Electricity price to increase by 13% annually until 2019

13 Apr 2015 15:40pm
WINDHOEK, 13 APR (NAMPA) – Electricity tariffs are expected to increase by on average 13 per cent annually for the next five to six years, NamPower Managing Director (MD) Paulinus Shilamba says.
Speaking at a media briefing here on Monday, Shilamba said the situation will stabilise after the introduction of the Kudu Gas-to-Power project by the end of 2019, with the first block expected to be online by the end of 2018.
Shilamba said that following delays over the past few months, the project is now firmly back on track after a Cabinet resolution last month to approve a Government support package, which was also announced by the Finance Minister, Calle Schlettwein, in his budget speech last month.
A total of N.dollars 4.93 billion over the Medium-Term Expenditure Framework (MTEF) from the financial year of 2015/2016 to 2017/2018 will support the balance sheets of the national power utility, NamPower and the National Petroleum Corporation of Namibia (Namcor) for the Kudu Gas-to-Power project.
“The package includes the financing of the NamPower and Namcor obligations under the project equity and infrastructure, and provision of guarantees for the project,” said Shilamba.
He said following this positive development of a financial guarantee by Government, upstream and downstream project teams are now hard at work to review the commercial agreements in line with the provisions of the government support package, so that those agreements are concluded in time for the Final Investment Decision (FID) by mid-2015 and Financial Close (FC) by December 2015.
Shilamba said despite some of the key upstream partners withdrawing from the project, Government and Namcor are hard at work and have given their assurance that substitute arrangements are being finalised. They have also indicated that this will not affect the project’s timeliness.
In November 2014, the United Kingdom’s Tullow Oil withdrew its participation from the much-anticipated Kudu gas-to-power project.
Shilamba noted that NamPower has concluded Engineering Procurement Contract (EPC) negotiations with Shanghai Electric, a power generation and electrical equipment manufacturing company that is based in China, as a preferred bidder and a Long-Term Service Level Agreement (LTSA) with Siemens as original equipment manufacturer.
The NamPower MD said Standard Bank has been appointed as the mandated lead arranger that will be responsible for facilitating the syndicated loan of the major project and the contract in this regard will be signed soon.
He added that transmission connection agreements with South African power utility, Eskom and power purchase agreement negotiations with Eskom and Copperbelt Energy Corporation Plc (CEC) as regional buyers of what the project produces, are also at an advanced stage.
Shilamba said the evaluation of tenders for the appointment of the strategic equity partner and operations and maintenance contractor are at an advanced stage, and are expected to be concluded before the FID.
The project is estimated to cost about US.dollars 1.2 billion, about N.dollars 14.8 billion.