Zim threatens to cancel Essar licence

via Zim threatens to cancel Essar licence – DailyNews Live by Mugove Tafirenyika • 18 March 2015

HARARE – Zimbabwe plans to cancel independent power producers (IPPs) licences —with a capacity to generate 5 000 megawatts (MW) — including Essar Africa (Essar)’s.

Gloria Magombo, the Zimbabwe Energy Regulatory Authority (Zera) chief executive, yesterday told Parliament that the country was increasingly getting frustrated by more than 12 IPPs that were failing to get proposed projects off the ground — years after getting licensed to construct power stations.

“Essar is one such IPP whose licence we are seriously considering to cancel because they are doing very little in terms of what they were licensed to do,” she said.

The India-based Essar concluded a $750 million takeover deal of Ziscosteel in 2011, but little progress has been witnessed due to challenges including delays in the handover of mineral rights.

In addition to resuscitating Ziscosteel, Essar also proposed to construct a 600 MW thermal plant to boost power supply to the iron processor’s plant.

Magombo said some of the licensed IPPs under project development included China Africa Sunlight Energy at Gweru Power Station with a capacity to produce 600 MW, Shangano B Power Station (600 MW) Manako Power-Osborne Dam (2,5 MW), Great Zimbabwe Hydro-Mutirikwi Dam (5MW), Kupinga Renewable Power Plant (1,6MW) and HT Gen-Tsanga Mini-Hydro (3,3 MW), among others.

Recently, Zimbabwe liberalised its power industry by licensing IPPs to help reduce acute electricity shortages in the country.

The southern African country currently produces 1 200 MW per day against a national daily consumption of 2 200 MW.

Magombo said Zera had also approved six other independent producers with a combined total capacity of 360 MW as regional neighbours the country used to rely on no longer produced excess electricity for export.

“We are also contemplating reviewing the licence  application fee from the current $100 to $20 000 to make sure that we get more serious producers applying because at the moment what we have is a situation where companies apply for licences but they sit on them,” she said.

Magombo noted that Zera’s efforts to promote investment in the country were being “hampered by the inability by the IPPs to secure funding due to the perceived high country risk.”

She added that investment into new power projects was capital intensive thus making it difficult for IPPs to access the large amounts required.

On the challenges being faced by the energy sector, Magombo said the Zimbabwe Electricity Distribution and Transmission Company (ZETDC) was unable to meet the country’s demand for electricity.

She said operational inefficiencies and poor financial performances by the ZETDC, underutilisation of infrastructure such as small thermals, vandalism as well as ageing transmission and distribution infrastructure was also hampering provision of energy.

“Insufficient investment in internal generation capacity expansion is a challenge that we have been grappling with in the past 28 years,” said Magombo.