NamPower drags feet on Xaris

16 December 2016
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NamPower is still to conclude an agreement with Xaris Namibia over the implementation of a planned 250MW stop-gap measure power plant in Walvis Bay, despite government approval for the project last year.
The Windhoek Observer can reveal that the plant, which is meant to reduce the country’s power imports, is yet to get off the ground, with NamPower said to be dragging its feet, in terms of committing to the project.
The power utility, which is currently battling a domestic power deficit, and importing over 60 percent of the country’s electricity requirements, has only held one meeting with Xaris’ management, with no commitment forthcoming.
Agreements still pending include a power purchase agreement, transmission agreement, connection agreement and a shareholder agreement, which might become a contentious issue, as NamPower’s management is allegedly no longer interested in taking up a 30 percent equity stake in the project, as per a Cabinet directive.
Continued delays over the implementation of the project, which is part of the Harambee Prosperity Plan, resulted in Mines and Energy Minister, Obeth Kandjoze, writing a scathing letter to NamPower in September, in which he raised his concerns at the slow pace in the implementation of the project.
“I am aware that the review case lodged by Arandis Power (Pty) Ltd in the High Court is concluded. Despite the above-mentioned interventions and events, to date I have not been appraised of the progress on this important project,” the letter addressed to NamPower board Chairperson, Maria Nakale-Gaomas, reads.
“The minister regards this matter as urgent and important; therefore non-adherence on the directives issued by the minister cannot be condoned.”
The failure by the power utility to initiate negotiations on the implementation of the project, will likely result in it being delayed way beyond the initial 14 to16-month implementation period.
Xaris was initially scheduled to start producing power in July next year.
According to insiders, Xaris requires the power purchase agreement to start negotiating funding with banks.
Standard Bank has been mentioned as a possible funder, which could provide 80 percent of the capital required for the project, expected to cost more than US$400 million.
The project will be funded through private equity and debt, with no requirement for Government Sovereign Guarantees, and thus requires a bankable power purchase agreement from NamPower, allowing the total funding to be structured with 20 percent equity, five percent Mezzanine debt and 75 percent debt.
Shareholders are expected to provide 20 percent of the capital, with over N$499 million having already been invested into the project by the company.
NamPower Managing Director, Simson Haulofu, maintains that the project has no Cabinet approval, and is thus still subject to negotiations despite Kandjoze making reference to a March 2015, cabinet in principle approval in his letter and a the Minister`s announcement in December of the government`s position.
“Government has not approved the project, but given us the go-ahead to start negotiations, which we are now doing,” he said.
Quizzed on the delays and their impact on the timelines and implementation of the project, Haulofu said that the power utility has been discussing the project internally, before engaging Xaris Power.
“There is no problem at all, it is just that we needed to brief our people on the project and to make sure we are on the same page when we meet to discuss. We cannot just run into a project without the necessary and relevant information. Now everything is happening,” he said.
On the minister’s concerns that he has not been apprised of the implementation progress, the NamPower boss said Kandjoze had now been updated on the utility’s strategy and plans regarding the implementation of the multi-billion project.
“The minister has a right to ask about what is happening and the board explained it to him, and I believe we are now on the same page,” Haulofu said.
He confirmed that NamPower had not committed to how much shareholding it would take in the project.
“The company had made an indication that it will consider taking up equity of up to 30 percent and this will be determined by the negotiations,” Haulofu said.
He said that based on its timelines, NamPower expects negotiations with Xaris to be concluded at the beginning of 2017.
“We hope to have concluded the negotiations by the end of January, it could have been earlier, but the delay is because of the holidays. Our consultants, who are assisting us, are busy working on it,” the NamPower MD said.
Xaris Namibia Chairman, Boni Paulino, was tight-lipped on the company’s engagement with NamPower, referring the paper to the power utility.
“NamPower will be best suited to advise on that,” he said.
The Xaris project will entail the importation of liquefied natural gas (LNG) to a floating storage and regasification unit (FSRU) in the Walvis Bay port extension area, which would be piped to a power plant to produce electricity.
 
 
 
 
 
 
 
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