Zim in fix as world shifts from coal

Zimbabwe is fretting over the end in fossil fuel linked funding commitments for its power projects amounting to US$15 billion by multilateral funders including China as they move towards greener and less pollutive energy investments.

The country was planning to build several coal-fired electricity plants at an estimated cost of US$15 billion, with Chinese lenders initially committing to fund the bulk of the projects.

However, the Industrial and Commercial Bank of China’s withdrawal to finance the construction of the $3 billion coal-fired 2 800 megawatt Sengwa coal project in the northern Zimbabwe has been the most notable.

Energy and Power Development Minister, Zhemu Soda, told Business Weekly, that the decision to suspend funding came at a time the country was planning expansion and new projects that could end the perennial power shortages.

“We received some sad news about the suspension or total withdrawal especially from China from funding coal fired projects here in Zimbabwe.

“To us this is coming at a time when we were doing some expansion and the rehabilitation of our power stations, which we intended then, when we would have built adequate capacity, to then transmit from fossil fuel, but then this cannot just happen abruptly over a night,” he said.

Western and South African banks had come under increasing pressure from their shareholders not to fund developments that could contribute to climate change, leaving Chinese lenders as one of the last avenues to secure finance.

However, Chinese President Xi Jinping, told the UN General Assembly, that China would accelerate efforts to help the world battle the climate crisis through stopping funding coal projects overseas.

He indicated that China will step up support for other developing countries in developing green and low carbon energy.

According to Soda, the country will look at alternative means by which targeted projects and those already underway will move to completion.

“So this is what we are still looking forward to, and we are still hopeful we will get some advances from China for other projects that we have planned,” he said.

The Energy Minister said the Hwange expansion project is proceeding and it was not affected by the Chinese decision because the funding had already been secured and released.

“What have been affected by the decision are one or two projects that were to be undertaken with funding from China which we think we might have other interested investors from other countries that will come to give us funding (for coal projects).

“Already we have the Indians who are undertaking the rehabilitation of Hwange unit 1 to 6 and we have not heard anything from India,” Zhemu said.

He added that the Government’s intention is that the power generation at Hwange be restored to capacity, which is 920MW from the $300 million facility that was sourced from the Government of India.

The Government in 2020 launched the National Renewable Energy Policy (NREP) and the Biofuels Policy of Zimbabwe (BPZ), documents that will guide the investment and production of clean energy alternatives in the country.

The policies emanate from the National Energy policy of 2012 and seeks to achieve a 33 percent reduction in greenhouse carbon emissions by 2030.

Soda said the Government has made efforts in creating a conducive environment for renewable energy sources and aims to achieve at least 27 percent of internal power generation coming from renewable resources by 2030.

“Through the NREP policy, my Ministry will continue to incentivise investments in the renewable energy space through tax holidays and duty free importation of equipment,” he said.

According to the NREP, in order to lure more investments, licensing timelines for prospective investors was reduced from six months and grid connection approvals for producers of renewable energy would be expedited.

Furthermore, Environmental Impact Assessment (EIA) for production of 5MW and below would be relaxed while for the other categories, the (EIA) timelines would be shortened.

All renewable energy projects would be given National Project Status while incentives in the forms of tax holidays of 5 percent for the initial five years and 15 percent thereafter.

Zhemu said to date, a total of 52 independent power producers have connected to the national grid while several others are at different stages of development.

But ZESA’s Gata thinks Government is to blame Recently ZESA Holdings executive chairperson, Dr Sydney Gata, blamed the Government for stalling projects by Independent Power Producers (IPPs) at a time the country has inadequate power supplies and is facing threats ranging from climate change and a move away from funding thermal power stations.

Speaking to editors and journalists during a tour of zesa’s Hwange thermal plant a fortnight ago, Dr Gata said efforts by IPPs to securitise power projects have failed to materialise because of the refusal by the Government to issue out some guarantees. He laid the blame on Finance and Economic Development Permanent secretary George
Guvamatanga. “Policy development to securitise especially private investments in the industry, who is to
blame. I am very candid on issues like this, you want a name, the Secretary for Finance, is
the man to blame,” Dr Gata said.

In the past, the Ministry of Finance has often given guarantees, binding the Government of Zimbabwe as surety for the repayment of outstanding amounts due to lenders at the date of maturity of the guarantee.

Under the guarantee arrangement, the borrower is able to obtain a loan from the lender on condition that the Government provides a guarantee that, in the event of default, the Government will take on the responsibility of repaying the loan.

The Minister of Finance is mandated by the Constitution of the Republic of Zimbabwe and the Public Debt Management Act (PDM Act) to on-lend and issue out some guarantees.

But from what Dr Gata said, it seems there is a departure from such practices, at least in terms of independent power producers.
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Despite close to 100 IPPs with potential to produce 6 000 megawatts having been licensed, only a few projects have been successfully implemented in the past, according to the Zimbabwe Energy Regulatory Authority (ZERA).-eBusiness Weekly