Ethiopia, Meridiam in Totals to Resume Tulu Moye Geothermal Project

Developer seeks profit repatriation guarantee

By Surafel Ashebir

Talks surrounding the resumption of the ill-starred Tulu Moye Geothermal project have officially begun, nearly two years after the company behind the project in southeastern Ethiopia pulled out citing security concerns.

Sources close to the issue told The Reporter the talks aim to revive construction of the geothermal power plant in the Oromia region’s Arsi Zone, and include new demands from investors and developers.

Tulu Moye Geothermal Operations Ltd is a joint venture between French investment firm Meridiam SAS and Reykjavik Geothermal Limited (Iceland) established in 2017 with financial support from the AU’s Geothermal Risk Mitigation Facility for Eastern Africa, the African Development Bank (AfDB), and the US Trade and Development Agency.

The firm, which was poised to become the country’s first independent commercial-scale power producer, began drilling in the Arsi Zone three years later, and it was expected to produce 150 MW of energy by 2025.

However, in 2024, the company pulled the plug on the operation, contending that security threats, particularly from OLF-Shane, were behind the decision to shutter the two billion dollar geothermal energy project.

At the time, Tulu Moye employees told The Reporter that work had been paused after dozens of armed men stormed the project site, located around 100 kilometers southeast of Addis Ababa, in 2023.

Government officials and EEP executives later confirmed that the company had pulled out, but denied security concerns as the cause.

“The developers and foreign investors claim security concerns, but we’ve ensured that there are no such concerns in the project area. The government is running other projects in the vicinity of Tulu Moye. For instance, the Assela Wind Farm project is operating peacefully in the same zone. There are security issues but the government is ensuring that no incidents occur at project sites,” EEP chief Ashebir Balcha (Eng.) told The Reporter in June 2024.

He claimed there were other factors behind the trouble.

“The real reason is the developers failed to find the geothermal reservoir. There are also financial concerns,” Ashebir said.

Nonetheless, sources say talks with investors and developers are progressing well under a new negotiating committee composed of representatives from EEP and the ministries of Finance, Justice, and Mines.

The developers have submitted new preconditions as part of the efforts to restart the project under revised terms, according to Tesfaye Tilaye, a director at EEP.

He notes the demands were not part of the original power purchase agreement (PPA) that Tulu Moye and EEP had signed in 2017 and then again in 2020.

Among the new demands are guarantees on foreign currency availability, permission to transfer profits earned from electricity sales abroad in US dollars, and the inclusion of the New York Convention on Arbitration.

The New York Convention, which has been ratified by more than 150 countries including Ethiopia, obliges member states to recognize and enforce arbitration decisions made in other jurisdictions.

Tesfaye also explained that international lending institutions have tightened their financing requirements after assessing Ethiopia’s current debt burden. As a result, additional negotiations are underway to meet these stricter conditions and secure the necessary funding for the project.

Tesfaye confirmed that the project’s planned generation capacity remains unchanged at 150 MW.

He added that all parties are working to conclude the negotiations as quickly as possible and move toward completing the project, which is considered a key component of Ethiopia’s renewable energy development strategy.

Ababe Degef, Tully Moe project manager, told The Reporter the decision to revise the agreement was driven by a combination of technical and financial challenges.

He notes the project site does not hold as much geothermal steam as originally thought, and argues that this shortfall, coupled with financial constraints, made it difficult to continue the project under the original terms.

Abebe added that international lending institutions, after reviewing the exploration results, were unwilling to provide financing, making it necessary to revise the agreement.

“Due to the lack of adequate geothermal resources at the site and the resulting financial difficulties, lenders were not prepared to continue funding the project,” he said. “This made contract renegotiation unavoidable.”

It is worth noting that in 2024, Meridiam publicly cited security concerns as a key reason for its inability to continue construction activities.

To clarify the issue, The Reporter contacted Awel Wafo, administrator of Iteya Woreda, where the project is located. Awel rejected claims of serious security problems at the site, stating that there was no significant security incident that could have halted the project’s operations.

EEP’s Tesfaye also downplayed the security concerns surrounding the project.

“We were informed that there had been a security incident at the time, and the developers communicated this to us,” Tesfaye said. “However, we do not believe that the reported security issue was serious enough to completely stop the project.”

Tesfaye claimed that the developers had drilled six wells without finding viable geothermal steam and had exhausted their financial resources. He suggested that security concerns were used as a justification rather than the primary cause of the project’s suspension.

“Our assessment is that the lack of geothermal output from the drilled wells and the depletion of funds were the real reasons behind the project’s interruption,” he said.

As negotiations to revive the project move forward, several critical questions remain unanswered: How will the 2020 agreement, which has already exceeded its contractual timeframe, be handled under the new negotiations? Under what conditions will the project resume operations? Who will be held accountable for the time delays and financial losses incurred so far? And ultimately, when will the project be completed?

Observers expect the ongoing negotiations to provide clarity on these unresolved issues and determine the future direction of one of Ethiopia’s most high-profile geothermal energy projects.