Namibia’s Electricity Control Board (ECB) and power utility NamPower raised electricity tariffs by a whopping 18.06 per cent amid reports that the utility had put its massive Kudu gas-to-power project on the back burner.
NamPower, which is scrambling to meet rising energy demands as winter approaches, said it would invest about US$ 70 million into emergency power generation, adding that raising tariffs was one way of raising capital for power generation projects.
ECB CEO Siseho Simasiku said current tariffs are not cost-reflective, adding the price of power should meet rising generation overheads and import tariff.
In addition, Nampower should be well capitalised to embark on short term generation projects to avert a total blackout.
Namibia is currently purchasing power from Eskom of South Africa at substantially higher prices whilst running its own power stations at high costs.
Namibia has peak power demand of 550 MW and can only generate 240 MW from Ruacana hydro power station when it is running at full capacity, especially in the rainy season, about 120 MW from coal fired Van Eck and about 24 MW.
“The increased fuel cost for running the Van Eck and Paratus power station has increased the total running cost and placed and additional burden on Nampower,” Simasiku said.
Costs at coal-fired Van Eck have gone up from R0.90 per kilowatt hour to over R1 .00 per kilowatt hour.
Coal prices have also gone up from US$ 80 to more than US$ 100 a tonne.
Costs have also gone up and Paratus, which runs on diesel because of a surge in prices of crude.
“At the current low prices, which are not cost reflective, Namibia will not be in a position to attract investors to invest in new generation projects as cost reflectivity is viewed as a prerequisite for private investors.
“Therefore, electricity tariff increases are unavoidable,” Simasiku added.
Nampower said it needs to keep its debt service ratio above the 1.5 minimum, which is the amount of cash flow available to meet annual interest and principal payments on debt.
Debt service cover ratio means the minimum ratio which is acceptable to a lender and often it is a loan condition.
Therefore for Nampower, it means that for every one dollar debt they need to service they need 1.5 dollars cash.
“It is clear from the energy crisis in the region that South Africa is no longer in a position to provide its neighbours with power unless it is emergency power at exorbitant prices,” Simasiku said.