Namibia Power Report Q3 2012

BMI View: Namibia’s state-owned utility, NamPower, has announced that the country faces a 80 megawatt (MW) power deficit in 2012, and that this will rise to 150MW in 2013 and reach 300MW by 2015. With new large-scale capacity from thermal or hydroelectric power plants not scheduled to become operational until 2016, Namibia has devised a short-term solution to meet its energy needs, one that combines power purchase agreements from neighbouring countries, negotiations with independent power providers and temporary fixes to extend the capacity at existing plants. While BMI welcomes the government’s transparency over its energy sector, we question how NamPower will fund these proposed solutions, and believe that in the short term at least, the market will be characterised by load dropping.

Between 2011 and 2016, BMI forecasts that Namibia's overall power generation will increase by an annual average of 59.3%, to reach 6.0 terawatt hours (TWh), although this growth rate is deceptive, as it is not until 2016 that capacity will post a significant increase as new gas-fired power facilities become operational. In order to minimise the effects of an energy deficit, NamPower has announced several short-term measures to meet demand, including rehabilitating the thermal Van Eck power station to extend its lifespan by five years, and installing new turbines at the Ruacana hydroelectric plant to boost capacity. Towards the end of our forecast period, the 800MW gas-fired power plant linked with Namibia's the Kudu gas field project is expected to become operational by 2016, while Angola and Namibia are discussing the viability of the Baynes hydroelectric power project, which NamPower estimates could cost up to US$1.3bn.

We envisage Namibia's net power consumption increasing from 3.65TWh in 2011 to 5.25TWh by 2016, signalling an annual average of 7.5% over the period. Following an increase in 2011 real GDP of 3.8%, BMI forecasts average annual growth of 4.6% between 2011 and 2021. Meanwhile, Namibia's population is expected to rise from 2.3mn in 2011 to 2.5mn in 2016.

Key developments for Namibia’s power sector this quarter include: • The fourth unit at the Ruacana hydroelectric plant has now been installed, with NamPower beginning commercial operations in March 2012. This new unit increases capacity by 92MW.

• In April 2012, state-owned utility NamPower called for domestic users to cut their electricity consumption by 10% to reduce the prospect of outages and power cuts during the winter, as NamPower predicts that the country will suffer a 80MW shortfall in 2012.

• In April 2012, Namibia entered into an agreement with Botswana, Zambia, and Zimbabwe with a view to improving and controlling energy consumption in these four countries.