Nampower Ignored Kudu Report

NAMPOWER allegedly ignored expert aice not to enter a power-purchasing agreement with a Zambian energy outfit entailing the export of electricity from the Kudu Gas Power project.

The agreement, signed in February this year, compels NamPower to export 300 mega watts of Kudu’s expected output of 800 mega watts to the Zambian company, Copperbelt Energy Corporation (CEC).

CEC supplies power to mines in the Copperbelt.

According to sources, prior to the agreement with CEC, NamPower contracted audit firm Ernst and Young to compile an intelligence report on the deal and Ernst and Young reportedly subcontracted Aurecon – a South African energy outfit with Australian links.

According to sources, the report raised questions about CEC’s capacity to be a 30% partner in the Kudu project and aised NamPower against the deal, but the power utility allegedly ignored this aice.

The report said that part of the investigations centred on CEC’s financial ability to buy into the power project, and whether the company’s infrastructure was capable of carrying the 300 mega watts to enable CEC to sell and distribute the power.

The investigation could not confirm whether CEC is in a g financial position to take the full 300 mega watts allocation and that despite the CEC network being reasonably loaded and stable, there are some impediments which the NamPower had to consider.

The report also found that the CEC infrastructure is mostly obsolete, while some of the transformers being as old as 50 years. These would need replacement to enable it to carry the 300 mega watts effectively.

Other technical problems highlighted are the network’s voltage instability, a lack of reliable emergency power and a dysfunctional protection system. The report recommended that some of the components of the network needed replacing since they had become obsolete.

NamPower chief executive officer Paulinus Shilumba, confirmed the agreement with the Zambian outfit, but disputed claims that the company had ignored expert aice.

“This is simply not true. The due-diligence report was extensively discussed and finally approved by the NamPower board of directors,” he said.

Shilamba also defended the CEC deal saying there was no other credible customer in the SADC region acceptable to financiers who would have been able or prepared to pay for energy in US dollars.

He also added that the NamPower board saw the CEC offer as a significant opportunity to resolve some of the commercial challenges facing Kudu.

“Market research and discussions within the Southern Africa Power Pool (SAPP) community clearly showed that there was no other customer prepared to entertain the US dollars exposure on energy sold.

“The forex exposure on 800MW denominated in US dollars is too much for NamPower to manage,” Shilamba told The Namibian via email.

Shilamba disputed that the report was negative towards CEC and said that the extensive report clearly outlined that CEC will be good to manage both the equity investment and to buy the power.

He added that for CEC to buy the full 300MegaWatt allocation, CEC will have to provide further credit enhancements, which it has agreed to. He said that this was normal and would apply to any power purchaser.

Shilamba admitted that further discussions are being held with the Zambian Electricity Supply Corporation (Zesco) to transmit the electrical energy through Zesco’s network for the CEC.

He said CEC’s buy into the Kudu power project is being addressed through loan agreements already in place pending a positive investment decision by the Kudu Project partners.

Source : The Namibian