- In their annual report, GET FiT Zambia highlights that solar project lenders have maintained concerns about the financial sustainability of the energy sector.
- This has ‘continued to pose challenges for the solar PV projects selected under GET FiT Zambia to achieve financial close.’
GET FiT Zambia announced six IPP project winners totalling 120MW back in April 2019 amid much fanfare. “The awarded consortia comprise Building Energy, who received the award for projects Bulemu East & Bulemu West of 20MWac each, Globeleq & SOLA Group received award for projects Aurora Sola One & Aurora Sola Two of 20MWac each and InnoVent & CEC received award for projects Garneton North & Garneton South Solar of 20MWac each.” Read more.
The solar PV tender set record low tariffs for medium size (20MW) utility projects at the time. Read more
On its website, GET FiT Zambia explains that ‘apart from diversifying Zambia’s power mix, it aims to strengthen the Zambian power market by encouraging private sector participation from a wider range of developers, construction firms and financial institutions.’
The GET FiT Programme is implemented by the German development bank KfW. Programme funding is provided by the German government (German tax payer).
So what went wrong?
Clearly the people employed by GET FiT Zambia (mainly German nationals), did not understand the local context of doing business in Zambia. They also appear not to have understood the utility scale solar PV project value chain and what boxes need to be ticked in order for a project to reach financial close. They also appear to have overlooked concerns over Zambia’s public debt at the time of going to tender and how it would impact on lenders. Read more
Independent Power Producer’ (IPP’s) appear to have been duped to carry out development works studies and submit shovel ready project bids (at their own considerable expense), without GET FiT Zambia securing debt security from the specified off-taker, in this case state owned energy utility, ZESCO.
The record tariffs set at the time by winning bidders may have subsequently become ‘unbankable’, due to ongoing implementation delays.
The model appears to be German circular. The only winners in the GET FiT Zambia solar tender are the German nationals employed in the programme. This also explains a lack of understanding of the local context and resultant failure. The people of Zambia have not gained anything and the IPP’s have lost a considerable amount of money and face with lenders.
In January 2021, I asked GET FiT Zambia if they would be compensating the winning bidders (IPP’s) for the time and resources that were committed to the tender. To date, I have not received a reply.
Author: Bryan Groenendaal