* Risk if piracy drives up fuel prices for power firm
* Somalia govt under siege from Islamist rebels
* Attacks limit expansion of electricity supply
By Sahra Abdi
MOGADISHU, Dec 23 (Reuters) - Somalia's main private power firm, Somali Energy, said on Thursday piracy on the Indian Ocean has driven up the cost of imported diesel by 50 percent, making it difficult to keep the lights on in the conflict-torn nation.
Somali Energy, a private company generating electricity in the Horn of Africa country's capital of about one million people, said the cost of fuel had risen over the past two years after pirates cranked up their attacks on commercial ships.
Pirates are making tens of millions of dollars in ransoms from seizing merchant ships in the Indian Ocean and the Gulf of Aden, despite the efforts of foreign navies to end the attacks. Marine insurers have raised premiums for ships. [ID:nLDE6BK0U1]
Somali Energy produces 4 megawatts (MW) of electricity and serves only a fraction of the population of Mogadishu, but plans to raise this amount to 6 MW next year.
The managing director of Somali Energy, Abdirisaq Halane, said apart from the threat of pirates, his company has to contend with insurgents fighting a fragile government, which is being protected by African Union troops under a U.N. mandate.
"The main challenge we have is the pirates who have made the fuel expensive since there are no ships and cargo boats coming into Somalia," Halane told Reuters in an interview.
"We use diesel generators and fuel is very expensive due to the insecurity of the Indian Ocean where pirates always hijack ships," he said.
Somalia's government is seeking to revamp its power sector, and this week signed a deal with Kenya to help it restore power supplies, including providing solar power generating devices.
Kenya also agreed to help train electricity employees.
Somali Energy bought about 30 smaller electricity firms over the past 10 years, and consolidated power supply to most of Mogadishu and nearby settlements on its outskirts. The company is part of a group with telecommunication and banking operations.
Halane said Somalia's dilapidated electricity transmission grid was also facing constant breakdowns, making it a challenge to serve the firm's 30,000 customers. The company supplies government offices, some residential homes and light industries.
The nation has descended into violence since dictator Mohamed Siad Barre was ousted in 1991.
"We are using the network laid by the former government, which is run down and unreliable, so we resort to underground power lines because of the attacks by insurgents," Halane said.
"Private companies worry about challenges from other companies, but we worry all day about the ongoing violence."
There are increased concerns about more disruptions after Somalia's al Qaeda-linked al Shabaab rebels and rivals, Hizbul Islam, said they had agreed to join to fight the government, which was a risk that curtailed the firm's expansion.
"Our target is to add to our customers, but most people can't afford our charges so families stay in darkness every night while shelling and fighting goes on," Halane. (Additional reporting by Abdi Sheikh; Writing by James Macharia)
