- MLA’s Mining & Energy Practice Group offers our international and domestic clients a wide array of services in all legal aspects of the mining and energy industries. MLA’s mining and energy practice grew several years ago in response to the increasing interest in Ethiopia’s power generation, especially in the hydro, gas, oil, wind, geothermal and solar power industries. Our lawyers have substantial experience representing clients in transactions involving both the mining and energy industries.
- Our mining law practice represents multinational mining companies in Ethiopia and has assisted in the drafting mine construction agreements, exploration and development agreements, and environmental compliance of mining fields and agreements.
- We advise investors and clients on virtually every aspect of operating in Ethiopia, including from the initial stages of acquisition, title examination, permitting and exploration through feasibility studies, site development, financing, management and operation of an active mine. We also provide advice on mining rights, titles and regulations in Ethiopia, obtaining a mining license in Ethiopia, on tax issues, commercial contracts, acquisition and disposition of technology and intellectual property rights and patents involving mining technologies.
Mehrteab Leul & Associates’ Quick Guide on Mining and Energy in Ethiopia
- The Ethiopian Constitution provides for a state-controlled land and resource tenure. The fast-growing mining sector, primarily as a result of the foreign direct investment in Ethiopia, has necessitated the revision of antiquated mining laws that were in place.
- Currently, there are a number of laws that govern mining operations, petroleum operations, and transaction in precious minerals. The laws that currently regulate the industry include: Mining Operations Proclamation No. 678/2010; Mining Operation (Amendment) Proclamation No. 816/2013; Petroleum Operations Proclamation No. 295/1996; and Transaction of Precious Minerals Proclamation No. 651/2009.
- The above laws regulate the requirements and procedures for acquiring the different licenses (Reconnaissance, Exploration and Mining) that are required to undertake various activities associated with mining and minerals. The rights and duties that these licenses carry are also dealt with under these laws. These laws task, among others, the FDRE Ministry of Mines, Petroleum and Natural Gas and the respective regional bodies to license and supervise entities that are involved in the mining industry.
- The specialized income tax proclamations that used to regulate mining and petroleum operations were recently repealed and replaced by the new Federal Income Tax Proclamation No. 979/2016. The new Federal Income Tax Proclamation consolidated the taxation of mining and petroleum operations into a single body of legislation which regulates income generated from different sources. However, there were no major changes to the mining sector that resulted from this consolidation and the previously set income tax rate for mining business remains unchanged at the rate of 25%.
- Investments in the Ethiopian energy sector are regulated principally by the Energy Proclamation No. 810/2013 and the Geothermal Resources Development Proclamation and the Electricity Operations Council of Ministers Regulation No. 49/1999.
- Pursuant to the Investment (Amendment) Proclamation No. 373/2003, the business of generation of electricity as well as off-grid transmission and distribution are open to foreign investors either to carry out the investment in a solely foreign-owned entity or through a joint venture with a local company or the government.
- Typically, the state-owned electricity off-taker (Ethiopian Electric Power, EEP) will enter into a power purchase agreement (PPA) by first issuing an internationally competitive bid. However, the current laws, as well as the highly anticipated Public Private Partnership draft law and policy, also provide for the possibility of entering into direct negotiations with the EEP upon fulfilment of certain conditions.
- Once the PPA and the Implementation Agreement (IA) are signed, an IPP will be required to incorporate a special purpose vehicle (SPV) that will implement the terms of the PPA and IA. For the implementation of the terms of the PPA, the IPP will be required to obtain a commercial registration certificate, investment permit, geothermal wellfield development and use license, and environmental and social impact assessment.
- Once the construction of the generation facility is completed, the IPP will also be required to obtain a generation license in order to produce electricity and sell it to the off-taker. The IPPs through the IA may get some indispensable incentives such as duty-free importation of capital goods and spare parts, and exemption from income tax.
- In November 2017 the government of Ethiopia, with the support from the World Bank, launched an ambitious National Electrification Program (hereinafter “NEP”). The NEP aims to attain universal access to electricity by 2025 through grid electrification, off-grid services, and sector capacity and institutional reforms. In line with this program, Ethiopia’s energy and power sectors have experienced a stirring development in the first half of 2018. The most notable developments in the sector included the signing of the first power purchase agreement with an Independent Power Producer (hereinafter “IPP”) and the announcement of tenders for 250 MW Scaling Solar project and the first-ever IPP tender for two hydroelectric power projects. Scaling solar is a program that brings together several World Bank Group services to make IPP solar projects (that own generation plants and sell bulk electricity to the national grid through power purchase agreement) operational within two years and at competitive tariffs. Ethiopia was the fourth country to join the scaling solar program, preceded by Zambia, Senegal and Madagascar.
- MLA, keeping up with this newly growing sector, assisted a solar photovoltaic (PV) project developer planning to build a solar electricity generation plant integrating different technologies to sell the generated electricity to a public utility off-taker. The team assisted the client to ensure compliance of the power purchase agreement with Ethiopian law during all phases of the negotiation process.
- The energy practice also advised a Dutch-U.S. solar developer on the Ethiopian legal framework of the energy sector specifically on off-grid electricity. Through the off-grid model, the generation plants will be designed to supply electricity directly to the consumers, without being connected to the national transmission and distribution networks.
MLA Quick Guide on Environmental Law in Ethiopia
- The Environmental Pollution Control Proclamation No. 300/2002 and the Environmental Impact Assessment Proclamation No. 299/2002 provide rules intended to control pollution and to govern environmental impact assessment in Ethiopia.
- The Ministry of Environment, Forest, and regional environmental authorities set environmental standards and ensure compliance with those standards, review environmental impact study reports of projects and notify their decision to the concerned licensing agency and, as may be appropriate, audit and regulate their implementation in accordance with the conditions set out in the standards.