Title of paper

3. Supply of power

The major factor that influenced the situation from 1990 was certainly the fact that now the infrastructure, which was originally planned to supply 5% of the population, should now supply everybody in the country or at least a majority; a goal which is still far away.

Paulinus Shilamba, CEO of NamPower showed in his presentation at the NCCI event on 6 July 2013 at NamPower Convention Centre the following slide:

This slide indicates that on that particular day, NamPower was importing 73% of its supply. Since the traditionally major supplier, Eskom of South Africa, had to concentrate on supplying their own needs first, NamPower had to negotiate supply contracts with other partners, such as Zesa, which expired at the end of 2013, and Aggreko Mozambique, which requires considerable transmission capacity and subsequently losses. Grid capacity is another factor that might either hamper security of supply in Namibia or require major investments because huge loads will have to be generated – in the current setup – somewhere in the region and transmitted over huge distances to the users. In general, all potential suppliers are in the same situation as Eskom: the national economies have grown and their own needs come first.

In fact, the country is now at a watershed situation, where a decision needs to be made how Namibia’s industry, public sector and private households, shall be supplied with electrical energy for the coming decades. The cost for such investment will in one way or another be borne by the Namibian consumer or taxpayer. In other words: it will have to be paid by one or the other player in the Namibian economy - either it will have to be refinanced via the price consumers pay for electricity or the money will have to come ‘from the shareholder’, which is the government of Namibia, and thus the taxpayer. Only roundabout one third of Namibians is using grid electricity right now and only about 15% of Namibians pay income tax.
Paulinus Shilamba estimated in the same presentation that a staggering amount of 28.7 billion Nam$ will have to be invested.
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This slide shows the capital requirements needed to keep the old system going. It also indicates, how the funds shall be raised. However, it needs to be pointed out that almost all income NamPower can generate will have to be taken out of the Namibian economy either in form of increased prices for electricity supply an in the form of tax money, since until now the Namibian Government is the only shareholder of NamPower. Even if a decision would be taken to go to the stock

This slide shows the capital requirements needed to keep the old system going. It also indicates how the funds shall be raised. However, it needs to be pointed out that almost all income NamPower can generate will have to be taken out of the Namibian economy either in form of increased prices for electricity supply or in the form of tax money, since until now the Namibian government is the only shareholder of NamPower. Even if a decision is taken to go to the stock exchange and raise capital from Namibians, or even international investors, the dividends issued will have to be paid by the inhabitants of the country.

4. The price of power

Von Oertzen predicts in his study ‘Namibia’s Energy Future’ on page 41:

Average wholesale price projection anticipated by NamPower, in N$/kWh

Source:

NamPower’s CEO Paulinus Shilamba expects even steeper rises in the wholesale price of electrical power:

The black line stands for the expected rise of wholesale prices.

Consumer prices will rise more significantly. This is a prediction how energy prices might rise in the following years:

Price increase for electricity calculation
Fill in your tariff (=price per kWh) here:					100.00
Price increase per Year in %
	2013	2014	2015	2016	2017
10%	100.00	110.00	121.00	133.10	146.41
15%	100.00	115.00	132.25	152.09	174.90
18.2%	100.00	118.20	139.71	165.14	195.20
20%	100.00	120.00	144.00	172.80	207.36
25%	100.00	125.00	156.25	195.31	244.14

This calculation is based on a linear increase of the indicated percentage over the years. In reality, the increases are different from year to year, because NamPower has to get permission from the Electricity Control Board (ECB) to increase its prices and after that, the Regional Electricity Distributors (REDs) and municipalities have also to show their calculations to ECB in order to get permission for price-hikes. However, the last two years the prices increased by 18.2% and 15% respectively. In the coming years prices will have to rise in double-digit figures to enable the centralised power supply system to survive.