Power utility, NamPower, has defended the slow pace at which all planned mega electricity projects are moving, saying the execution of projects such as Baynes and Kudu Gas are highly complex,
extremely expensive and require Government guarantees for financing arrangements.
This comes after an investigation by an energy expert who said NamPower and the Government have not done enough to ensure security of supply.
The expert, who preferred not to be named, said this failure had come at a very high cost which is not sustainable in the long run.
He added that the failure to invest in a local baseload is in contrast to the White Paper on Electricity, whose objective is to have 100 percent of peak demand and 75 percent of electric energy demand be supplied from local sources.
The energy expert said NamPower imported about 97 percent of its average hourly power load in September, or 465 MW out of 480 MW.
He said 77 percent of this power was imported from South Africa, 2 percent from Zimbabwe and 18 percent from Zambia.
NamPower also imported 68 percent of the country’s energy demand last year from the region, up from 64 percent in 2015.
NamPower Managing Director, Simson Haulofu, told the Windhoek Observer that they have made progress on a number of small generation projects, which include private participation to reduce the reliance on imports while waiting on the mega projects.
“Some of the renewable plants are already operating,” he said.
Haulofu said considerable progress has also been made since the resumption of project activities during the second quarter of 2017.
The company’s long-term power generation projects include the Baynes Project, Kudu Gas, Xaris and Arandis.
“Mega projects such as Bayness, Kudu, Xaris and Arandis are complex and with great funding requirements and thus need thorough risk analysis. Furthermore, projects of this nature need Government [financing] guarantees to unlock them. Hence, their implementation cannot be rushed without proper consideration,” the NamPower MD said.
Since May 2017, three rounds of gas sales agreements negotiations have taken place between the Kudu Gas Field developers and the Kudu Power Station developers, with the final negotiations expected to be concluded by the end of November, he said.
The company has also re-engaged Kudu Gas contractors, namely the consortium of Shanghai Electric and Siemens for the construction, installation and commissioning of the power station in respect of price reconfirmation.
Haulofu said the re-engagement negotiations have been positive and said the renewed consultations with Marubeni Corporation for the operations and maintenance contract and the 19 percent equity is on course.
NamPower has also re-engaged CEC Plc of Zambia for the power offtake. The talks started in August and are also progressing well, he said.
NamPower was also accused of not doing anything to make contingency plans to end its dependency on one power transmission line from South Africa.
But Haulofu defended the company’s contingency plans, saying that Namibia is connected to two utilities, Zesco of Zambia through the Zambezi interconnector and Eskom of South Africa through two lines (400 kV and 220 kV).
“This provides Namibia with a redundancy, in the event that one interconnector is out, Namibia can still be supplied via the other two lines. The situation is improving as most local IPPs are busy commissioning their generation plants and this will alleviate the burden on the interconnectors,” he said, adding that NamPower always has mitigating factors in the event one supply option is curtailed, and Eskom is no exemption.
The energy expert also accused NamPower of delaying the implementation of renewable energy projects by independent producers.
Haulofu, however, said NamPower is continuously engaging Independent Power Producers (IPPs) for the provision of electricity from renewable energy projects.
“The implementation of the Renewable Energy Feed-In Tariff (REFIT) programme which is designed to fast-track investment in renewable energy technologies by offering long-term contracts to renewable energy Independent Power Producers is typically based on the cost of generation of each technology.”
So far, 40 MW of power is being supplied by IPPs and an additional 92 MW is expected to be commissioned by end of 2018.
According to the 2016 NamPower Annual Report, despite an increase in revenue, the gross profit margin fell from 40 percent achieved in 2015 to 28 percent and the company made a loss (before tax) amounting to N$551 million compared to a profit of N$666 million achieved in 2015.
NamPower said this was due to extraordinary items that occurred on its balance sheet, which included the increased cost of electricity, and the severe drought having affected the generation capacity of NamPower’s ‑ flagship hydro power station at Ruacana.