TO ensure that Namibia is not left in the dark by 2016, NamPower will fast-track a coal-fired power station of between N$4 billion and N$7 billion near Arandis, and not the Kudu gas power project of nearly N$9 billion.
Realistically speaking, the Erongo coal-fired power station is the country's only commercial option to prevent black-outs in four years, NamPower managing director Paulinus Shilamba said this week.
"The year 2016 will be a crucial year and we cannot miss putting up a base-load power plant by that year, else the country could be faced with power outages of a severe scale," he said.
Shilamba said although other regional power stations may also become operational by 2016, the risk of being delayed, the risk of getting the power to Namibia, the losses associated with transmission lines, as well as the risk of non-delivery due to transmission problems cannot be underestimated.
Besides the various challenges facing Kudu, the project can simply not be up and running by 2016 when Namibia's energy needs will hit 750 megawatts, about 220 megawatts more than currently, Shilamba said.
"If the decision is made today to go ahead with Kudu, we will be lucky to have it commissioned by 2017 or 2018," he said.
Similarly, the more than N$10-billion Baynes project wouldn't be able to power Namibia in time either.
According to Shilamba, the hydropower project is unlikely to be commissioned before 2020.
Regardless of where Namibians will get their power from by 2016, it will cost them. Generation costs at NamPower currently stands on average at 60 cents per kilowatt hour (kWh). By 2016, it will be N$1,20 kWh, Shilamba said.
NamPower, who was mandated by Cabinet in 2004 to develop Kudu, hasn't pulled the plug on the gas project, he said.
Shilamba compared NamPower's dilemma to a hunter having to make a responsible choice to fend for his family. So NamPower decided to go for an easier target for the time being and shoot a hartebees, instead of hunting down a kudu. The hartebees might only feed the hunter's family for a few days, but it will give him time to go after the mighty kudu, Shilamba said.
"The board of NamPower resolved to mandate the management to fast-track the development of a coal-fired power station," he said.
Shilamba said Kudu, which has the capacity to generate 800 MW of power, "remains a strategic investment for Namibia", but that the project is marred with challenges. These include securing equity partners, getting strategic support from Government and sorting out the foreign exchange risks associated with Kudu's gas sold in US dollars.
Government, as the sole shareholder of NamPower, is expected to underwrite the residual risks which the developers, lenders and power off-takers cannot take and which is beyond NamPower's ability to underwrite, Shilamba said.
"When such risks are reflected on a government's balance sheet, it may influence the government's ability to borrow more money on the open market for other projects or to manage it foreign exchange reserves," he said.
Shilamba said the substantial increase in power demand in the central Namib due to developmental growth required the investigation into the feasibility of the Erongo coal-fired power station, able to generate between 150 MW and 300 MW.
The final environmental impact assessment study has been submitted to the Ministry of Mines and Energy, while detailed techno-economic and geo-technical studies have been concluded. In addition, detailed investigations regarding the security and cost of coal supply and the required upgrades in the coal supply chain have been done.
"This project could be fast-tracked to be in commercial operation by 2016," Shilamba said. Namibia's white paper on energy requires the country to be able to generate 100 per cent of its peak demand and 75 per cent of its annual energy demand from local sources, and the Erongo power plant can deliver this, he said.
The inherent complexities of commercially developing Kudu and the huge capital investment it requires, on the other hand, means that discussions with Government on strategic intervention in the project will have to be on-going, Shilamba said.