Zimbabwe gives guarantees to 27 independent power producers with combined 1 000 MW projects

Government has ambitions of installing 2 100MW of renewable energy by 2023. But a combination of Zimbabwe’s currency uncertainty and low tariffs have discouraged private energy investment.

ZESA executive chairman Sydney Gata has said currency risk in the country was one of the major factors hurting investment.

“Banks will not come to the table. How can I lend in US dollars to buy equipment that is sold in US dollars to produce electricity that will be sold in local currency?” Gata said. He criticised Treasury’s refusal to issue the government guarantees that would help producers secure offshore funding.

The case of Nyangani Renewable Energy showed why many energy investors have stayed away from Zimbabwe. Nyangani’s 10MW Riverside Solar power station was the first independent producer to feed into ZESA when the first 2.5MW came on stream in 2018. The company took Zimbabwe Electricity Transmission and Distribution Company (ZETDC) to the International Chamber of Commerce in Johannesburg, South Africa, over US$8.6 million for power delivered from its 15MW Pungwe B hydropower plant in Manicaland.

The arbiter ruled that Zimbabwean law allows ZESA to pay Nyangani’s USD-denominated power purchasing agreement in Zimbabwe dollars, a decision that Managing Director Ian McKersie said “does not encourage further investment in the sector”.

Last year, Zimbabwe had 104 licenced IPPs, but only a few are generating power, contributing just 1.87% to the national grid, according to data from the Zimbabwe Energy Regulatory Authority (ZERA). This was “due to a variety of reasons, chief of which was lack of financial closure”, ZERA’s 2021 annual report says.

Only seven IPPs were licensed in 2021. Of the newly licensed IPPs, only one solar operator, Solgas, is supplying power to ZESA. The rest, such as Zimplats’ 185MW and ZFC’s 5MW power plants, are being installed by companies to generate power for their own operations.

Government in 2019 removed duty on solar products, such as panels and inverters, to ease the import of renewable energy components. But duty applies only when these are brought in as complete kits, which means importers can still be charged duty for bringing in a battery alone.-NewZwire

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