President Robert Mugabe’s government says it will soon instruct the Zimbabwe Energy Regulatory Authority (Zera) to cancel the licences of more than ten independent power producers (IPPs) whose power generation projects have failed to take off the ground – four years after they were licensed.
Energy and Power Development Minister Engineer Munancho Mutezo says government views the failure of the licensed IPPs, which have a combined capacity 5 000 MW, in a very serious light.
“IPPs have been licensed with the aim of complementing the existing power stations, but producers like RioZim’s Sengwa have taken more than a decade and they are not moving. We are very frustrated with these people.”
Of the 15 IPPs licensed since 2010, only three small projects located in the Eastern Highlands and the south-eastern Lowveld have started operating and are producing power mainly for their own consumption.
Mutezo says government is worried that all the big IPP projects have failed to take off at a time when the power deficit is growing. Rio Tinto’s Sengwa power station (2 400 MW), in Gokwe, the Lusulu power plant (2 000 MW), the China-Africa Sunlight project (600 MW), and a project that was to be developed by Essar Africa Holdings (600 MW) are some of the key IPP projects which have failed to take off despite great promise in the last few years.
However, executives of some of the IPP companies tell Engineering News that the ongoing liquidity crunch and a lack of clarity on the implementation of the indigenisation policy remain a major cause for concern among financial institutions.
“It is very easy for government to accuse IPPs of sabotage but this is business and all decisions on whether to invest or not are informed by conditions at the investment destination. No international financial institution is willing to risk investing in an uncertain and deeply politicised economy like ours without proper safeguards against potential losses.
“As it is, no IPP can give the guarantees and collateral that lenders want and government itself cannot do that, so these projects are stalled because there is no start-up capital,” says a senior manager with one of the IPPs.
Zimbabwe faces a huge power deficit and has embarked on the expansion of the Kariba South hydropower station to install equipment that will provide an additional 300 MW for the station’s existing output. The project will be financed by a $355-million loan from the China Export-Import Bank.
The Zimbabwe government has also contracted Sino Hydro Corporation to expand the Hwange thermal power station by adding two more power generating units with a combined capacity of 600 MW.
Zimbabwe also expects to get an additional 1 600 MW from the planned Batoka Gorge hydropower, which will be built jointly with Zambia at a cost of $42.5-billion.