MORE Independent Power Producers (IPPs) are likely to participate in Zambia’s power sector following the agreement of new trading terms between the Copperbelt Energy Corporation Plc (CEC) and Zesco Limited, energy commentator, Johnstone Chikwanda has predicted.
Commenting on the initialing of the new bulk supply agreement (BSA) between the two power utilities, Chikwanda, who is the former Rural Electrification Authority board chairperson, said the friction the two utilities had experienced over the last two years was concerning.
“This had been a ‘love relationship’ for more than 20 years, where each depends on the other, and they need each other. As industry analysts, we were concerned when they failed to reach consensus and started fighting each other in the public gallery, and we called for intervention to ensure that the challenges that were being highlighted were resolved to the benefit of the parties,” said Chikwanda in an interview.
“We’ve seen the statements coming from both CEC and Zesco and the line Ministry (of Energy) that both parties have engaged in constructive discussions and are happy with the outcome,” he stated.
Asked how the prospect of a renewed power supply agreement between Zesco and CEC would impact the power sector, he predicted that more IPPs were likely to participate in the electricity sub-sector on the back of renewed confidence in the national power utility and the energy reforms going on.
“This is good news for the industry in that IPPs will feel more confident in the sector because Zesco is an ‘elephant’ in the industry. So, when you hear that it is able to resolve issues in a mutually beneficial way, then it gives way to other emerging IPPs that they have a partner in Zesco. I foresee a situation where we can expect more IPPs expressing interest to invest in the country, especially with the ongoing energy sector reforms because one of the major bottlenecks, which has been impeding investment, has been the issue of tariffs,” said Chikwanda.
He described tariffs as having been a thorn in the flesh because “investors want to be assured that when they invest, there is a guaranteed off-taker, and that they will be able to pay back the loans. And when they do their financial modelling, the current tariff is not yet cost-reflective.”
During the initialing of the expected-to-be BSA, both power utilities spoke of the need for enhanced partnership and collaboration for their mutual benefit and the development of Zambia and bemoaned the lengthy period they’d gone without a contract for the services exchanged between themselves and how their survival was dependent on each other.
Kalemba May 19, 2022
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