The World Bank Group (WBG)-backed Lusaka transmission and distribution rehabilitation project is being restructured for a second time, following a series of setbacks. The $246m project officially began in February 2014 with a closing date of February 2019, but that was extended to February 2021 after the European Investment Bank left the project.
Campaigners have attacked the proposed development of the 2,400MW Batoka Gorge hydroelectric scheme on the Zambezi River, arguing the dam will destroy tourism and that the coronavirus pandemic has prevented proper consultations with affected communities, writes Tonderayi Mukeredzi in Harare.
Zambia’s government has said it will assume Zesco’s debt to private power suppliers in a bid to promote confidence as it seeks to renegotiate power supply agreements. A government team led by the Industrial Development Corporation (IDC) is renegotiating power purchase agreements with IPPs in an attempt to reduce the tariffs at which Zesco buys power from private producers. Ministry of Energy sources estimate Zesco’s debt to IPPs had reached around $726m at the end of November 2020.
Off-grid solar company Solarise Africa announced on 9 February that it had signed a partnership agreement with turnkey energy firm Centennial Generating Company.
The completion date for the $2.3bn Chinese-sponsored Kafue Gorge Lower (KGL) hydropower scheme in southern Zambia has been pushed back after a surge in cases of the South African coronavirus strain. Planned to produce 750MW on completion, KGL will be Zambia’s third biggest power station after the 1,080MW Kariba North Bank and the 990MW Kafue Gorge Upper and will help to reduce the current 810MW supply deficit.
Policymakers agree more action is needed to counter debt distress and unlock funds for the energy transition, but there are few signs that a more effective financial architecture will emerge any time soon. Meanwhile concerns over rising sovereign debt are feeding into hesitancy over new lending, writes Jon Marks.
Zambia has suspended value-added tax (VAT) on diesel and petrol in an effort to avert an expected price increase as the country prepares for elections in August. Finance minister Bwalya Ng’andu signed a statutory instrument zero-rating petrol and diesel with effect from 1 January. The government had previously charged VAT of 16% on petroleum products. Fuel prices were last raised in December 2019 when the kwacha had depreciated to 14 to the dollar while crude oil prices were at $70/bbl.
The UK’S Renewable Energy Performance Platform (REPP), part of the Department for Business, Energy and Industrial Strategy, on 11 December announced that it had signed an agreement to invest £1m ($1.3m) of equity in renewable-powered battery rental company Mobile Power. The investment was part of a £2m series A funding round.
Mining companies are struggling to pay the interim power tariff of $0.093/kWh to Zesco, blaming higher taxation and a harsh operating environment. The tariff was introduced in 2018 while a cost of service study was carried out. But some miners are struggling to pay their bills despite a recent surge in world copper prices and want the power price to be set once the study is completed in 2021.
Mini-grid company CrossBoundary Energy Access (CBEA) has published a white paper on its model for developing mini-grids in developing countries and will release term sheets and its template project finance model on 15 February 2021. The unusual move comes as mini-grid developers focused on rural electrification continue to face challenges with profitability and attracting investment.
The United Kingdom’s Renewable Energy Performance Platform on 11 December announced that it had signed an agreement to invest £1m equity in renewable-powered battery rental company Mobile Power.
Zesco is in talks to lower power purchase prices from its private suppliers while it awaits completion of a delayed cost of service study. The utility’s debt to Zambia’s four IPPs currently stands at just under $800m, and Maamba Collieries Ltd (MCL) has gone to the High Court in London to enforce payment on $350m it is owed.
Zesco invites bids by 5 February 2021 for the engineering, design, manufacture, supply, construction, testing and commissioning of power transmission and distribution equipment under the Sustainable Electricity Supply Southern Division Project.
The Zambian government’s refusal to make a $42.5m interest payment by its 13 November deadline – thereby triggering a sovereign debt default – was hardly a surprise. The investor appetite that persuaded lenders to pile into $3bn-worth of Eurobonds has waned on President Edgar Lungu’s watch, while Covid-19 and falling commodity prices have affected sub-Saharan Africa as a whole. The International Monetary Fund (IMF) predicts the region’s economy will contract by 3% in 2020 and its forecast 3.1% growth in 2021 will be “a smaller expansion than expected in much of the rest of the world”.
Investors, contractors and financiers have been reassessing southern Africa’s potential to emerge as a natural gas producer, supply hub and importer of molecules and electrons for gas-to-power (GTP) schemes. Mozambique’s emergence as an LNG exporter gives it potential to develop new gas-based industry and infrastructure. Developments in southern Mozambique further suggest it could drive a wider regional industry, with more gas exported by pipeline.
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