Rehabilitating power in Zambia and Mozambique

Moe Shaik, group executive of international financing at DBSA

Moe Shaik, group executive of international financing at DBSA

The Development Bank of Southern Africa Limited (DBSA) is one organisation that continues to support the growth and development of the energy infrastructure of countries across Africa.

Within the international energy sector they have worked with Zambia, Mozambique, Tanzania and the DRC, just to name a few, in order to create sustainable and robust solutions to the continentwide energy crisis.

One of the projects that demonstrate how the rigorous procedures and analysis afforded by the DBSA are vital to achieving a high level of success is the Zesco Power Rehabilitation Programme (PRP) in Zambia. Over the course of the initiative, the DBSA provided four loans to Zesco that totalled US $100m to implement an extraordinary rehabilitation programme.

The PRP included the power station rehabilitation at Kafue and Kariba North Bank, the implementation of an enterprise resource planning system, capacity building, and the further rehabilitation of social infrastructure for displaced communities in residence around the Kariba Dam.

“The PRP started several years ago and it is a great example of how we helped a state-owned utility within Zambia to sort out their systems and assist them on a number of different levels,” says Moe Shaik, group executive of international financing at DBSA.

“We helped them on their businessinformation systems and strengthened the generation capacity of the institution and provided the tools to create an economically viable solution.”

Overall, this investment from the DBSA enabled Zesco to improve the technical efficiency and quality of power that was generated, transmitted and distributed from the power plants.

They increased the power generation capacity at three of the primary power stations — Kafue Gorge, Kariba North Bank and Victoria Falls.

The project also undertook to mitigate the long-standing environmental problems that had arisen over the construction of the Kariba Dam by supporting a scheme aimed at meeting the basic needs of the inhabitants of the Gwembe/Tonga Valley.

In 2010, the DBSA provided furtherfunding to increase the generation capacity at Kariba North Bank Extension (KNBE), providing an additional capacity of 360MW at the power station for a total of 1 080MW.

However, this was not the only venture that the DBSA undertook in Zambia and the list of success stories includes Lusemfwa Hydro Power Company (LHPC) and the Copper-Belt Energy Company (CEC) Plc.

“We facilitated the management buy-out of Lunsemfwa Hydro Power Company (LHPC) by participating in a US$7-million bond issue and also provided a further loan of US$8.5- million for the buy-out and rehabilitation of both Lusemfwa and Mulungushi hydropower stationsowned by the LHPC,” says Shaik.

“The electricity generation of the company has improved dramatically — from 28MW to 56MW today — and now they are looking to expand to another 200MW and DBSA is providing preparation assistance to do the initial feasibility studies for the expansion of the company’s generation capacity.”

The DBSA provided equity funding into Zambia Energy (Zam-En) which is an investment vehicle into CEC in order to obtain a shareholding in the company, which is now listed on the Lusaka Stock Exchange (LUSE).

The US$10- million loan to CEC provided for the refurbishment of the electrical infrastructure in the copperbelt area in Zambia.

“The loan was fully serviced by 2010 and we are in the process of exiting as a shareholder,” says Shaik.

“Along with the work we did with the LHPC and Zesco, this stands as a superb example of how our work is making a difference on the continent.”

Moving across the borders to Mozambique, the DBSA has not been slack in ensuring that all membersof the SADC are given the support and guidance they need to move towards an energy efficient future.

They approved a US$65-million loan to Sasol subsidiaries for the development of the central gas processing facility and the gas pipeline that ran 865km from Mozambique to South Africa.

The project has been completed and is delivering gas to the South African industry, a much-needed service from a resource-rich country.

“Mozambique is a success story for us, as investment and development have allowed for the energy gap to close significantly,” says Shaik.

“There is more work to be done in the energy sector in Mozambique given its abundant energy resources and huge potential for electricity generation and distribution projects.”

The rehabilitation of the Matola Distribution Network saw the DBSA provide US$12-million to Electricidade de Mozambique (EDM) specifically for this project.

Throughout, the project upheld the ideals of the DBSA as the financier and partner to assist EDM in achieving the best possible results.

It was, of course, a success and the initiative saw improved electrification as well as access to electricity in the major towns in Mozambique.

In another project aimed at rehabilitating existing infrastructure the DBSA provided finance to the Beira Distribution Network to the value of US$15-million.

This allowed for access to electricity to undergo substantial development and improvement in the distribution systems themselves.

As a result, the company is providing a reliable supply of power to the town of Beira through a more efficient infrastructure.

“The key challenge in Africa is to increase generation capacity, to bring more energy onto the grid and to do this in a way that is sustainable,” says Shaik.

“We have been working towards removing legacy inadequacies and infrastructures so as to provide the utilities with robust and reliable tools that will allow them to improve capacity in generation and transmission. We have also seen a dramatic socioeconomic change in the regions as this development has encouraged a much needed flow of capital to the region.”

Another initiative involving Mozambique that met the original parameters and showed remarkable results was the Hydroelectric Cahorra Bassa (HCB) project; this endeavour was co-funded by the DBSA and commercial banks to the total value of US$800-million, giving the government a share of 85% in HCB and allowing for this vital recapitalisation project to move forward seamlessly.

Today the Government of Mozambique owns an additional 7.5% of the remaining 15% shareholding owned by the Government of Portugal at an additional cost of US$42-million and their goal is to take over the remaining amount of 7.5% over the next few years.

“Our purpose is to accelerate sustainablesocio economic development by funding physical, social and economic infrastructure,” says Shaik.

“We want to improve the quality of life for the people of the region and do so by expanding access to development finance and effectively integrating and implementing sustainable development solutions.”

Today these projects across both Zambia and Mozambique stand testament to the DBSA working consistently towards these goals and ensuring that their investment delivers on its potential.

Since 2009 the bank has disbursed R43.1-billion to infrastructure projects, advanced R1.5-billion in grant funding to support project capacity developments and reinvested R880-million in reserves.

The Bank has aligned itself to deliver on shareholder expectations and the year ahead looks set to be as successful as the previous ones.

The contents and photographs in this article were compiled with, paid for and signed off by the Development Bank of Southern Africa. This article forms part of a larger supplement