Implementing Agency: Southern Africa Power Pool (SAPP)
The objective of the preparatory activities for which the NEPAD-IPPF funding will be used for, is to support the SAPP Coordination Centre (as the Project Coordinator for ZIZABONA) in engaging suitable firms to undertake further work on legal advisory services; project documentation and financial advisory services; and Project packaging including the proposed SPV arrangements, shareholders agreements; and supervision and coordination of the project.
a)Overall Project Scope and components 7.1The scope of the preparatory activities shall include (i) Feasibility Study Update; (ii) Independent Technical Review; (iii) Environmental Impact Assessment; (iv) Market Study and legal advisory services; (v) Project Documentation and Financial advisory services; and (vi) Project Packaging, coordination and supervision including the necessary arrangements of the SPV setup and documentation (vii) Project Preparation Phase, and (viii) Project contracting and financing Phase.It is to be noted that components (i) to (v) are already under implementation. The remaining components are to be addressed under this new request from IPPF. 7.1.1Feasibility Study Update: The existing techno-economic feasibility studies which were prepared by the ZIZABONA Project Management Committee shall be complimented with more in-depth load flow analysis assessing the transmission capacity available which can be contracted out to potential customers, other than NamPower. The outcomes from this module should confirm the available transmission capacity which the Sponsors can depend on, as a basis for firm contracts with other users of the Project. The Consultant shall prepare a detailed load flow study taking into account all the operational guidelines in the relevant areas and the existing contracts and rules governing the existing transmission facilities. The Sponsors would need to be satisfied that the declared transmission capacity is indeed available and can be contracted out to other potential customers over the long term. 7.1.2Independent Technical Review: This will help the Sponsors to make an objective and informed decision on the robustness of the technical proposal developed by the ZIZABONA Project Management Committee and the ability of this solution to provide a strong dependable transmission solution which NamPower and other customers could depend on for many years in the future. The consultant shall review the design proposed by the ZIZABONA Project Management Committee, including but not limited to the review of the substation design proposed by ZESCO for Phase one. The Consultant shall highlight weaknesses, where any exist, in the proposed design and suggest improvements where necessary, to meet the objectives of the Sponsors. The Consultant shall take into account the general accepted practices that have been used in SAPP in designing international transmission interconnectors. 7.1.3Environmental Impact Assessment: This would entail an environmental impact assessment of the proposed ZIZABONA interconnection project. In Zambia and Zimbabwe, EIA were done and completed but have lapsed due to time limit imposed by the Authorities in the two countries. Besides some changes were afterward introduced in Zambia. New EIA work would need to be initiated and completed in Zambia and Zimbabwe. In Botswana and Namibia, consultants have been appointed to do EIA which are almost completed, but results would need to be reviewed for compliance with national and funder's standards. Proposed intervention of IPPF: IPPF funding will serve to partly cover the cost of the EIA for new line routing and capacity upgrade of the interconnection going from Victoria Fall (Zambia) to Sesheke (Namibia). 7.1.4Market Study and legal advisory services: This module shall help the Sponsors to make an objective and informed decision on the potential volume of business available to the Project. The consultant shall scope the geographic area from which the potential generators are located, and the likely customers who would wish to enter into long term cross-border wheeling agreements that would utilize the available transmission capacity. The Consultant would have to assess the available sources of generation, particularly those from sustainable sources which are located in remote locations, which would otherwise not have materialized due to unavailability of transmission facilities for feeding their power to the customers. The Consultant would need to match the available generation with the likely customers and outline a clear timeframe for the materialization of these generation sources and their suitability to the various customers in SAPP. The Consultant shall address the potential for and the willingness of customers to conclude long-term agreements for utilization of the Project's facilities to guarantee a firm volume of power for the planning and lending period of the Project.A preliminary market study has been done by the ZIZABONA Project Management Committee and would need to be updated. Proposed intervention of IPPF: IPPF funding will serve to complete the work not done by the previous contract mainly under legal advisory services requirements up to reaching financial close. 7.1.5Project Documentation and financial advisory services: The objective is to draft the Project documentation required for the mobilization of financing in conformity with the SAPP Protocols and the requirements of the international lenders and investors. The Consultant shall review the existing Project documents, and prepare a report outlining the required documents for the Project. This is an on-going task which would need to be carried out throughout Project development up to financial close. Also, a financing model will be developed that will calculate the appropriate wheeling and capacity charges required for the project. Proposed Intervention of IPPF: The IPPF funding will be used to develop all additional project documentation necessary to reach financial closure. The work done under the present contract came up with a preliminary financial model. The IPPF funding will be used to update and finalize the model once the PPA and wheeling agreements and the exact quantum of off-takers are finalized. 7.1.6Project Packaging, coordination and supervision: The objective is to prepare a report on the recommended Project packaging and phasing in such a way that it makes it easier to raise funding for the Project. The Consultant shall discuss various project packaging options and recommend the most appropriate one for the Project. The Consultant shall also recommend appropriate phasing of the Project in line with the findings of the Market Study. 7.1.7The complexity and unique features of the preparatory activities require the SAPP-Coordination Center to be supported in coordinating and supervising the various activities, in particular as regards: (i) quality and timeliness of outputs; (ii) risks assessment, monitoring and management; and (iii) optimization of outcomes and positive impacts. The SAP-CC will be therefore provided with a Consultancy services to enhance its coordination and supervision capacity. Proposed IPPF Intervention: IPPF funding will contribute to finalise and consolidate the report to be used for raising fund. IPPF will also partly support the cost of Project coordination and supervision. 7.1.8Project Preparation Phase: The services that will be provided during the Project Preparation Phase, can be summarised to include: "Resourcing, operationalizing and empowering the ZIZABONA Project Team to manage the Project going forward, with the Project Team to be accountable to the SPV governance structure;"Establish and formalise the ZIZABONA SPV, including appointing its Board of Directors, Managing Director and staff (initially envisaged to be the Project Team referred to above), as well as formalising necessary governance arrangements;"On the basis of initial feedback from the Investors' Roundtable and other stakeholder feedback, continue with the development and finalisation of all key ZIZABONA Project agreements;"Preparation of EPC tender documentation, to be ready for launching of a tender process at the start of the Contracting and Financing Phase;"Ensure that all ESIA's are progressed and completed;"Negotiate and agree a firm wheeling path across other parts of the regional transmission network necessary to give effect to power transfers from Zambia to Namibia and South Africa, primarily focused on firm wheeling over the NamPower system in Namibia, but also wheeling across e.g. the ZESA infrastructure in Zimbabwe under certain system conditions;"Support for on-going engagement with financiers committed to support ZIZABONA, including development of term sheet setting out the key terms and conditions of both equity and debt financing arrangements for the Project; and "Facilitation of Lenders due diligence on the ZIZABONA Project, including technical, environmental, legal and financial aspects, the latter also including aspects such as insurance arrangements and financial model audit. Proposed IPPF Intervention: The IPPF funding will cover the full cost of the project preparation phase, as described above. 7.1.9Project contracting and Financing Phase: Key activities in this Phase will inter alia include: "Launch of EPC tender process, including prequalification, invitation to tender, tendering and tender evaluation, up to recommendation of a preferred contractor;"Contract negotiation with preferred contractor, award and approval;"Negotiation of detailed Project financing agreements and security structures, to be done in parallel with the EPC tendering process; and "Financial close. Proposed IPPF Intervention: The IPPF funding will cover the full cost of the project contracting phase, as described above. Detailed cost estimates for the Preparatory activities are provided in Table 1. The total cost is estimated at US$3,179,000; comprising US$335 ,000 for feasibility study updating and independent technical review; US$993,000 for the EIA; US$205,000 for market study and legal advisory services; US$260,000 for project documentation and financial advisory services; and US$180,000 for project packaging and administration costs; US$644,000 for Project Preparatory Phase; US$542 ,000 for Project Contracting and Financing Phase and US$20,000 for financial audit.
7.5Socioeconomic benefits: The ZIZABONA interconnection will link the southern and northern parts of the SAPP network with the benefit of further developing of a competitive electricity market in the SADC. The project will decongest the Central Transmission Corridor (CTC) through Zimbabwe, which is currently congested resulting in reduced power trade, and promote increased trade all SADC countries of the network, by providing another power transmission corridor. The project will benefit population in the SADC countries with competitive cost power and contribute to increasing energy access. 7.6Environmental benefits: The SAPP power is by far dominated by thermal generated power. By making mostly hydroelectric power produced in the various networks of ZESA, ZESCO, BPC, SNEL and HCB available in the SAPP network, the ZIZABONA interconnection will contribute to significantly improve the energy mix in the medium term, in the SADC, and especially in ESKOM, which expressed its willingness to purchase any excess power wheeled through the network.
3.1 The ZIZABONA project is very strategic in terms of facilitating trade within the SAPP. Currently there are wheeling constraints on the existing Central Corridor covering ZESCO-ZESA-BPC and Eskom to facilitate trade on current Power Purchase Agreements especially for those involving BPC, Eskom and NamPower. The ZIZABONA investments can immediately be underpinned with current Power Purchase Agreements involving these utilities. The existing and future generation projects present opportunities for trade, which flows would utilise the ZIZABONA and CTC networks. By entering into Transmission Use of System Agreements, the investments on the ZIZABONA and CTC networks can be recovered from such trade opportunities over and above the normal SAPP Wheeling arrangements for any other SAPP transactions. 3.2 The Project Management Committee agreed that this Project is a regional Project not only because of the transmission multi-countries interconnectors involved but also because of the numerous generation projects planned for development by SAPP. Once developed, these generation projects will see more power being wheeled through the ZIZABONA transmission network. The linkage between ZIZABONA and the development of additional generation capacity within SAPP is illustrated below: 3.2.1ZESA Generation Projects i)ZESA is working towards the expansion of Hwange Power Station by two additional units of 300 MW each. This expansion project is targeted for completion after 2016. ii)ZESA is also planning to have Kariba South Power Station expanded by two units of 150 MW each after 2015. The same project financier is also expected to fund the development of Gokwe North Thermal Power Station which is planned for commissioning after 2014 or 2015. iii)Some of the power from these projects is earmarked for export to NamPower, Eskom and BPC and any other SAPP member through the ZIZABONA transmission and Central Transmission Corridor (CTC) networks. 3.2.2ZESCO Generation Projects i)ZESCO is currently developing the Itezhi Tezhi Power Station of 120 MW. The power station is targeted for commissioning in 2014. ii)ZESCO is also developing the Kafue Lower Hydro Project of between 600-750 MW currently under feasibility studies. iii)In addition ZESCO also intends to expand Kariba North Hydro Power Station by two units of 180MW each by 2013. iv)Part of the power from these power stations is to be exported to BPC, Eskom, NamPower, ZESA and any other SAPP members through the ZIZABONA transmission and CTC networks. 3.2.3BPC Generation Projects i)BPC are developing the Morupule Project in two phases with 4 x 150MW units to give a total of 600 MW. The first unit is targeted for commissioning in 2012 while the second unit is targeted for commissioning in 2013. ii)There is also the Mmamabula Power Project (3 x 810 MW units) which will result in BPC getting 25% of the power or 600 MW while Eskom will receive 75% of the power or 1 800 MW. The first unit is targeted for commissioning during the first quarter of 2013 with the other two units targeted for commissioning during the first quarter of 2014. 3.2.4NamPower Generation Projects i)NamPower has constructed the Caprivi Transmission Line that was commissioned in 2010. This project will benefit SAPP especially when the ZIZABONA project is integrated to it through the Sesheke 220kV line and the Victoria Falls Pandamatenga-Zambezi links. ii)NamPower is also working on Ruacana Power Station. This project is targeted for commissioning in 2012. This development would still leave NamPower short of between 300 - 400 MW which it would like to import from BPC, ZESCO and ZESA using the ZIZABONA and CTC networks. 3.2.5SNEL's Rehabilitation of Inga Power Station i)While the ZIZABONA Project is under construction, SNEL of the Democratic Republic of Congo (DRC) will be working on the rehabilitation of generators at Inga Power Stations. This power station is capable of releasing additional capacity that will result in the import of power by other SAPP members down South. The wheeling of the power from Inga to BPC, Eskom, NamPower, ZESA and ZESCO will be done through the ZIZABONA and CTC networks. ii)It must be noted that SNEL has already secured funding from the World Bank for the rehabilitation of the generators at Inga Power Stations. However, it is noted that there would be need to reinforce the transmission network between DRC and Zambia when these generation projects in DRC are realised. There are on-going efforts within SAPP to address these transmission challenges. 3.2.6Expansion of the HCB North Bank - Mozambique i)There are plans by Hydro Carbora Bassa (HCB) of Mozambique to expand the North Bank by an additional 2,000 MW which would be exported mostly to BPC, Eskom, NamPower, ZESA and the rest of other SAPP members in the South. ii)This also means that the ZESA network has to be reinforced to facilitate the evacuation of this power to the South. The network expansion and reinforcement works in Zimbabwe are to be financed and implemented by CTC. 3.2.7Central Transmission Corridor (CTC) Projects i)For power to be wheeled from the North to the South following the successful commissioning of all the generation projects detailed above, additional transmission capacity has to be created in the ZESA network. ii)ZESA has created the Central Transmission Corridor (CTC) SPV, also named CTC, in charge of creating that additional wheeling capacity of up to 1060 MW with some of the projects expected to be commissioned by end of 2013. CTC-SPV is a separate legal entity that ZESA has created to spearhead the implementation of transmission lines in Zimbabwe. iii)This CTC-SPV project will result in the reinforcement and upgrading of existing transmission lines as well as the construction of new lines to wheel power to BPC, Eskom, NamPower and ZESA itself. These projects are: "Construction of the fourth Kariba-Alaska Line (2011), "Construction of 2nd Alaska- Sherwood 330kV Line (2012), "Construction of Mutorashanga-Bindura 330kV Line (2012), "Installation of a new SVC at Dema substation (2012), "Construction of 2nd Marvel-Insukamini 330kV Line (2013), "Construction of second Zimbabwe-South Africa Interconnector, (2015) and "Construction of the Hwange-Victoria Falls-Livingstone (border)-Pandamatenga (border) Line (Part of the ZIZABONA Project). To underpin and securitise the investment in these transmission works, CTC-SPV are currently negotiating wheeling contracts with BPC, Eskom, NamPower and ZESA.