The Namibian (Windhoek)

10 February 2014

Namibia: Nampower Signs First Kudu Power Export Agreement

STATE power firm NamPower on Friday signed the first ever export agreement on the Kudu Gas Project. The utility signed a joint development agreement and a power export agreement with Zambian private power company, Copperbelt Energy Corporation.

"As we are all aware, the Kudu Project has come a long way, and this occasion is therefore a historical milestone in the sense that this is the first time that NamPower has advanced the project to the extent of signing a joint development agreement with a potential off taker and investor in the Kudu Project," said NamPower chairperson Maria Nakale during the signing ceremony.

NamPower is developing the Combined Cycle Gas Turbine, Kudu Power Station near Oranjemund will will tap power from the Kudu fields. The 800 MW station is expected to cost about N$9 billion.

LONG DELAYS

The long delayed project to develop the gas project off shore Namibia is at an advanced stage with various major tenders having reached various stages of bid evaluations, Nakale said.

In 2007, the project was temporarily halted as a result of the commercial challenges that faced the project at the time. The challenges were the gas price, which was deemed at the time as expensive, the complexity of concluding power export agreements with secondary off-takers for the power that Namibia cannot take, and the last commercial challenge was the foreign exchange risk exposure, as the gas price will be denominated in US dollars, whereas electricity in Namibia is sold in Namibia dollars.

"Since 2010, NamPower did endeavour with the support of government to find solutions to all those commercial challenges. The electricity tariff in the region has considerably increased over the past six to seven years, which has made Kudu to be more competitive against any other new build power station in the region," Nakale said.

U.S DOLLARS

The Zambian firm has shown interest in buying 200 MW to 300 MW of electricity from Kudu to be denominated in US Dollars. Nakale said this has lessened the foreign exchange risk exposure as the residual exposure is now slightly more manageable.

"Their further interest to participate in the Kudu Project as investors/shareholders definitely demonstrates without a doubt their full commitment in ensuring that this project is successfully implemented and commissioned by end 2017, latest first quarter of 2018," Nakale said.

The energy security in the region has been a major concern recently in Southern Africa. Kudu will be the first large power station to be developed in Namibia. It is equally going to be the first Combined Cycle Gas Turbine Power Station of its size in the SADC region.

The field is estimated to contain 1,3 trillion cubic feet of proven natural gas reserves however more recent exploration and analysis suggests that reserves could reach three trillion cubic feet with potential up to nine trillion cubic feet.

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