increased from the $48 million approved by Parliament in the 2011 State Budget.  According to the Transparency Portal, EDTL also spent $3.98 million from the Infrastructure Fund, mostly in June 2011, although this is not mentioned in the budget documents or budget execution report. The portal and execution report both indicate that in July 2011 EDTL paid $487,781 in "interest payments and borrowings," although this had not been included in the 2011 State Budget.

La'o Hamutuk wrote a blog showing that electricity projects received much more money and implementation than other infrastructure projects during 2011, with Puri Akraya and CNI22 receiving three-fourths of the $429 million Timor-Leste spent from the Infrastructure Fund, which paid for projects in all sectors costing $1 million or more or taking more than a year to build.  This pattern continued into the first six months of 2012. According to the Second Quarter 2012 Budget Execution Report, 74.5% of the Infrastructure Fund money allocated for electricity in 2012 ($210m out of $282m) was spent by 30 June, while only 4.8% ($25m/518m) of the Fund's allocation for all other infrastructure projects had been spent by mid-year.

As of 5 October, the Transparency Portal showed that EDTL had already spent $61.1 million of the $95.5 million allocated for generator fuel during 2012. Another $25.1 million is committed or obligated. (The original 2012 state budget had allocated $102.3 million to EDTL for generator fuel; we do not know how this was reduced.)  The proposed mid-year budget rectification does not change the fuel appropriation for EDTL, although it does cut $4 million which had been intended to pay for electric meters, because "payment to implement the system of prepaid meters is no longer needed this year." (Most of the money is reallocated to veterans' pensions.) According to this budget, EDTL will spend $105.1m in 2012, of which $89m will be subsidized by the Government, with EDTL taking in only $16.1m of its own revenues.

Construction of the power plants is paid out of the Infrastructure Fund, not the EDTL operating budget. Of the $302 million available from the Infrastructure Fund for electricity during 2012 ($20m carried over from unused 2011 appropriations, plus $282m added by the 2012 state budget), $283m was reported as spent (Transparency Portal, accessed 26 April 2013), with another $16m committed or obligated. EDTL also reported spending $102 million on operational costs during 2012 ($84 million of this was for generator fuels), out of $105 million authorized by the mid-2012 budget rectification.

On 10 July 2012, the Finnish company Wärtsilä announced that Timor-Leste's government had "awarded a full scope, long-term operations and maintenance (O&M) agreement" for the Hera power plant to Wärtsilä and Puri Akraya. The Hera plant continues to run on diesel fuel, shipped into Tibar and trucked across Dili.

In August 2012, the generators for the Betano power plant arrived in Dili, where they sat on the wharf for months while the power plant and temporary dock in Betano were being built.

In December 2012, the Government proposed to increase total capital outlays for the two power plants and national electricity grid from $414 to $652 million. In La'o Hamutuk's January 2013 submission to Parliament on the 2013 General State Budget (GSB), we wrote "The national electricity project has already shown that accurately anticipating total costs of multi-year projects is crucial. When it was first proposed in 2008, it was expected to cost $390 million in total. By the end of 2011, $540 million had been expended, and about $300 million more was spent in 2012. GSB 2012 expected that $111 more would be needed from the Infrastructure Fund from 2013 on to finish the project, but GSB 2013 tripled this to $359 million over the next four years."

"In addition, EDTL’s costs of operation (not including Infrastructure Fund capital expenses) are significantly increased over last year’s budget. However, they are still too low to provide fuel when the Betano power plant begins operation. The budget predicts that fuel expenditures will rise exactly 4.00% each year after 2013, which is totally unrealistic and ignores rising fuel prices, growing numbers of consumers, and increased electricity use per consumer as more people expect reliable electricity and purchase appliances."

Parliament reduced the 2013 fuel budget appropriation by $17 million (if the Betano plant runs, this will go up) but left future allocations unchanged. In the promulgated budget for 2013, EDTL annual generator fuel costs were budgeted as follows (USD millions):

2011

2012

2013

2014

2015

2016

2017

$58

$102

$101

$122

$127

$132

$138

Sustainability?

EDTL is beginning to try to recover a greater share of its outlays. In March 2013, it invited bids to supply 50,000 prepaid electric meters, enough for about one-fourth of the households in the entire country. On 28 March, the National Procurement Commission clarified the specification, and bids were due on 18 April.

In his address to the UN General Assembly on 25 September 2012, Prime Minister said that "we cannot impose solar panels on homes without food, and therefore, without any perspectives of sustainability." However, it is instructive to compare solar panels with the system under construction, which EDTL's head recently said will cost $1.2 billion to build, and La'o Hamutuk estimates that it will cost at least $200 million annually to fuel and maintain when construction is completed.

One solar panel costs about $800 to purchase and install, including storage batteries. Two such panels will provide more than enough power for lights, fans, TV, radio and refrigerator for an average home, and do not require a centralized, high-voltage grid. Timor-Leste has about 170,000 households, a significant portion of which are in remote areas, not reachable by the transmission lines under construction. Installing two panels on every house in the country would cost $272 million (much less after applying quantity discounts), or less than one-fourth of the construction cost alone of the power plants and national grid. Solar panels require no fuel and little maintenance, although their total cost is less than two year's worth of fuel for the oil-fueled generating stations.

Two solar panels will not supply enough electricity for air conditioners, dishwashing machines or electric stoves. Rich people who use such appliances are receiving a large state subsidy -- even if they pay EDTL for the many kilowatt-hours they consume, it covers only about one-quarter of the operational costs of generation. Are they the appropriate beneficiaries of Timor-Leste's limited natural resource wealth, while the rural poor remain in the dark?

Fuel imports

The Hera and Betano power plants were intended to run on cheap and dirty heavy oil fuel (also known as residual, or no. 6), but they have used diesel since they began operating in 2011 and 2012, which is cleaner by more expensive.  It is also more adaptable -- for smaller generators, vehicles, and private use. In October 2012, La'o Hamutuk wrote a blog (also Tetum) and a letter to relevant officials (also Tetum) pointing out that Timor-Leste's Government spent much more on vehicle and generator fuel in 2011 ($68 million, $59m of which was for generators) than the total value of gasoline ($11m) and diesel ($27m) imported into Timor-Leste for all consumers, a discrepancy which continued during the first half of 2012.

On 30 October 2012, the Government hosted an all-day conference on Infrastructure. When La'o Hamutuk asked whether EDTL would eventually be able to recover its costs from electricity ratepayers, Director-General of Electricity Virgilio Guterres said that EDTL would probably never be able to raise more than $20 million per year in revenues -- less than one-quarter of the operating costs of its power plants, with no possibility of recovering any of the billion-dollar-plus capital investment.

Also in October 2012, local newspapers published the notice at right, indicating the intent to award a $50 million contract to Esperanca Timor Oan for 47 million liters of diesel fuel to supply the Hera power plant for six months, as per the tender invitation at left. The Government will pay $1.07 per liter, about 16¢ more than it will cost to buy this fuel in Singapore (about 83¢/liter), ship it to Tibar, and pay Timor-Leste excise tax and import duty. Prices in Indonesia are probably even lower, so the markup (profit plus costs in Timor-Leste) may be even higher than 17%.

On 5 March 2013, The Council of Ministers adopted Government Resolution no 11/2013 of 13 March (official Portuguese), appointing the state-owned oil company TimorGAP to import diesel fuel for the Hera and Betano power plants. TimorGAP, which has no capacity to produce or refine fuel, reportedly signed an agreement with the Indonesian company Pertamina to supply it, without an open tender or competitive bidding. On 23 April, the Council of Ministers approved the contract with TimorGAP "with corrections."  On 8 May, TimorGAP announced the opening of a temporary fuel terminal and delivery of the first shipment.

However, the process did not work out as expected, and the Ministry of Public Works had to purchase $40 million worth of generator fuel from Esperança Timor Oan on an emergency, single-source basis. Although TimorGAP’s EDTL fuel supply activities ended in mid-2013, they are described as continuing in TimorGAP's January 2014 newsletter. TimorGAP wanted to use its status as a State-owned institution as an implicit guarantee to foreign suppliers so that they would extend credit, rather than the normal practice of requiring cash on delivery. TimorGAP preferred a brief interagency MOU with EDTL for this transaction worth more than $50 million, rather than a normal contract which would protect Timor-Leste’s interests by spelling out who is responsible for what. After several months of negotiations, TimorGAP and other State agencies failed to reach agreement, and the effort was dropped. In August 2014, La'o Hamutuk asked the Court of Appeals to look into this and other issues regarding TimorGAP.

The 2013 State Budget appropriated $101 million for EDTL generator fuel, of which $95 million was spent. The 2014 budget appropriates $94 million. The graph at right shows how much the Ministry of Public Works is spending on generator fuel. It increased when the power plants came on line in 2011-2012, but has been more-or-less constant since the end of 2012, reflecting more stable fuel prices and perhaps better procurement practices.

The graph at left shows that Timor-Leste has purchased over $200 million worth of generator fuel (60% of all payments for fuel) from Esperanca Timor Oan, and that more than one-third of this amount was done through single-source tenders without competitive bidding.

 

The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk)
Institutu Timor-Leste ba Analiza no Monitor ba Dezenvolvimentu
Rua dos Martires da Patria, Bebora, Dili, Timor-Leste
P.O. Box 340, Dili, Timor-Leste
Tel: +670-3321040 or +670-77234330
email: 
info@laohamutuk.org    Web: http://www.laohamutuk.org    Blog: laohamutuk.blogspot.com