WINDHOEK – In the wake of calls by President Hifikepunye Pohamba for the expeditious execution of the Kudu Gas Project, the national power utility, NamPower, says the crucial project to secure electricity for Namibia and the region has advanced to such an extent that a Joint Development Agreement (JDA) was signed recently
During the first ordinary Cabinet meeting for 2014, that took place last week Pohamba called on projects, such as the Kudu Gas to Power Project to “be implemented speedily.” Nampower Board Chairperson, Maria Nakale at the JDA signing ceremony two weeks ago remarked that the Kudu Project has indeed come along way, and she noted the JDA and power export agreement term sheet with Zambia’s Copperbelt Energy Corporation (CEC) is a historical milestone as it is the first time Nampower signed a JDA with a potential off-taker and investor in the Kudu project. “It is also the first time that the project reached the stage of having advanced all the tenders on the project, inter alia the EPC tender, Strategic Equity Investor tender, Coordinating Bank tender, as well as the Operations and Maintenance tender, which are at various stages of bid evaluation,” said Nakale. The Kudu project was temporarily halted in 2007 as a result of the commercial challenges such as the gas price, which was deemed expensive at the time; the complexity of concluding power export agreements with secondary off-takers for the power that Namibia does not need, and the last commercial challenge was the foreign exchange risk exposure, as the gas price will be denominated in US dollar, whereas electricity in Namibia is sold in Namibian dollar.
Since 2010 and with government’s support, Nampower has endeavored to find solutions to these commercial challenges. The electricity tariff in the region has since increased considerably over the past six to seven years, which has made Kudu more competitive against any other newly constructed power stations in the region.
“The interest that CEC has shown in off-taking 200
to 300MW from Kudu, to be denominated in US dollars, has lessened the foreign exchange risk exposure as the residual exposure is now slightly more manageable. There are several other avenues that Nampower, the ECB and government are investigating to further reduce the residual exposure,” said Nakale. “CEC added considerable value to the Kudu project, as the off-take denominated in US dollars has lessened the burden on Nampower to manage the foreign currency exchange risk exposure. Their further interest to participate in the Kudu project as investors/shareholders definitely demonstrate without a doubt their full commitment in ensuring that this project is successfully implemented and commissioned by end 2017, latest first quarter of 2018,” added Nakale.
Energy security in southern Africa has been one of the pre-occupations of the region’s political leadership at Southern African Development Community (SADC) level, as the inadequate generation capacity currently prevalent in the region is hampering socio-economic development. Also, experts agree that foreign direct investment (FDI) cannot be stimulated in the absence of secure and affordable electricity.
According to the Nampower board chairperson, Namibia has been a net importer of electricity for much too long and it is therefore of national strategic and security interest to ensure that a reliable supply of electricity is guaranteed. When completed the Kudu Gas Project will be the first Combined Cycle Gas Turbine Power Station of its size in the SADC region, if not in the whole of Africa. The development of the Kudu project is also of strategic interest to Namibia, as it will convert the natural gas resource to currency and is expected to further stimulate oil and gas exploration in Namibia.
“The Kudu Gas field can therefore no longer continue to be a stranded asset. It needs to be developed, and commercialised for the interest of Namibia and the region,” Nakale said.
“The signing of these two agreements signify our official cooperation as development partners, it is now upon our respective utilities to avail all the necessary resources to the Kudu Project. There are binding obligations on both Nampower and CEC as contained in the JDA in particular, it is therefore upon the leadership of these two utilities and most importantly the governments of Namibia and Zambia to create an enabling environment for the smooth implementation of these agreements,” Nakale further said.
By Edgar Brandt