Deepening forex crisis frustrates IPPs

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Chengetai Zvauya

INDEPENDENT Power Producers (IPPs) have expressed frustration over failure to access foreign currency to get their proposed projects off the ground, years after they were licensed to construct power stations.

The Zimbabwe Energy Regulatory Authority (ZERA) has licenced more than 30 IPPs with a capacity to generate more than 5 000 megawatts (MW). However, very few projects have taken off the ground and fears are that it might take longer than expected because of the hefty capital outlays required in foreign currency.

Government has been hoping that IPPs will complement State-owed power utility ZESA, which is currently struggling to meet national demand at peak period estimated at 1 800MW. ZESA is generating less than 1000MW. To cover for the short fall, the power utility is importing power from regional power utilities especially Eskom of South Africa and Hydro Cahora Bassa of Mozambique.

Now, government is contemplating cancelling licences of IPPs that have failed to implement their projects. But, IPPs have bemoaned acute foreign currency shortages.

Presenting oral evidence to the Parliamentary Portfolio Committee on Energy and Power Development on Thursday, executives from IPPs said they were facing challenges in accessing foreign currency, a situation which has resulted in them failing to meet deadlines set by ZERA in implementing their proposed projects.

“Most of our components require foreign currency to bring in the equipment from overseas and we are constantly in-touch with the Reserve Bank of Zimbabwe sourcing for foreign currency which is not readily available,” a representative of IPPs, Ian Mackerie said.

Mackerie, who is the CEO of Tsanga Power Station, said foreign investors wanted to be guaranteed that they will be able to repatriate their investment proceeds back to their countries.

Zimbabwe is facing a debilitating foreign currency crisis which has seen companies struggling to pay foreign suppliers and remit dividends to foreign shareholders. The forex crunch has forced companies to source the greenback on the parallel market thereby increasing the cost of production.

Monetary authorities say the foreign currency shortages are a sign of an expanding economy.