Govt tightens screws on IPPs

PHILLIMON MHLANGA

Government is contemplating migrating from the current unsolicited bidding process for power projects to a competitive procurement framework as part of efforts to ensure projects are implemented timeously, Business Times can report.

The migration to competitive bidding involves inviting multiple vendors or service providers to submit offers and usually present the best value as opposed to unsolicited bidding, which entails an offer made by an individual investor.

Energy and Power Development permanent secretary Gloria Magombo said the current system has failed as 93 independent power producers (IPPs) have been licenced to date, with a capacity to generate about 8 000MW but nothing has materialised.

“From what we have seen, unsolicited bidding has not been successful at all. They have not come up with any innovation but hold licences for speculative purposes,” Magombo said at a ZERA stakeholder meeting in Harare yesterday.

“We want to move away from the unsolicited bids to a competitive procurement framework. Government needs to plan for a middle-income economy. So, we need to come up clear on what projects are coming up. We need to review and come up with stringent measures.”

Added Magombo: “We want to bring in competition and guarantees on this framework. We can’t be sitting with almost 100 licences and no progress is being made. We want to see an industry which is viable.”

Some IPPs have failed to take off, even in cases where some of them were awarded licences more than 15 years ago.

Government has been hoping that IPPs would complement State-owned power utility ZESA, which is currently struggling to meet national demand at a peak period estimated at 1 800 megawatts (MW). ZESA is generating less than 1500MW.

To cover for the short fall, the power utility is importing power from regional power utilities especially Eskom of South Africa and Hydro Cahorra Bassa of Mozambique.

Magombo said only 19 are operational and largely generated for their own consumption.

Not much is being fed on to the national grid.

This means, more than 70 IPPs have failed to take their projects off the ground.

Magombo said the government was seriously considering the introduction of a competitive procurement framework for new projects going forward to ensure projects are implemented timeously.

Also included in this will be standard power purchase agreements to address the risk of currency volatility.

The IPPs that are currently holding licences but failed to develop their projects will be reviewed. This means, some IPPs could have their licences cancelled.

Most 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.

ZERA board chairman, David Madzikanda, said the energy regulator would introduce new stringent conditions.

“We are introducing competitive bidding that will see us creating sites that will be auctioned to those capable of developing the projects,” Madzikanda said.

 “We are going to tighten a bit because we have got a lot of IPPs coming overnight. They are not doing well because of huge forex outlays. To address that, we are going to be very innovative. We need to benchmark ourselves with other countries in the region.

This means, we are going to consider serious applications, those that have financial wherewithal. We also need to recommend a certain threshold.”

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