This is why Independent Power Producers are now interested in the energy sector in Zim

As I’m sure we all understand now, our electricity woes can only be fixed by the private sector getting involved. Of course, ZESA remains the most important entity in that sector but we just can’t put all our eggs in that basket.

We have had a difficult time trying to attract investment into the energy sector but these past couple of years seem to indicate a shift.

Mthuli Ncube told us why we are seeing an increased interest in the sector. Apparently, the government has met the private sector half way and made assurances on some of the matters that kept private investors out of energy.

Independent power producers (IPPs) in Zimbabwe requested three key measures to facilitate investment in the energy sector:

1. Economic Tariffs: They asked for tariffs that ensure profitability. The government responded by raising the tariff to $0.16 per kilowatt hour, exceeding the profitability threshold of $0.10 per kilowatt hour.
2. Government Guarantees: They sought guarantees on power purchase agreements to ensure that if ZESA or ZETDC failed to pay, the government would cover the payments. The Treasury implemented this guarantee.
3. Access to Foreign Currency: They requested arrangements to access foreign currency for servicing loans and paying dividends. The Government Implementation Agreement was established to address this, with ongoing fine-tuning.

These measures have attracted investor interest in solar, coal, and transmission infrastructure projects. Mthuli says most of the independent power producers are investing in the solar sector.

He also says since the tariffs were adjusted there have been several enquiries from investors. That’s hardly surprising because everyone understood that the tariffs were too low to attract investment for years.

However, like I said earlier, we still need ZESA and it continues to face challenges, including customer defaults on payments, particularly from large industrial users. Most individual users like you and me are on prepaid metres, so we’re no longer a problem.

To address this, ZESA is implementing net metering and pre-payment programmes to improve revenue collection from the large industrial users.

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