Kariba 250MW Floating Solar Project Gets $250m Funding: Should Appease Green Army Mad About Hwange Expansion

Let us talk about power. We sat idly by whilst our country’s electricity generation and transmission infrastructure crumbled, and now we are paying the price. So now, we are scrambling to find solutions—better late than never, I guess.

Right off the bat, I’m with you: many, if not most, of the projects we are hearing about will not come to fruition. That said, there is reason to be cautiously optimistic that we will make strides in fixing our electricity shortage mess.

Floating solar at Kariba

We talked about why we thought it would be a good idea to deploy floating solar at Kariba early last year:

• Zimbabwe should jump on floating solar panels, would benefit Kariba

At the time, we didn’t know this was seriously being considered. It seemed like those talking about it were of the mind that we couldn’t pull it off, and so it was a mental exercise talking about it. We were pleasantly surprised to see ZESA consulting on it:

• ZESA consulting on deployment of floating solar panels at Kariba, for now, here’s the state of power in the country

It appears we have now reached the financing stage of the project. Bloomberg reports that Zimbabwe’s biggest power users have secured $250 million from the African Export-Import Bank (Afreximbank) to construct floating solar panels at Kariba, which happens to be the world’s largest man-made lake—perfect for floating solar projects.

IEUG

The Intensive Energy User Group (IEUG) is a voluntary association of private organisations that use the most power in the country. It represents about 40% of domestic power demand in Zimbabwe, and about 90% of its members are mining companies.

They are working together to provide the resources and demand for power in Zimbabwe. They have formed three subsidiary companies, one of which is involved in trading.

This IEUG plans to develop a 250 MW solar plant at the Kariba Dam, with implementation expected within 18 months. Bloomberg reports that they reviewed the presentation IEUG made to secure the funding.

The presentation was made during the Africa Investment Forum in Morocco, which ended last week.

Although the initial plan is for 250 MW, the project has the potential to expand to 1,000 MW of solar capacity. I guess they will test out the 250 MW and, depending on how it works out, proceed to expand to 1,000 MW.

IEUG’s subsidiary, Green Hybrid Power Pvt Ltd (GHP), will implement the Kariba Floating Solar Project.

Edward Cross—yes, that Eddie Cross—is the chairman of the IEUG, and he says investors are loving the idea. He claims they received “oversubscribed” interest for financing.

It is encouraging to see that they have already secured funding for the project. That’s important because they have grand ambitions and will be seeking to raise a lot more in the coming years.

IEUG is involved in electricity generation and also in the transmission and distribution business. Cross said:

We have formed a company to do an investment in new power generation, which is responsible for this project and we have a company that is responsible for transmission and distribution. In the transmission and distribution sector, we have to invest massively in the region. We estimate in the next five years we have to invest US$3 billion in transmission to enable us to move power from areas of surplus to areas of deficit.

IEUG already operating

The encouraging bit is that IEUG has been trading power successfully and profitably for the last 19 months, according to Cross.

So, those electricity tariff caps imposed by the government—which are real and concerning—were not enough to render IEUG unprofitable. This gives me hope that we will see some other private projects succeed.

The PPA

IEUG holds a 20-year Power Purchase Agreement (PPA), which is likely what gave Afreximbank the confidence to fund the project.

As I alluded to, the terms ZESA imposes on independent power producers have long limited the number of players interested in investing in power generation in the country. However, IEUG seems to have worked out a good agreement with the national power utility.

The PPA is a long-term contract between the IEUG (as the energy producer) and an electricity off-taker, likely ZESA or other large power consumers, including IEUG members themselves.

Under the PPA, the IEUG will sell electricity generated by the floating solar project to the off-taker at agreed terms, such as a fixed price per kilowatt-hour (kWh) or with periodic adjustments.

We know that those adjustments are sometimes not readily approved, even in the event of currency devaluations, which has long been one of the biggest challenges independent power producers face.

In IEUG’s case, the 20-year term provides financial certainty to both parties. It assures the IEUG of revenue over two decades, which is crucial for repaying the funding provided by Afreximbank and ensuring the project’s financial sustainability.

Since the IEUG holds a 20-year transmission agreement to connect to the national grid, the PPA likely also includes guarantees for the sale of solar energy into the grid. That is invaluable, as there is a ready market for the electricity they generate.

So, yeah, a PPA is a key document in renewable energy projects, as it reassures lenders like Afreximbank that the project has a stable income stream, making the loan less risky.

Afreximbank involvement

Having said that, I know many switched off when they heard Afreximbank is involved in this, and I don’t blame them. I mean, bond notes were supposedly backed by a $200 million Afreximbank loan, but we all know how that turned out.

Not to say it was the bank’s fault, but unfortunately, we associate them with a few other unsuccessful projects.

I’m on an optimism spree these days and will prepare for the worst but hope for the best. Let’s hope IEUG succeeds and expands the floating solar project to 1,000 MW. Fingers crossed.