Republic of Zambia OPPORTUNITIES IN THE ENERGY SECTOR IN ZAMBIA

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1 Republic of Zambia OPPORTUNITIES IN THE ENERGY SECTOR IN ZAMBIA

2 Presentation Outline COUNTRY PROFILE KEY POWER SECTOR PLAYERS OVERVIEW OF THE ENERGY SECTOR IN ZAMBIA ZAMBIA ENERGY SITUATION PRESENTLY RESULT OF SHORTFALL OF ELECTRICITY ON GENERAL PUBLIC MITIGATION MEASURES SOLAR SOLUTIONS OFF-GRID SOLUTIONS TARIFFS CONCLUSION

PRESENTLY RESULT OF SHORTFALL OF ELECTRICITY ON GENERAL PUBLIC

3 Country Profile Brief Location Southern Africa Size -752,610 sq.km Population - 14 Million Climate Temperate, Tropical Rain Season (November to April) Political: Multi-Party Democracy Stable & Peaceful Economy Mining, Agriculture, Energy, Manufacturing, Tourism, Infrastructure GDP growth rate 6% average 3

to April) Political: Multi-Party Democracy Stable & Peaceful Economy Mining,

4 Key Power Sector Players

5 Overview of the Energy Sector in Zambia Zambia s energy resource potential includes Hydro, Solar, Wind and Bioenergy resources. Zambia s hydropower resource potential is estimated at 6,000MW. Despite abundant hydro-power generation potential, only 25% of the population has access to electricity. Population Distribution

Zambia s hydropower resource potential is estimated at 6,000MW.

6 Overview of the Energy Sector cont d.. Zambia s Renewable Energy Strategy defines RE sources to include: Solar - thermal and photovoltaic Biomass agriculture waste, forestry waste, industrial/municipal organic waste, energy crops and products and animal waste. Geothermal

Solar - thermal and photovoltaic Biomass agriculture waste,

7 Overview of the Energy Sector cont d Solar Energy Zambia has: Potential energy out put per unit area (Solar radiation) average 5.5kWh/m²/day (MEWD,2008) Up to 3000 sunshine hours per year. This is significant potential for solar thermal & photovoltaic exploitation

5.5kWh/m²/day (MEWD,2008) Up to 3000 sunshine hours per year.

8 Overview of the Energy Sector cont d.. Geothermal More than 80 hot springs occurrences associated with deep seated faults and fracture systems in Zambia. 35 were rated high in terms of surface water temperature, flow rate. No detailed exploration done to determine potential for electricity generation. Kapisya Project 2.0MW potential for electricity generation.

$fracture systems in Zambia.$

9 Zambia Energy Situation Presently Zambia is currently faced with a deficit of 560 megawatts in its energy supply because of unusually low water levels in the Kariba Dam, the world s biggest man-made reservoir. Of the total installed Electricity Generation Capacity of Zambia of 2,347 MW, hydropower is the most important energy source in the country with 2,259 MW (96%), followed by diesel contributing about 4% to the national energy supply. Demand for energy in Zambia has been rising due to robust GDP growth of more than 6% per year for the past decade in the country, particularly in the mining, manufacturing and agriculture sectors. The Zambia Development Agency (ZDA) record that the demand for electricity in the country has been growing at an average of about 3%, or between 150 and 200 MW, each year.

Of the total installed Electricity Generation Capacity of Zambia of 2,347 MW, hydropower is the most important energy source in the country with 2,259 MW (96%), followed by diesel contributing about

10 Zambia Energy Situation Presently cont d Power Deficit Generation of electricity in Zambia is predominantly from 3 main hydropower stations, namely: Kafue Gorge, Kariba North Bank and Victoria Falls These currently account for 96% of total supply of the country. Due to the below average rainfall during the 2014/2015 rain season, water inflow into the reservoirs has not been adequate enough to meet the national power requirement till the end of In response, the Zambezi River Authority, after carrying out hydrological modelling, reviewed the water allocation to ZESCO for hydropower generation from 45 billion to 33 billion cubic metres for the period March - December, 2015 in order to allow generation to last till the next rain season. This led to a shortfall in power generation of approx. 560 MW.

Due to the below average rainfall during the 2014/2015 rain season, water inflow into the reservoirs has not been adequate enough to meet the national power requirement till the end of 2015.

11 Result of shortfall of electricity on general public In order to mitigate the reduced power generation caused by the reduced water levels at the three major stations, ZESCO embarked on the load shedding programme country wide. ZESCO then began implementing revised load shedding schedules of between 5 and 6 hours for the domestic, industrial and commercial customers on a rolling basis through a 24 hours period. Based on hydrological forecasts, ZESCO was further advised to reduce power generation beginning in July 2015, from the earlier recommended 700 MW to 540 MW and from 600 to 305 MW for Kafue Gorge and Kariba North Bank, respectively. This has led to a further reduction of 455 MW. NOTE: The Mines supplied by ZESCO and Copperbelt Energy Corporation (CEC) still receive their full compliment of the contracted power. The mines are not load shed.

ZESCO then began implementing revised load shedding schedules of between 5 and 6 hours for the domestic, industrial and commercial customers on a rolling basis through a 24 hours period.

12 Result of shortfall of electricity on general public cont.. The projected demand for the month of October 2015 stands at an average of 2000 MW, while the current total generation stands at 985 MW, broken down as follows: Kafue Gorge 540 MW; Kariba North Bank 305 MW; and Other stations 140 MW This translates into a deficit of 1015 MW for the month of October 2015.

the current total generation stands at 985 MW, broken down as follows: Kafue Gorge 540 MW;

13 Mitigation Measures In order to alleviate the power deficit and load shedding situation in the country, Government through ZESCO, has been implementing the following short term and medium term measures: Short Term Measures Medium Term Measures a) Importation of Power: Government commenced the importation of power as follows: i. 148 MW from AGGREKO off the coast of Mozambique (this power is available on a continuous basis); ii. 150 MW from Southern African Power Pool (SAPP); and iii. 100 MW from Electricidade de Moçambique E.P. (EDM) in Mozambique. iv. b) Load Shedding: The power indicated in (ii) and (iii) above is only available at off peak hours. ZESCO has continued to implement the load shedding programme to mitigate the reduced power generation. However this has proven not to be effective as customers seem to be shifting the loads and simply postpone their consumption to the point when they get back power. This has led to an increase in the deficit of an average of about 260 MW. a) Commissioning of Maamba Coal Powered Station in November, MW; b) Promotion of Renewable Energy Technologies Minimum of 100 MW; c) Further Contracting of Emergency Power from KAR-POWER starting on 1 st January MW; d) Government has further initiated the procurement process for the deployment of up to 300 MW from Solar; and e) Up to 200 MW of inland thermal power stations (HFO, Diesel and Gas)

148 MW from AGGREKO off the coast of Mozambique (this power is available on a continuous basis); ii. 150 MW from Southern African Power Pool (SAPP); and iii. 100 MW from Electricidade de Moçambique E.

14 Solar Solutions The International Finance Corporation (IFC) (World bank) is assisting Zambia to set up two of its first Utility-Scale Solar Power Projects in an attempt to help deal with the electricity shortage. Zambia s Industrial Development Corporation (IDC) recently partnered with the IFC in an programme called Scaling-up Solar. Under this programme the IDC and IFC intend to package and bring on board 600 MW of solar power. IDC + IFC Solar Power Projects For Zambia At the same time ZESCO with the Ministry of Energy are involved in a parallel effort to bring on board 300 MW of solar power into the grid + INVESTMENTS IN SOLAR PV

Zambia s Industrial Development Corporation (IDC) recently partnered with the IFC in an programme called Scaling-up Solar.

15 Off-grid Solutions The Rural Electrification Authority has been mandated to spearhead development of offgrid solutions in far flung areas. Particular incentives can be negotiated on a case by case basis. Tariffs REFIT: Government is collaborating with stakeholders to develop initiatives that will diversify the country s electricity generation through investment in the energy sector and expand the electricity supply industry in order to reduce over dependence on hydroelectricity. Renewable Feed-In Tariff (REFIT) Policy Equally, the GET-FIT Zambia Initiative aims to promote grid connected renewable energy with a focus on small grid connected RE Generation Projects (1 MW 20 MW). The adoption of an effective REFIT policy and finalization of the REFIT regulations will enable the Zambian Government to buy renewable energy from small-scale independent power producers at predominant prices to meet the high energy demand by the public. The paper should be tabled before cabinet within a month.

Tariffs REFIT: Government is collaborating with stakeholders to develop initiatives that will diversify the country s electricity generation through investment in the energy sector and expand the

16 Required Investments and Funding in Electricity Sector Generation Projects requiring funding or strategic partners PROJECT Kafue Gorge Lower (hydro) SPV PROJECT OWNER GRZ will hold 60% shares through ZESCO COST ESTIMATE IN US$ (MN) CAPACITY (MW) COMMENT 2, Transaction adviser has been engaged to secure an equity partner for the remaining 40%. Debt/equity ratio 70:30 Debt funding of US$1.4bn required. EPC tender to be advertised. Batoka Gorge (hydro) Mambilima and Mumboto Hydro scheme Private Sector Shared between Zambia and Zimbabwe Not yet awarded 2, Draft updated feasibility study complete. The structure of this project is yet to be finalised by the two Governments 1,000 GRZ to award concession and decide on structure

Debt/equity ratio 70:30 Debt funding of US$1.4bn required. EPC tender to be advertised.

17 Required Investments and Funding in Electricity Sector cont d Generation Projects requiring funding or strategic partners PROJECT PROJECT OWNER COST ESTIMATE IN US$ (MN) CAPACITY (MW) COMMENT Kalungwishi Power Project (hydro) Private sector - LPA Power Purchase Agreement negotiations with ZESCO in progress. LPA is seeking funding Lusiwasi Lower (hydro) ZESCO Requires funding Lusiwasi Upper (hydro) ZESCO Requires funding Chishimba Falls Power Expansion (hydro) ZESCO Requires funding TOTAL EXPECTED

Purchase Agreement negotiations with ZESCO in progress. LPA is seeking funding Lusiwasi Lower (hydro) ZESCO 253.

18 Required Investments and Funding in Electricity Sector cont d Transmission Projects requiring funding PROJECT COST ESTIMATE IN US$ (MN) COMMENT Zambia-Congo DRC 330kV Line Interconnector 64.0 Requires funding Zambia-Tanzania-Kenya 330kV Line Interconnector 93.0 ZESCO has completed the larger portion of the work from Pensulo to Kasama. Funding for the line from Kasama to Nakonde is required. Connection of Lundazi and Chama to the National Grid 63.0 Tender document completed, Requires funding

0 Requires funding Zambia-Tanzania-Kenya 330kV Line Interconnector 93.

19 Required Investments and Funding in Electricity Sector cont d Transmission Projects requiring funding PROJECT COST ESTIMATE IN US$ (MN) COMMENT Kafue Gorge Lower-Kafue West 330kV Line 46.0 Kabwe-Pensulo 330kV Line This line is required for the evacuation of power from the planned US$ 2 billion Kafue Gorge power plant Funding required Feasibility and EIA studies pending Funding required Feasibility and EIA pending Muzuma-Kafue West 330kV Line 80.0 Funding required Connection of Nyimba-Petauke to Transmission Grid. 40 Requires funding TOTAL EXPECTED 471

0 This line is required for the evacuation of power from the planned US$ 2 billion Kafue Gorge power plant Funding required Feasibility and

20 Conclusion Zambia remains a remarkable investment destination in the energy sector Zambia s Location and the development of new interconnectors coupled with power deficit in the region makes for good export market potential.

the development of new interconnectors coupled with

21 Thank You

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