Investment Opportunities in the Zimbabwean Energy Sector

 

Preamble

The Energy sector in Zimbabwe presents immense investment opportunities, be it in Power development, Petroleum supply or in the renewable energy sub sectors. 26 billion tonnes of coal reserves are available for power generation, translating to an estimated 8 000 years of use at the current consumption of 3 million tonnes per annum. In that regard there is room for power generation capacity to be enhanced through participation by foreign investors.

Currently there is only one power utility in Zimbabwe, which creates opportunities for either direct investment (as IPPs) in the sector or joint venture participation with the national power utility, ZESA. Zimbabwe, through its System Development Plan (SDP), has shown that it has adequate resources required for the development of Power generation plants necessary for both internal and export markets. However, the challenges include among others, securing of finance and also lead times involved to implement the projects in order to meet growing electricity demand.

Power Sector Reform

In accordance with Government policy to embark on reforms of the electricity sector, a new Electricity Act (Chapter 13:19) was enacted in 2002 bringing about the restructuring and unbundling of the Zimbabwe Electricity Supply Authority (ZESA) from a vertically integrated utility into separate successor companies focusing on Generation, Transmission & Distribution and Service companies.

The new Act also provided for the setting up of an autonomous regulatory body that would encourage new investment in the electricity sector through appropriate regulatory, fiscal and environmental frameworks, harmonized with those of the SADC countries and through strategic partnerships.

Electricity Regulation

In 2005, the Zimbabwe Electricity Regulatory Commission (ZERC) was established in accordance with section 5 of the Electricity Act (Chapter 13:19). However, in line with regional trends in the regulation of the energy sector a policy for the establishment of an all-encompassing energy sector regulator that seeks to harmonise regulation in the energy sector is being adopted. In this regard the Ministry is in the process of enacting the Energy Amendment Bill which seeks to synchronize the Petroleum Act, the Electricity Act and other renewable energy Acts that will provide for, among other things, the setting up of an energy regulator to harmonize regulation in the energy sector as a whole.

Zimbabwe Priority Power Projects

These projects, when implemented will have the effect of ameliorating power outages as the country strives to achieve its objective of self-sufficiency in power generation and supply.

The priority projects are detailed below:

Expansion of Kariba South Power Station

Currently Kariba South Power Station is producing 750MW against an installed capacity of 750MW with all 6 units operational, furthermore, Kariba has a total potential for an additional 300MW for the Zimbabwean side. The main objective of this project is to increase capacity at Kariba South Hydro Power Station (Zimbabwean side) by 300MW. Feasibility studies are in place and the lead time for this project is 4 years from financial closure. The estimated total cost for the project is around US$214 million.

Gokwe North Power Station Project

This is a Green field coal fired power station with a potential to produce 1 400 MW. Gokwe North Power Station will contribute power for both the internal and external markets (within the SAPP).  Feasibility studies are in place and the lead time for this project is 4 years from financial closure. The estimated total cost for the project is around US$1.4 billion.

Batoka Gorge Hydro Power Project

This is a Green field Hydro powered station project with a potential capacity of 1600MW for both the Zimbabwean and Zambian sides. Feasibility studies have been completed and the project lead time is about 7-8 years from financial closure with an estimated total cost of US$2.5 billion.

Development of Petroleum Refining and Distribution:

Construction of Refinery

The Government of Zimbabwe is interested in partners who will construct a refinery on either a BOOT (Build Own Operate Transfer) or BOT basis. Provision should also be made for the supply of a suitable crude type for the refinery.

Construction of pipeline network

The Government of Zimbabwe is also interested in expanding its pipeline network to the southern regions of the country, such as Bulawayo and the surrounding areas. Partners with pipeline construction expertise are invited to consider opportunities in this field.

Renewable Energy and Energy Conservation

Coal Bed Methane (CBM)

The resource is located in the western and south eastern parts of the country, with ≈ 40 Trillion Cubic Feet (TCF) of potentially recoverable gas estimated to be available around Lupane/ Lubimbi. The gas can be used for electricity generation, production of liquids fuels, Industrial heat generation, and production of a variety of chemicals including fertilizers, among others. There has been limited exploration done to establish viability.

Investment scenarios for CBM development:

  1. Joint Venture/Public Private Partnership Approach
  2. Build Operate Transfer (BOT).
  3. Private Sector Investment

Bio-fuels Development

The country has a target to substitute 10% of the nation’s fuel requirements with bio-fuels by 2015. This will be done through expanding sugar cane growing to produce ethanol and the resuscitation of blending with petrol, growing of Jatropha and processing the seed into bio-diesel. 122 000 hectors of Jatropha are to be planted to meet the target. Ethanol for blending with petrol will be produced from molasses, a byproduct of sugar production. Sugar cane is grown in the country’s low rainfall areas under irrigation. A bio-diesel processing plant with a capacity of producing 35 million litres per annum is already in place.

There are Investment opportunities the production and processing of feedstock, as well as in the distribution and marketing of the products.

Solar Energy Technologies

Zimbabwe has high solar irradiation averaging 20MJ per square metre. Solar energy can be harnessed for pumping drinking water for rural communities, electricity production ,powering lights and appliances at rural institutions (schools and clinics),and water heating in urban areas. There is high demand for solar energy systems, especially in remote rural areas where there is no power grid, however the cost is prhibitive. Local production of systems is being encouraged by the government to reduce the cost of solar equipment.

Small Hydropower Development

  • Projects with a potential productivity of 120 MW have been identified country wide.
  • The table below shows some of the sites that are being prioritised for development
  • The 1st 4 sites are on dams and the rest are run-of-river

District

Site

Capacity (MW)

Annual Energy Production (GWh)

Mwenezi

Manyuchi

1.4

5.5

Masvingo

Mutirikwi

5

40

Mutasa

Osborne

3

23.6

Bikita

Siya

0.9

5.6

Mutasa

Duru

2.3

6.0

Nyanga

Gairezi

30

70

Nyanga

Tsanga

3.3

8.8


Demand Side Management

Studies have proved that between 15% and 45% of energy goes to waste during use.

Investment opportunities exist in the manufacturing and selling of energy efficient equipment/products such as:

  1. energy saving lamps
  2. Solar water heating systems for domestic and industrial applications
  3. Central control of electric geysers, etc

Investment Incentives

  1. Tax holiday (negotiable)
  2. National Project Status
  3. Exemption from payment of withholding tax
  4. Guaranteed dividend payment and repatriation
  5. Cost reflective tariffs
  6. Other incentives provided under the Mines and Minerals Act

 

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