NamPower signs deal with IPP
The national power utility, NamPower, has signed a 25-year power purchase and transmission connection deal with Independent Power Producer, GreeNam Electricity (Pty) Ltd, for two of the 10MW solar photovoltaic power plants to be constructed at Kokerboom near Keetmanshoop in the //Karas region, and another in the Hardap region.
The IPP is majority-owned by Israeli multi-national investment company, the FK Group, and some local partner. FK Group’s total equity investment into the project is between US$35 million (N$ 497, 180,250) and US$40 million (N$568,206,000), according to the group’s senior business executive, Hana-Muriel Setteboun.
GreeNam is the second IPP to sign a power purchase and transmission connection agreement with the NamPower since the adoption of the Short Term Critical Supply Project (STCS) project in 2011. The first Private Purchase Agreement (PPA) with NamPower was in 2013 with InnoSun Energy Holdings.
“We know that the SADC region in general and Namibia in particular is facing a shortage of power supply and is in dire need of power generation plants to meet the ever increasing demand for electricity. In an effort to address the problem, NamPower initiated the STCS under which a number of short to medium term initiatives are being implemented to address the immediate power supply shortages. PPA’s such as this one form part of our STCS programme. While working on base load generation and transmission projects with a view of meeting the ever increasing demand for power supply, NamPower will continue to negotiate new PPA’s with power utilities and IPP’s in the country and elsewhere,” said Acting Managing Director of NamPower Kahenge Haulofu at the signing agreement between the two entities.
Recently, the Electricity Control Board (ECB) revealed that 14 independent power producers (IPPs) have signed power purchase agreements (PPAs) with NamPower to supply 70MW of energy in an investment deal worth N$1.6 billion.
This comes at a time that has seen Namibia import up to 70% of its electricity requirements from the rest of the SADC region. The 14 IPPs are expected to supply a total of 70MW of renewable energy in the next 18 months with a combined investment amounting to N$1.6 billion to the electricity supply industry and ultimately the country’s economy. The ECB stated that HopSol Otjozondjupa being the first of the initial 14 IPPs has commenced operation since 28 June 2016, to be supplying power under a long term contract.
Recently Fitch Ratings affirmed NamPower’s long-term foreign currency Issuer Default Rating at ‘BBB-’ and Short-Term IDR at ‘F3’. Fitch has also affirmed NamPower’s National Long-Term rating at ‘AA+ and its Short-Term rating at ‘F1+. The Outlooks on the Long-Term ratings are stable.
“NamPower has benefited from state financial support in the form of N$360 million energy subsidy in 2008, and we expect the zero-dividend policy to be maintained. The state also guaranteed 17% of NamPower’s debt in 2015. The guarantees relate to amortising debt, and the share of debt with direct government guarantees is thus decreasing. We may reassess the strength of the shareholder links if the share continues to decrease, which may happen in the absence of new large-scale investments,” a Fitch statement said.
Fitch expects the supply schedule to remain tight over the next 12 to 24 months, especially in the absence of a firm supply agreement with Eskom. NamPower had N$403 million of cash at the end of March 2016, supported by a liquid investment portfolio of N$6.2 billion.