NamPower guarantees R2 billion ZPC loan

By Tiri Masawi

Windhoek – Namibia’s state owned power utility NamPower will be paying for their power purchased from Zimbabwe directly to Standard Bank as a guarantee for the US$160 million (about R2.08 billion) loan advanced to the Zimbabwe Power Company (ZPC), for the rehabilitation of existing power infrastructure at Kariba South Hydro Power Station and Hwange Thermal Power Station, The Southern Times can reveal.

The development was confirmed by NamPower’s general manager energy trading Betholdt Mbuere ua Mbuere in an interview with The Southern Times.

“Zesa received a loan from Standard Bank and we will be paying for our electricity purchases through Standard Bank as way of providing security for the loan. For explanation sake, the situation is that Zesa got a loan from Standard Bank and convinced them that they are in partnership with NamPower which is a credit worth institution. What that means is that when we pay for our power purchases from Zimbabwe we deposit the money directly into Standard Bank, which will be directly servicing their loan,” he said.

The partnership between the Zimbabwe Electricity Supply Authority Holdings (Zesa) and NamPower comes amid a crippling power shortage faced by most of the utilities in the Southern African Development Community caused by increasing consumption due lower generation capacity.

The latest engagement between ZPC, a subsidiary of Zesa Holdings responsible for power generation, and NamPower for the Standard Bank loan would come in handy for the Zimbabwe power utility that has been struggling to cater for some of its creditors. Reports in 2016 indicated that Zesa was at loggerheads with about seven financial institutions over repayments of loans.

Zesa and NamPower have a long standing power purchase agreement which was created a few years ago when NamPower provided a US$40 million loan facility to their Zimbabwean counterparts for the rehabilitation of Hwange Power station.

On the other hand the Kariba South will eventually ease the power deficit in Namibia and Zimbabwe and play a stimulant for industrial growth as enshrined in the SADC industrialisation policy which aims to improve industry in the region.

Ideally, that engagement has since cemented the two power utilities engagement with Namibia getting 80 megawatts power supply from Zimbabwe for the past three years.

The Zimbabwe power utility was also reported last year to still be servicing loan advancements from about seven local banks in Zimbabwe, including loans from the Reserve Bank of Zimbabwe and the World Bank. The loans being serviced by the Zimbabwe power utility by last October stood at a combined US$180 million.

Increasing power consumption

Mbuere ua Mbuere also revealed that the two sister utilities have also opened communication channels for the increase of Namibia’s power importation from Zimbabwe from the current 80 megawatts to 150 megawatts. However, he did not shed light on whether the negotiations have been opened because of the latest guarantee provided by NamPower.

“We are currently engaging at utility level to increase our power generation from Zimbabwe to 150 megawatt but the negotiations are still in their infancy. In principle, we are in talks and we will inform everyone when a conclusion is reached,” he said.

However despite Mbuere ua Mbuere’s confirmation, Standard Bank media relations manager Hayley Crane told The Southern Times from her South African base that the payment is not a guarantee.

Efforts to get comment from Zesa Holdings chief executive officer Josh Chifamba, however, proved futile despite several phone calls and messages.

Zimbabwe is expanding its Kariba South Power Station to improve generation capacity by 300 MW at a time when most utilities in the region have been struggling with power shortages because of inconsistent supply.

The Zimbabwean government secured a US$320 million loan from China as part of the mega deals signed between the two countries. The Kariba South Project is essential for Zimbabwe as it also falls within the scope of improving power as enshrined in that country’s economic blue print Zim-Asset.

Zesa was supposed to raised more than $200m as part of its contribution to Kariba South power station extension and it was not clear whether the $160 secured from Standard Bank is part of the deal.

Government not involved

Meanwhile, Namibian Minister of Finance Calle Schlettwein also told this publication that the engagement for the guarantee was negotiated at utility level and did not involve the Treasury.

“We are not providing any guarantee to Zimbabwe as a country. That deal is probably a direct negotiation between Zesa and NamPower but as a government we are no involved in the engagement,” he said.

According to a statement released last week, Standard Bank partnered the Eastern and Southern African Trade and Development Bank (PTA Bank) to deliver the financing.

The transaction was a continuation of a previous funding arrangement with ZPC, which went towards their contribution to the 300MW expansion at Kariba South Hydro Power Station.

Commenting on the loan facility, Standard Bank regional head of investment banking Tandiwe Ndjobe said: “This funding will assist in improving access to power for Zimbabwe and Namibia, and in the medium to long term, benefits of improved power supply and reliability will also extend to other Southern African Power Pool (SAPP) members. The proceeds will be applied to significant capital expenditure which will increase capacity and improve efficiency of the power stations. Without reliable access to power, industry and economic growth are negatively impacted.”

She added that while raising finance remains a challenge in sub-Saharan Africa, the ZPC loan deal speaks to Standard Bank’s ongoing commitment to use its on-the-ground presence and expert capabilities across Africa to finance the development of power and infrastructure projects throughout the continent.

“This is a landmark transaction in which we could leverage our sector and technical expertise in both markets, as well as our understanding of the regional power dynamics and local regulatory environments, to deliver value to ZPC and Namibia Power Corporation, (NamPower). To make this transaction work we engaged with four regulatory bodies and key policy makers in four ministries in Namibia and Zimbabwe,” said Njobe.

Standard Bank also added that the facility is cross border, placing reliance for repayment on a long-term power purchase agreement (PPA) between ZPC and NamPower. They also added that Standard Bank has a long-standing relationship with ZPC as their primary banker, and with NamPower, which ultimately benefited all parties to the transaction.

May 2017
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