Energy firm contributes to ending load-shedding

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AS THE country continues to grapple with rolling power cuts there is a need for a lasting solution to deal with the challenge. In light of this our News Editor Tendai Kamhungira (TK) spoke to Solgas Energy co-founder and chief operating officer Petros Kazungu (PK), pictured, on how his company is contributing towards ending load-shedding through its Cross Mabale solar power plant in Hwange which is expected to add 30 megawatts to the national grid when completed and was given a national project status. Below are excerpts of the interview:

TK: What is Solgas Energy?
PK: Solgas Private Limited is a registered independent power producer (IPP) in Zimbabwe. Our work is achieved through the construction of large-scale solar power plants that merge with ZETDC (Zimbabwe Electricity Transmission and Distribution Company) infrastructure to increase power supply to the general population. Through viable renewable energy solutions, we aim to help the country increase the use of clean energy to guard against the adverse impact of climate change which is being caused by the world’s long-term dependency on non-renewable energy sources. Under our belt are multiple solar projects in the works and of note is our flagship in Hwange, the Solgas Cross Mabale 5MW Solar Power plant.
TK: How did you source funds to finance the project?
PK: After using much of our personal funds to get the company off the ground, we sourced investor funding from many local and international organisations. Old Mutual Zimbabwe then came to the party as our main investor for that project under a mutually beneficial partnership agreement. We were a relatively new player with very big goals in the local industry which made our proposition of a higher risk nature, so to speak. Many are yet to appreciate the scale and nature of entrepreneurship, especially in Africa where there is so much to be done. In this regard, we continuously appreciate Old Mutual for seeing the vision and grasping the opportunity with both hands. As entrepreneurs, we applaud this example they set and hope that other potential local investors can have faith in local entrepreneurs in the same manner.
TK: What’s the current project status?
PK: The plant has been feeding into the national grid since October 2021 and therefore has consistently been contributing to ZESA for nine months now. We are now clearing for phase two which will dial up output by 10MW. All the groundwork is already underway including procurement of steel, inverters and our biggest cost item which is the solar panels. The paperwork and administration are done in stages and we have met all the requirements.
TK: When is phase two scheduled for completion?
PK: Due to the current power situation in the country where load-shedding is being implemented to manage the supply of electricity between industry and households, we have committed to working faster than before. This way, after increasing this plant’s contribution, we can focus resources and finances on other projects which will also increase the power being supplied by Solgas to the national grid… all things being equal it takes about four months to construct a 5MW plant, therefore we are targeting the expansion completion date to December 2022. We do reckon that given the current social and economic dynamics our timelines might be a bit ambitious, but we are determined to increase our output for the benefit of the people.
TK: Power distribution and transmission is burdening renewable energy start-ups. How much has Solgas spent on transmission infrastructure?
PK: Funding is without a doubt a major concern for start-ups because the renewable energy industry is capital intensive. This means that there is a great need for established and capable investors to seriously consider supporting this relevant economic developmental pillar… we did spend approximately US$1,1 million for the replacement of the 11KV line with an upgraded 33KV stretching 28km from the plant to the Dete substation. Over and above that we have a 16km fibre optic communication network to ensure effective message exchange between Hwange and Harare. The list is quite lengthy, however, these and all the other costs for phase one and two add up to over US$20 million.
TK: How has been the government supporting your initiatives?
PK: The government has been implementing policies necessary for the growth of the renewable energy sector. Some of the policies have a specific focus on issues that include, but are not limited to tax rebates, duty-free importation of the required equipment, and allocation of forex amongst others. These are fundamental elements especially for the security required by investors in terms of return on investment, as well as the timeous delivery of the project in terms of project management and commencement of operations. There is still more to be done because the government is a key stakeholder, so we look forward to their continuous and responsive support.
TK: What challenges have you faced in implementing the project?
PK: Unfortunately, the major challenges will always be money-related even after securing funding because then comes issues to do with disbursement and allocations. The turbulence the country is experiencing in the local money market cascades into business operations creating hurdles in project delivery. We acknowledge that there have been challenges resulting in the delay of swift foreign payments. We do hope that as phase two unfolds, the same challenges will not persist to allow us to complete the project as scheduled. We are always in communication with the Reserve Bank concerning these issues and we continue to work with them to find effective solutions. Resolving the stated issue will also address the procurement-related challenges created through a ripple effect. In terms of work on the ground, another hurdle… is the actual integration of infrastructure with ZETDC. The equipment that is available on the market in China or Germany is more modern and it seems that current-day manufacturers did not consider the type of equipment which is still being used by most power utilities in Africa. This has created a deviation in the standardisation of equipment, making the integration process a bit cumbersome as local energy supply authorities must now recreate policy to accommodate a more efficient process to integrate with IPPs. One can say that it is a transitional process for ZETDC which therefore requires the ministry of Energy and Power Development, ZERA (Zimbabwe Energy Regulatory Authority) and other related stakeholders to urgently work on favourable frameworks.
TK: Renewable energy generation and use are gaining momentum in Zimbabwe. In your view, are there entry barriers to local players?
PK: Lack of capital remains the main barrier… the industry is highly capital intensive. To put it into perspective, it requires millions of dollars to put in place the necessary infrastructure to generate a single megawatt. Locally, funding is still not easy to access especially for IPPs that may just be starting as they will not have any traceable reference projects on record. We came face to face with this barrier when we were seeking funding for Cross Mabale and then discovered that one of the reasons the local investors may not be on board with long-term investments might be due to the compressed tenures of available loan facilities. It is not a sound venture for an IPP to offset a US$20 million facility in five years, therefore, there is need for the adjustment of loan facility terms. The licensing framework for IPPs can also be considered a barrier due to the way it is structured with the licence-exemption cap being too low.
TK: How can those barriers be overcome?
PK: Well, it might be easier said than done but, in my opinion, it would be best for the relevant authorities through the ministry of Power and Energy Development to conduct a consultative process with both IPPs and potential investors. Such an engagement will create a platform which allows for constructive contribution from the affected and interested parties to develop policies or even workarounds that will help the industry generate more electricity for the benefit of our economy. On the other hand, incentives for both IPPs and investors might also help. These may include a deliberate commitment by ZESA to make payments to IPPs in foreign currency, which will also allow both local and international investors to get a viable return on their investments. As for the licence exemption cap, raising it to a significantly higher number where speculative licencing can still be managed might help IPPs afford to generate more electricity to add to or ease the burden off the national grid.
TK: Your venture received the national project status, how has this assisted you?
PK: We are grateful for having received national project status on the Solgas Cross Mabale project as this gave us quasi-government advantages which cushioned us greatly. We managed to expedite many processes and import the required equipment duty-free. The pandemic caused some delays in our projected timelines, an unforeseen occurrence which was mitigated by the benefits awarded to the project such as receiving priority from the Reserve Bank in terms of forex allocations. Through this status, the project also gets an income tax exemption for the first five years of operation. These concessions add up and are very significant on our books following the large capital spend injected into the solar plant. Many other advantages come with the national project status conferment, and these are some of the incentives that will help IPPs come to the table and pledge commitment and contribution towards an upper-middle-income economy.
TK: With regards to paperwork to register solar projects for locals, how easy or complex is it?
PK: There have been some changes in registration paperwork which I think have created a clean and precise format. As expected, there is a lot of information required for obvious reasons because when handling paperwork for anything as critical, due diligence is of utmost importance. In that regard I would not say it’s easy or complex but that it covers all the necessary requirements. newsdesk@fingaz.co.zw