Investing in power projects key to growth
Published On January 28, 2014 » 4075 Views» By Hildah Lumba » Business, Columns
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.Mr. Chikwanda

.Mr. Chikwanda

By MAIMBOLWA MULIKELELA –

SINCE the commissioning of the Kariba North Dam in 1977, no Greenfield investments have taken place in the expansion of the power sector.

This is due to the fact that Zambia enjoyed the surplus capacity from the 1980s till early 2000, when electricity demand began to escalate due to the discovery of copper mining and the extension of Zesco’s customer base.

Consequently, the major reforms in this sector occurred in 1995 when the Energy Regulation Board (ERB) was established, abolishing the statutory monopoly of Zesco Limited and encouraged the participation of private operators in the energy sector.

We have seen in the recent years, foreign investors expressing interest in the power sector with intentions of investing and expanding Zambia’s generation capacity.

However, the pipeline of projects so far only includes hydro and coal- based power plants due to their economic generation costs that continue to reflect the country’s low national electricity tariffs, which are recognised as being among the lowest in the Southern African Development Community (SADC).

Therefore, it is important to mention that the Government has invested significant amount of money in the electricity power generation and distribution.

In 2012 alone, the Government released a total of US$255 million to support the Kafue Gorge Lower project and to finance selected distribution and customer service projects.

To show its commitment, the Government issued guarantee letters of credit to enable Zesco secure a total of $173.43 million from the various local commercial banks.

To support Government efforts in the electricity power generation, a number of private companies such as Maamba Collieries, EMCO Coal Fired plant, Ndola Heavy Fuel Oil Power plant, West Lunga, Chanda falls, Kariba North Bank extension hydro-power project, Lunzua hydro-power, among others, are currently involved in the expansion of electricity generation in the medium to long-term.

As a result, a total of 3064.2 megawatts will be generated from these projects and would cost about $6.54 billion.

Out of these projects, Kariba North Bank extension project, Lunzua, Mujila and Musonda falls are expected to come on stream this year while, others will materialised in 2015 and 2016 respectively.

It is for this reason that the Government is constantly improving the investment environment by reducing the bureaucracy and eliminating unnecessary licensees.

These improvements in the business environment has facilitated the lowering of capital and operational costs for private sector that are investing in the energy sector, thereby improving the viability of the projects being carried out.

In addition, the National Energy Policy seeks to create conditions that would ensure availability of adequate supply of energy from the various sources, which are dependable and low cost.

The policy measures are aimed at increasing generation and transmission capacity by promoting new sources of power generation and promoting private sector involvement.

It is envisaged that the Government would enact appropriate legislation for investment and adopting an open access regime to the national grid.

Commerce, Trade and Industry Permanent Secretary Siazongo Siakalenge said the Government attaches great importance to power generation and improving access nationwide, saying that this was evident in the work of the Rural Electrification Authority and the Office for Promoting Private Power Investment (OPPPI).

Mr Siakalenge said the new projects in the pipeline valued at $6.5 billion being promoted by the public and private companies was an indication that Government efforts to expand generation capacity are beginning to bear fruit.

“This is evident in the work of the Rural Electrification Authority and OPPPI which interfaces directly with investors for private sector hydropower projects” Mr Siakalenge said.

Further, the Government is committed and was continuously improving the investment environment in the electricity sub sector.

“The energy sector growth would result in significant job creation for Zambians directly through the new jobs in power plants and indirectly through improved efficiency in other sectors such as agriculture and manufacturing,” he said.

Mr Siakalenge said leveraging public investment and private capital would speed up the pace at which the country’s power infrastructure was developed and made available country wide.

Commenting on the investments in the sector, Mines, Energy and Water Development Deputy Minister Charles Zulu said despite the current challenges of load shedding, Zesco Limited had performed well between the period 2011 and 2013.

It is important to point out that Zesco was managing about 81 projects to improve the performance of the value chain, in order to facilitate for wealth creation and improved livelihood of the Zambian people.

The projects are presently at various stages which include feasibility studies, financing, appraisal and implementation.

About 80 projects are focused on generation infrastructure development, while 15 are focused on transmission infrastructure development and 40 would deals with distribution development countrywide.

Mr Zul

u said during the period under review Zesco had challenges in implementing some of its projects due to lack of financing, adding that the company had secured loans and grants from multilateral organisations to support its balance of financing projects.

In the period under review, Zesco implemented the Shiwang’andu one megawatts power station in Muchinga Province, refurbished and upgraded the 66/33/11 kilovolt skyways substation in Ndola, installed and commissioned one of the two 180 megawatts generators under the Kariba North Bank extension project.

Other projects were, the Leopards Hill substation, installed and commissioned a 125MVA, 330/132 KV at Kafue Town substation and installed and commissioned the prepaid meter system in Southern, Eastern and Western Provinces respectively.

Mr Zulu said the implementation and commissioning of the project lead to improved customer service, reduced load shedding and facilitated for increased access to electricity services by urban and rural communities countrywide.

He said: “About 1,697 jobs comprising of 280 permanent and 1,417 contract jobs were created through these and other projects. Other benefits from the projects included acquisition of skills and capacity building in various technical and non-technical disciplines.”

Mr Zulu said the company had continued to employ youths in the execution of projects for the expansion of its customer base saying that youths were engaged in the construction of the distribution line and other jobs.

The multi-skilled human capital currently employed in the energy infrastructure construction industry has to a great extent been trained by Zesco, through the temporary and contract employment scheme.

Finance Minister Alexander Chikwanda believes that the energy sector will in due course be contributing significantly as a result of the enormous investments the Government has put into this sector.

“I think that by 2015 we shall begin to see

significant export of power from Zambia and I am excited about the power exports because power exports you don’t have to build fancy railway infrastructure transmission lines do not cost much and also power exports are not subjective to security logical constraints,” Mr Chikwanda said.

He said Zambia needs to achieve higher levels of economic growth to make meaningful headway in creating decent jobs and reducing poverty and inequality.

Government remains committed to maintaining macroeconomic stability characterised by low inflation, stable exchange rate, rising international reserves and expansion in access to credit particularly to small businesses.

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