Blackouts: IPPS to get US dollar payments

THE government has cherry-picked and offered incentives to almost 40 independent power producers (IPPS) to accelerate the implementation of projects with capacity to generate 800 megawatts (MW), in fresh moves meant to stem a blazing energy crisis.

Zimbabwe has a pipeline of 100 IPPS, most of which have not implemented projects due to a hostile policy compelling them to sell power in the free falling Zimbabwe dollar.

The Zimbabwe Electricity Transmission and Distribution Company recently said electricity generation was affected by faults at Hwange Power Station.

Some businesses and individual consumers are enduring long hours without power as load shedding bites.

But in reaction to the crisis, senior government sources said those in charge of power generation and supply have come up with the plan hoping to address electricity shortages in the quickest period possible.

The detailed plan is likely to be discussed by Cabinet soon. Under the plan first seen by the Zimbabwe Independent, the government will give guarantees to a selected list of IPPS that the state power utility, Zesa Holdings will pay for electricity transmitted to the national grid.

The sources did not disclose the names of IPPS earmarked for the deal, or if the government had abandoned its policy to pay in Zimbabwe dollars.

As authorities cracked their heads to fix a crisis that has paralysed industries and threatened the economy, senior government officials claimed this week blackouts could be history within 24 months.

But if such guarantees were to be issued in the next weeks if approved by Cabinet, there would be no chance of a quick fix, given the long gestation periods of power projects.

The sources said the 800MW were more than the current deficit, and could return Zimbabwe to normalcy quicker than expected.

But many have pulled back, citing endemic risks in a market where policies compel them to accept the haemorrhaging Zimbabwe dollar.

Power producers’ push back has been a huge blow to the economy, which relies heavily on the struggling state power monopoly to fire up industries.

During the run up to polls held in August, President Emmerson Mnangagwa promised Zimbabwe that the power crisis was history after investing US$1,5 billion for the Hwange Power Station expansion and facelift.

The project, which was funded by Chinese lenders, added 600MW to the national grid.

But it has emerged uninterrupted power flows enjoyed during the run up to elections were backed by imports.

Zesa’s debt to regional power exporters rocketed to US$100 million during the

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period. It stunned markets last month, when it pushed for hefty tariff hikes to pay off the Hwange debt, and help it import more power.

The tariff hike was approved last week. “We have agreed to provide guarantees to solar IPP companies. The government, through the Zimbabwe Energy Regulatory Authority, licenced over 100 of these,” a senior official said as he glossed over the crisis, which he called ‘temporary’.

“So as government, we have selected 38 of the best IPP projects from the private sector, which together will give us 800MW, which will be more than the total load shedding.

“We are confident that guarantees will end load-shedding and imports,” he added.

The official spoke as the power crisis haunted markets with fresh precision from last month, with blackouts of up to 18 hours a day. Last week, Nash Paints, a leading manufacturer of paints, cut production by over half after running for eight days without power. Across industrial estates, machinery is being grounded during production time, and companies have been forced to revert to expensive diesel powered generators.

“This is a temporary situation and fairly in our control,” another source insisted.

Zimbabwe requires up to 2 000MW a day, but has been producing less than half of this. Zesa said last week it was placing the Hwange facility off the grid for scheduled service.

But sources said synchronising the new Chinese equipment with existing and old Italian technology has been a challenge. Zimbabwe is battling with a complex power puzzle. The Zambezi River Authority has slashed water allocations for power generation at Kariba hydro-electric power station from 40 billion cubic metres (BCM) to 30 BCM due to reduced water inflows in Lake Kariba, where Zimbabwe has a 1 050MW power station.

Experts have not ruled out massive water usage overruns by Zimbabwe during the run up to the polls, as electioneering took precedence over the economy.

In a recent interview with the Independ

ent, Edgar Moyo, the minister of Energy and Power Development, stated that the government would expedite the operationalisation of licences granted to IPPS in light of Kariba's decreased power generation.

“We are cognisant of the predicted below-normal rainfall in the coming rainy season and this would, definitely, affect power production at Kariba,” he said.

“We are, however, moving forward to make sure that the more than 100 IPPS that have been licenced would start producing electricity, especially from solar projects across the country.

“The most pressing issue at the moment is on guarantees being demanded by the IPPS for the government to ensure that they are paid for feeding power into the national grid.

“These guarantees are what we are working on as government but not all IPPS are assured of receiving them as we would want to make sure that the licence holders are producing the power according to their contracts,” he said.