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NamPower
Electricity Supply Update
A Presentation to
the Chamber of Mines
By
Paulinus Shilamba
MD: NamPower
22 May 2014
Contents
Current power supply challenges
Power supply outlook
Projects (generation and transmission)
Electricity tariffs
Conclusion
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Current power supply challenges
Regional power supply deficit
Reliance on imports (average 60%, up to 80% during dry seasons)
Regional transmission congestions (Zambia and RSA)
Aging power supply infrastructure and associated higher maintainance costs
Interruptible supply from Eskom as per the new arrangements
Challenges to accommodate IPPs without GRN guarantees
High economic growth and step loads (driven by the mining sector)
Termination of four (4) regional PPA’s within the next few months, namely:
ZESA: 150 MW – October 2014
Eskom Supplemental: 200 MW – April 2015
Aggreko: 115 MW – August 2015
Eskom Off Peak: 300 MW – April 2016
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Power supply outlook
2014 – 2015
Electricity supply management challenges
Short-term critical supply (STCS) project implemented
Power supply situation manageable to a certain extend
2016 – 2017
Serious power supply deficits will be experienced
STCS project expanded to cover the deficit
A new 250 MW plant to be commissioned by mid 2016
2018 and beyond
New base load plant in operation
Namibia a net exporter of electricity
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Hourly demand forecast: 2014-2036
-200
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Peak D
em
an
d (
MW
)
Year
Non-Step Load Step Loads DSM Total Transmission Level Load
Electricity Supply Forecast
6
A new 250 MW plant being implemented to avoid load shedding in 2016 and 2017.
The plant to operate in peaking and stand by mode after 2018.
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NamPower Capacity Expansion Program
7
Refurbishment program New Power Stations STCS Project Transmission
• Van Eck refurbishment
• Ruacana Runner
Replacement
• The 250 MW power plant
• Kudu Gas Power Station
• Baynes Hydro Power Station
• Renewables
• IPPs
• PPA (Imports)
• Transmission Master Plan
• ZIZABONA
• Kudu Transmission
This capital investment program can only succeed with stakeholder assistance and support
Presentation to Chamber of Mines 22052014
STCS Initiatives
NamPower generation plants (Van Eck, Ruacana)
Import arrangements (ZESA, Eskom, ZESCO, EDM and Aggreko)
PPA negotiations with Independent Power Producers (IPPs)
Solar IPP tender for procurement of 30MW in progress
Demand side management (N$350 million, 110 MW saving potential)
Free distribution of 1,000,000 domestic LED bulbs
Subsidised installation of 20,000 domestic solar water heaters
Demand reduction agreements and agreements with large
customers to gain access to their standby generators
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The 250 MW Power Plant
Emergency diesels has been one of the NamPower
options to ensure security of supply for Namibia
Latest analysis found a long term 250 MW plant
at Walvis Bay to be more viable and cost effective
in comparison with the short term option mainly
due to its additional long term benefits (post Kudu)
The project must be fast tracked and become operational by mid 2016
The plant will be developed through the Special Purpose Vehicle (SPV) in
which NamPower will have up to 30 percent equity (PPP Framework)
The tenders for the procurement of the strategic equity partner and project
developer is currently in the market
The plant to operate in base-load mode in 2016 and 2017, and in mid-merit /
peaking and standby mode in 2018 and beyond
The choice of fuel left to the market for proposal and determination
Presentation to Chamber of Mines 22052014 9
Kudu Gas to Power Project
• Flag ship project with significant benefits
• FID by mid 2014, FC by December 2014
and commercial operation by 2018
• Milestones achieved since September 2012
Most outstanding issues resolved
PDA signed with upstream parties
Joint Development Agreement (JDA) and PPA Term sheet signed with CEC
PPA and Tx connection negotiations with CEC and Eskom on-going
Evaluation of tenders for procurement of Coordination Bank, EPC, SEP and
O&M contractors at advanced stage and to be awarded in June 2014
Document with quantification of GRN guarantees submitted to GRN
Negotiation of GSA with Upstream parties at an advanced stage
Discussions at an advanced stage with Namdeb/Debmarine for the allocation of
site and services, and with MME for de-proclamation of the plant site
GRN allocation of N$1,6 billion for Kudu in the current budget cycle appreciated
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Impact of Kudu on the economy
Electricity Supply: Namibia becomes a net exporter of electricity
GRN income: Approximately N$1billion in the form of royalties, taxes and dividends per year
Job Creation
Upstream: Not many during construction, but ±200 permanent jobs during operation
Downstream: ± 1500 jobs during construction and 70 permanent jobs during operation
Other Direct and Indirect Project Impact
Housing, roads and other infrastructure expansion and upgrade at Oranjemund
Increased utilization of the Luderitz harbour
Impact on Secondary Industry:
Catering
Trade
Transportation/logistic services
Cleaning services
Financial services, etc
11 Presentation to Chamber of Mines 22052014
Baynes
• 600 MW Hydro power project on the Kunene River
• 300 MW for Namibia
• Joint Venture project between the governments of
Angola and Namibia
• Techno-economic & EIA studies completed and
approved by the PJTC
• Project found to be viable by the PJTC
• Submission soon to be made to the two
governments of Angola and Namibia with
recommendations for final approval
• Project cost: U$1,3 billion (include compensation but excludes supporting
infrastructure such as transmission, roads, rails, runways and housing)
Presentation to Chamber of Mines 22052014 12
Key Transmission Projects
Zizabona
Linking Zimbabwe, Zambia, Botswana and Namibia
Joint Venture project by the four utility companies
SPV registered in Namibia (NP a hosting utility)
Shareholders, Wheeling and Power Supply
Agreements to be concluded in due course
Project cost U$250 million
Expected operational date early 2018
Transmission master plan
High demand growth especially in Northern Namibia
Upgrading of transmission backbone to 400kV
Estimated initial investment cost of approximately
N$ 7,3 billion
Presentation to Chamber of Mines 22052014 13
14
2014/2015
2015/2016
2016/2017
2017/2018
2018/2019
2022/2023
> 2023
SVC
Rundu Cuito 132kV
2015/2016
West Coast strengthening
2014/2015
Omatando strengthening
Ph 1: 2013/2014
Ph 2: 2015/2016
Auas Gerus 400kV
[2016/2017 2019/2020]
Gerus Otjikoto 400kV
(Operate at 220kV)
2014/2015
Omatando Otjikoto 400kV
2023
Baynes Integration
> 2023
Kudu Transmission
2017/2018
2nd Auas Kokerboom 400kV
2018/2019
Caprivi Link Bipole
Auas Omburu Gerus 400kV
, >2019
Kokerboom Upington 400kV
2022/2023
Electricity tariffs
Electricity pricing in Namibia is the responsibility of the ECB and is set in
accordance with GRN Policy which states that tariffs should be:
Cost reflective
Reflect the long-run marginal cost of supply
Based on sound economic principles
Only through these principles will NamPower be able to be sustainable, keep
lights on through out and ensure that:
The national economy is protected against un-served energy
The new power projects are implemented and commissioned on time
The ESI remain sustainable
NB: Having electricity at cost reflective tariffs is far cheaper and better for
the economy than blackouts or no electricity at all (darkness)
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NamPower energy supply cost (nominal N$)
Main Cost drivers
Investment in new generation and transmission infrastructure (N$18 billion)
Reinvestment in aging infrastructure (equipment replacement)
High cost of import contracts
Devaluation of local currency against US dollar
Higher returns by the private sector (IPPs)
Introduction of renewable energy generation (initially)
Increased use of coal & diesel (fuel costs increases higher than inflation)
Interruptible supply from Eskom
Supplier of last resort
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22052014
18
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Cumulative shortfall: N$ 2.3 billion
Cost reflective shortfall for 2014/15
addressed through GRN fuel
subsidy of N$170 million
It is not clear if GRN will continue with the principle of tariff subsidy to enable electricity price
adjustments to follow the lower path over the next 4 years or not.
Conclusion
• Namibia will continue to experience power supply deficits, and keeping the lights on will
remain challenging until the commissioning of Kudu in 2018
• In 2014 and 2015 the power supply situation will to a certain extend be manageable.
However, serious power supply deficits will be experienced in 2016 and 2017. This
deficit will be addressed through the STCS program (including the 250 MW plant)
• During the next 4 to 5 years NamPower will invest N$18 billion in new power supply
projects. During the same period we shall also rely on more costly import contracts to
ensure security of supply. Electricity tariffs will therefore continue to raise at a high rate
per annum after which they will stabilize with the introduction of Kudu in 2018
• NamPower has so far been successful in keeping the lights on thanks to the support
and cooperation from its stakeholders. We assure the mining community that with this
continued support NamPower will be able to continue to deliver on its national mandate
of powering the nation and beyond
• As usual we therefore request all our customers, especially the mining community, to
continue saving at least ten (10) percent on their energy use, particularly during peak
periods, i.e from 07h00 to 10h00 and from18h00 to 21h00
Presentation to Chamber of Mines 22052014 20
End
Thank you
21 Presentation to Chamber of Mines 22052014
