Zimbabwe’s biggest independent power producer, Nyangani Renewable Energy, lost an international arbitration involving a currency dispute with the state-owned power distribution firm, an official said.
Nyangani took Zimbabwe Electricity Transmission and Distribution Company (ZETDC) to the International Chamber of Commerce in Johannesburg, South Africa, over US$8.6 million for power delivered from its 15MW Pungwe B hydropower plant in Manicaland.
The arbiter decided that the nation’s law gives ZETDC discretion on whether to pay Nyangani’s U.S. dollar-denominated power purchasing agreement in U.S. dollars or Zimbabwe dollars, Managing Director Ian McKersie said in an interview.
“This is a disappointing result for Pungwe B, for all operating independent power producers, and the electricity sector as a whole as it does not encourage further investment in the sector,” he said.
The hearing was heard on June 14 and a ruling delivered on October 13.
Nyangani had chosen to take the dispute abroad because, it said, offshore banks prefer international arbitration.
“Local courts, be it in Zimbabwe or anywhere else, have proven to be much slower to reach a conclusion as well as there being a risk that they are not independent,” the company said in August.
Nyangani’s 10MW Riverside Solar power station was the first independent producer to feed into ZESA when the first 2.5MW came on stream in January 2018.
Nyangani has built eight power plants in Zimbabwe since 2009 with a total generation capacity of 32MW.
The company plans to expand, but “the rollout of the next phase has been stalled for three years pending a resolution of the IPP currency of payment issue”, the company said in July.
While Zimbabwe has issued permits for a combined capacity of 6,858MW, independent producers are supplying only about 135 megawatts to the grid, according to a parliamentary report earlier this year.
The Nyangani ruling lays a tough path for other independent producers.
This week, ZESA executive chairman Sydney Gata said currency risk in the country was one of the major factors keeping new investors away.
“Banks will not come to the table. How can I lend in US dollars to buy equipment that is sold in US dollars to produce electricity that will be sold in local currency?” Gata told reporters in Hwange. He criticised Treasury’s refusal to issue the government guarantees that would help producers secure offshore funding.