The Ethiopian Electric Power Cooperation (EPPCo) is finalizing a power supply feasibility study to for the Danakil Depression, 778kms from Addis Abeba and 110m below sea level, for companies involved in potash exploration in the area.
The study is initiated by the request of Ethiopotash SC for 70MW of power. Ethiopotash, a company established by Dutch investors, is now managed by Yara International, which, in May 2012, upped its share in the company from 16pc to 51pc. Yara International, the Norwegian fertiliser manufacturer, itself is established with a majority share by the Norwegian government.
Ethiopotash is currently undertaking feasibility study in the Danakil Depression to start potash mining.
Ethiopotash could extract 1.5 million tonnes of potash a year after completing the feasibility study in mid-2013, according to Yara's first quarter report for 2012. The site is said to have enough reserves for 30 years.
"We have been negotiating with officials of the Ministry of Water & Energy and the Ministry of Mines for the last three weeks," Jorgen Ole Haslestad, CEO of Yara, said to Fortune on September 25, in Arusha, Tanzania, during the African Green Revolution Forum.Ethiopotash's request is the second biggest after Mohammed Ali Al-Amoudi's (Sheik) Tossa Steel Factory, which requested a whopping 300MW for its plant to be built in Kombolcha, Amhara regional state.
Potash mining is an intensive activity as it uses energy. Although there are other methods potash is usually mined by dissolving it in water and pumping in crystallisation method to separate it from water by evaporation. Energy is thus needed to heat the water.
There are eight companies involved in the exploration of potash in the Danakil Depression, including Allana Potash of Canada, Nova Potash Plc and Sainik Coal Mining Plc.
"Since the area is becoming an industrial area, we will set the infrastructure anticipating future power demands," Mekuria Lemma, EEPCo's chief officer for corporate planning told Fortune.
The area will get power supply from Mekele, Tigray.
"We have studied all options, but Mekelle is better," Mekuria said.
"Since the area is not included under the EPPCo electricity expansion projects, the company will cover the project cost," he added.
However, both Mekuria and WondimuTakele (Eng), state minister for MoWE, say that it is not yet known how much it could cost supplying electricity to the Danakil Depression.
The company wants the power supply to be ready for 2014, according to the company's request.
Ethiopotash had also discussed water supply with the MoWE, but it has been advised to use ground water which is available in the area, according to Wondimu.
"Potash has capacity to replace the coffee in generating foreign currency," Wondimu said. "We will try our best to meet their demand with their own time frame."
Potash can be used for industrial purposes, such as for glass manufacturing, but its main use is for fertiliser.
The 2012 global demand for potash, according to InvestmentMine.com, is 53 million tonnes, up by 13pc from the previous year. This could grow to 60 million tonnes in 2013.
Canada and Russia, which respectively produce 10.5million and 6.7million tonnes a year, are the largest manufactures as they have high potash concentration.
A tonne of potash was sold at 467 dollars in the international market on Friday, October 5, 2012.
The project cost of the Danakil Depression concession could reach two billion Birr, according to Hoslestad.
This investment is taking place to fulfill Yara's commitment for the New Alliance for Food Security & Nutrition, a shared commitment by the G8 member states, private sectors partners and the Ethiopia, Tanzania and Ghana. Yara is among the eight multinational companies that are committed to invest in Ethiopia's agricultural sector according to government priorities.