NamPower banks on regional utilities

By Timo Shihepo

Windhoek – Namibia’s power utility, NamPower, has put its hopes on the regional utilities to supply the country with power for the next five years or so until such time the country’s ambitious power generating projects come on stream.

At the moment, power projects starting dates are dragging on and the country has resorted to buying power from neighbours including South Africa, Zimbabwe and Mozambique, which contributed to the country’s high tariffs for end consumers.

Projects such as the 800 MW Kudu Gas Power Station have been mooted since 1997 and 20 years later nothing is yet to happen on site. Boardroom squabbles have also put the 250 MW Xaris power plant on hold.

Disagreements over power purchasing agreements with independent power producers (IPPs) also means that the country has not been able to make headway in the development of renewable energy sector.

The country’s lack of rain also means that the biggest power station at Ruacana rarely operates at the installed 330 MW.

These factors have contributed to the country importing more than 60% of its electricity needs. Namibia’s reliance on power imports was further emphasised last month when NamPower signed a new agreement with South Africa’s Eskom for the supply of 200MW for the next five years.

The deal is estimated to be around R7,5 billion.

“This deal came in handy at a time when we are also rolling out our own projects. This deal will give us ample time to focus on our own projects while knowing that we won’t have blackouts,” NamPower’s managing director Simson Haulofu told The Southern Times in a wide raging interview.

The Eskom deal is well structured in terms of what NamPower and Namibia at large needs.

It’s a 200 MW during the dry season and 150 MW when it’s a wet season. NamPower has opted for a five-year deal with the aim that by the time the deal lapses, then some of the country’s big power projects will be operational.

The deal is also renewable. Say in five years none of the projects are complete and they require an additional year then NamPower can always go back to Eskom and ask for an additional supply of 200MW for a year.

Additionally, NamPower is also taking 39 MW from Zambia and 80 MW from Zimbabwe. All these power purchase agreements are confidential as the utilities have entered into confidentiality agreements with them.

Haulofu said that the prices have, however, been sustainable for the company’s operations.

“We have a good relationship with all the utilities in the Southern African Power Pool (SAPP), both the operating members and non-operating members,” said Haulofu.

He added that the only reason why NamPower is importing more from South Africa compared to other countries is because Eskom has got available power.

Haulofu, however, stressed that should other countries have power available and the need arises in the country they can always negotiate with these countries because they have the money ready.

Unlike many state-owned entities in the country that expect government’s handouts, it is the very opposite with the power utility.

“In the history of NamPower we have never gone back to government and request them for any power purchasing money or subsidy. Never! Maybe in the future. Right now we are still in a position to buy power on our own.

We buy the power and we sell it and get revenue at the regulated tariffs.”

Higher tariffs in the region

Namibia is perceived as the country with one of the highest electricity tariffs in the region. Haulofu said it will look like the tariffs are high because NamPower (as approved by the regulator) has to add its own cost to the price of the end user.

“We import most of our electricity from the region. Other countries have available power. It is costly to import thus the price of electricity in a country which imports electricity and that sells electricity will not be the same.”

IPPs

For many years, energy experts in the country have been attacking NamPower for apparent refusal to work with independent power producers (IPPs). They have accused the utility of monopolising the electricity sector.

Haulofu dismissed these allegations saying that they are the epitome of misrepresentation. He said NamPower has been spearheading the attraction of IPPs in the country. According to him the company has gone all the way out to try and accommodate IPP in the power sector.

Apart from the four IPPs, which NamPower has helped to start operating – the company has recently contracted 14 IPPs in a programme that gives 5 MW to each of these IPPs,  that is 70 MW all together.  Three of them have been commissioned.

“They are sending power to the grid while most of them are more than 50% complete. Our grid also supports IPPs who are setting up projects in the RED (Regional Electricity Distributors) areas.”

NamPower has also recently awarded a tender for a 37 MW IPP power project in Hardap region, south of Namibia.

Haulofu said he has never seen a credible IPP that was turned away unless there are disagreements in prices.

“If a photovoltaic (PV)  is 80 cents per kilowatt hour and one IPP comes here say for R2, naturally we say no simply because no one will buy that power in Namibia.”

The energy sector is also being hamstrung by a monopolistic structure, the single buyer electricity market model that made national power utility, NamPower as the sole buyer of electricity in the country.

The model was adopted by Cabinet in 2000. However the Ministry of Mines and Energy has moved to reform and develop the country’s energy sector, to make room for independent players.

Bypassing the regulator

NamPower has also been accused of undermining the regulator, Electricity Control Board (ECB).

Haulofu admitted that wherever there is a regulator and an operator there are certain disagreements but said so far they had never had any serious issues with the regulator.

“It is not true. First of all we report to the Energy Ministry not ECB.

We have got a good relationship with our regulator. We cannot be seen bypassing ECB because we do not fall under ECB.

We, however, operate under the rules and regulations of the law of the state and we cannot impose any tariffs on anybody if they are not approved by the regulator.”

Boardroom squabbles and salary issue

Haulofu has also dismissed that he was fighting with the board of directors over the salary disputes as reported in the media.

“The board does not set the salary. It is set by the Public Enterprises Ministry. Yes there were some contract provisions issues but they were not disputed. When the new board came in I signed that contract without even having to discuss much.”

Haulofu, who replaced former managing director Paulinus Shilamba in July 2016, is engineer and served the power company for 18 years, including as manager for construction projects.

But upon taking over the reigns, controversy ensured after he allegedly refused to accept the package of R3,3 million a year, if the NamPower board did not add the “medical aid for life” benefit that he was entitled to when he served in his previous position as divisional manager for power generation, an additional R5000 to his monthly salary package for being a long serving employee and a golden handshake of R3,3 million when his contract expires.

May 2017
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