Govt pushes RBZ to save under-fire IPPs

Energy and Power Development permanent secretary, Gloria Magombo

GOVERNMENT has escalated its push to save scores of independent power producers (IPPs) who have battled to raise foreign currency to start a string of vital projects, businessDigest can report.

IPPs are crucial for helping the country ameliorate a grinding power crisis.

In an interview with businessDigest this week, Energy and Power Development permanent secretary, Gloria Magombo said authorities had made inroads in negotiations with the central bank to give power start-ups priority in foreign currency allocations.

“Government has engaged IPPs to support Zesa in supplying power to the nation,” Magombo said.

“It emerged that IPPs need government support on two fronts: to ramp up capacity in existing plants through access to foreign currency, and capacity expansion. Government to facilitate IPPs set up new plants and expand existing ones,” she said.

“IPPs were experiencing operational challenges chief among them access to foreign currency for capacity expansion and payment of loans. Government will work closely with IPPs through a continuous engagement process to increase access to foreign currency auctions and timely and adequate allocations,” she said.

The RBZ’s auction system was at launch in 2020 an important factor in limiting economic damage inflicted by the black market.

The system has had its own share of problems.

But last week, Reserve Bank of Zimbabwe (RBZ) governor, John Mangudya said it has injected US$3,7 billion into the economy since its launch over two years ago.

At the end of last year, the government had granted about 70 IPPs rights to set up power stations across the country.

However, official data shows that only 20 of these have been implemented.

This figure falls far short of the requirements of a country that is fast gliding towards the swamps as blackouts mount.

IPP investors say the bulk of their projects have been undermined by a badly framed power purchase agreement, which compels them to sell electricity to national power utility Zesa Holdings in the free-falling Zimbabwe dollar.

Yet loan repayments to international financial institutions and the importation of power plants and spares requires foreign currency.

In a string of engagements, IPPs have warned that unless Zimbabwe makes a positive policy shift, implementation of their projects would be delayed.

This would be bad news for a country that has recently suffered rolling blackouts, which analysts say have become the biggest hurdle to economic recovery.

Zimbabwe’s power crisis has been compounded by worsening water levels at Lake Kariba, where its 1 050 MW Kariba Hydroelectric power station is situated.

The facility, upgraded for US$553 million in 2018, has been producing over half of the country’s power requirements.

But authorities hope that troubles over power will be partly solved after Zimbabwe completes the US$1,5 billion upgrade at the Hwange thermal power plant.

Under the renewable energy policy, the Zimbabwe Energy Regulatory Authority (Zera) has set out ambitious energy-production targets of up to 1 100 MW renewable energy by 2025.

But in October, the Zimbabwe Independent reported that the country was revamping its IPP framework, in a shake-up that will bring “water tight” clauses to pacify edgy investors.

The new framework, described by a Western diplomat as “world class”, was developed with funding from a leading pan-African development lender, with technical assistance from an international legal firm, the diplomats said.

Diplomatic sources said at the time that Zimbabwe’s policy shift had already held spellbound Western investors who have been briefed on the impending changes, ready to pounce on spin-offs to be unlocked once the government makes an official announcement.

A highlight of the new documents, according to the people, some of whom were directly involved in the project, would be a review of the PPA framework —  a controversial paper that has been widely condemned by investors.

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