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• Energy sector structure in Zimbabwe• Overview of renewable energy sector• On-going renewable energy projects• Investment opportunities in RE sector• Market entry licensing • Regulatory criteria for new investors• Next steps for investors

1. Overview of the Energy Sector

•The Zimbabwe Energy Regulatory Authority (ZERA) is a bodycorporate established in terms of the Energy Regulatory AuthorityAct [Chapter 13:23] of 2011.

•Mandated to regulate the entire energy sector in Zimbabwe in a fair,transparent, efficient and cost effective manner for the benefit of theconsumers and energy suppliers.

•Derives its mandate from the Energy Regulatory Authority Act[Chapter 13:23] of 2011 read together with the Electricity Act no 4 of2002 [Chapter 13:19], the Petroleum Act [Chapter 13:22] of 2006 andsubsequent amendments

• Government- development of energy policies

• ZERA- independent energy regulator (Technical audits,Compliance audit, tariff determination and PPA approval forIPPs, mmaintenance of register of licensees and monitoringprogress

• Public and Private sector- licensed entities in the powergeneration (ZPC, IPPs), transmission and distribution of energy(ZETDC, IDC (Triangle)) and petroleum importation, blending,wholesale and retail license

• Community projects (off-grid projects)-light handedregulation(below 100kW)

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Electrification is estimated to be >40% at over 792,095 customers (pop ~13mill).

Urban electrification >80%

Rural electrification <20%

Morden energy use in rural areas 5% - firewood remains most used energy

Target of 100% universal access to electrification is 2030.

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Power Station Dependable Capacity MW

Supply Average Capacity 22 August 2018 (MW)

Kariba Hydro 1050 394 -823

Hwange Thermal 750 657

Small Thermals 170 35

Total Internal Generation 1970 1,545 + 11 MW (IPPs)

Imports (ESKOM + HCB+ SAPP market)

Up to 345 +40MW (DAM)

NamPower 0-80

TOTAL 1710

System Maximum Demand 1,710 (22Aug 18)

Community off-grids (solar and mini hydros)

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•Petroleum sub-sector was deregulated in 2003 –procurement companies procure fuels from traders.

•Traders can bring fuel in-bond to Ferruka &Msasa.•Comprises of private and state owned companies•Pipeline available to all operators.•Prices of fuels are market driven but regulated through a pricing formula provided in SI 80, 20 and 100.

•Mandatory ethanol blending since 2013 to improve security of supply, reduce fuel import bill.

•Procurement of fuels – purchasing and supplyingfuel in bulk;

•Wholesale of fuels – purchase of bulk fuel andselling it to retail sub-sector;

•Retailing of fuels – purchasing of fuel andsupplying the fuel to final consumers;

•Production of fuels – construction, own, operateand maintain production facilities – currentlybiofuels producers (ethanol and biodiesel)

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2. OVERVIEW OF THE COUNTRY’S POTENTIAL

• Coal- 12 billion metric tons calorific value 20 to 32 MJ/kg

• Biomass, bagasse and bio-waste – forest residue, sugarcane waste (co-generation and energy banking/exporting excess)

• Hydro- potential to generate more than 5000MW along Zambezi River and mini-hydro sites and dams.

• Solar- irradiation averaging 20MJ per square metre and 3,000 hours of sunshine per year.

• Uranium- energy mineral in Zambezi basin• Coal bed methane (CBM) Approximately 40 terra cubic feet (1.132 terra

cubic meters) of CBM• Urban waste (Local authorities’ energy from landfills/sewer/dump sites)• Wind resource potential • Geothermal potential – not fully established

3. INVESTMENT OPPORTUNITIES INCLUDING BOT, PPP AND FUNDED PROJECTS IN SECTOR

The “Zimbabwe is Open for Business” drive

Unsatisfied local market – only 40% of the Zimbabwe population has access to electric power;

Wood fuel provides the bulk (61%) of the total energy supply;

Energy can easily be suppled into the regional markets (Zimbabwe at centre of SAPP);

Zimbabwe is a potential hub for fuel distribution in SADC;

Project PPP Structure Contract

Kariba Extension Brownfield EPC + Finance BTO

NOIC Pipeline JV 50/50 BOO

Storage Facilities Brownfield JPG BOO

Hwange Extension Brownfield JV (SPV) BOO

Batoka Greenfield PPP/IPP BOO, BOOT, Other

Transmission

Zizabona ITP, PPP or JV BTO

Distribution PPP BOT

LICENSEE #s AND TECHNOLOGY CAPACITY (MW)

a. 12 x Hydro 50.31

b. 22 x Solar PV 696.366

c. 5 x Coal Fired Thermal 3 250

d. 1 x Gas Fired 100

SUB TOTAL 4 96.676

• Estimated cost of projects is about USD10 billion• Partners can come in as EPC or funders/IPP

o $ 1,5 billion (rehabilitation - $300mil for small thermals), o $ 2,2 billion (new build ZPC(govt/PPP)), already committedo $1.5 billion in Tx infrastructureo >$9 billion - IPPs through private sector or PPPso Target new capacity 5 500MW by 2030

Licensee #s and technology Capacity (MW)

(a) Mini hydro projects X 8 31.475

(b) Solar PV x 3 2.5+1.5+0.4

(c) Biomass (wood waste) x 1 0.50

(d) Bagasse x 3 96.3

TOTAL 132.675

Existing Dam sites with Mini Hydro Potential

Proposed Dam sites with Mini Hydro Potential

Existing Large Hydro Site

Exiting Large Hydro Potential Site

Proposed Mini Hydro Runoff river schemes Potential

Area with Micro hydro potential (Runoff river schemes)

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• Located on the Zambezi River acrossthe boundary between Zambia andZimbabwe

• Potential to make Zambia andZimbabwe net exporters of poweracross the SADC region.

• Worth an estimated US$4 billionand expected to produce 2 400MW of power

• Involves the construction of a damwall and two power plants

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a. Legal and regulatory framework developed to support PPPs e.g. Energy Act, Electricity Act, Petroleum Act, and various Statutory Instruments including the Joint Venture Act.

b. Policies that support PPP in the Energy Sector e.g. Energy Policy, IPP Policy, Renewable Energy Policy; Biofuels Policy, and the establishment of an independent regulator (ZERA).

c. National Integrated Energy Resources Plan and IPP Policy being developed to promote competitive procurement framework in order to attract more private players by Dec 2018.

d. Regulator promoting cost reflective tariffs to ensure adequate revenue and credit enhancements of offtaker

e. Incentives put up by government for investors in the energy sector – tax holidays, national project status (duty exemption)- Finance act amended

f. Local, regional and international institutions welcome to provide long term finance for infrastructure projects – new interest by local banks , IDBZ, insurance

•Increased demand of liquid fuels• Growing vehicular population• Urbanisation and mechanisation of productive sectors• Construction of Beit-Bridge Chirundu highway as

North-South Corridor•Increased uptake of LPG as clean fuel•Biofuels production- ethanol(2) & biodiesel •Potential to be a regional hub for fuel distribution [refinery, pipeline, bulk storage]

•Coal or CBM – potential for gas to liquid fuel production

•Lithium – energy storage battery (electric vehicles)

OPPORTUNITIES IN THE FUEL SECTOR

4. MARKET ENTRY LICENSING AND REGULATORY CRITERIA FOR NEW INVESTORS

• Unsolicited Bids-still being accepted with development of Competitive Bidding Framework in progress

• Project developer obtains letter of no objection from Government and approvals from ZIA

• ZERA issues a licence on submission of :• Pre-feasibility• Grid Impact Assessment• EIA prospectus report• Evidence of water/land use/fuel source/rights• Background check of developer/EPC/Funding partner

/technical partner

Licence issued based on conditions:•EIA completion•Full bankable feasibility study•Approved Off taker/PPA by ZERA•Financial closure•Full project implementation to commissioning

•Monitoring of implementation by regulatory authority

5. NEXT STEP FOR INVESTORS

• Zimbabwe’s primary energy demand is projected to reach 5500MW by 2030 - in response to economic growth projection (3.4%) even higher as Zimbabwe works towards reaching middle income status by same period – agriculture and mining value chains

• Energy related laws and regulatory framework-• Energy Regulatory Authority Act; • Electricity Act and;• Petroleum Act and • related regulations

• Existing National Energy Policy and Other Policies under Development • Renewable Energy Policy (including REFIT and Auctions – competitive procurement),• Biofuels Policy • IPP policy

• Improved and coordinated energy sector planning ( NIERP) and regional integration through SAPP

CREATION OF AN ENABLING ENVIRONMENT

• Various regulations and programs are being finalized :• Net metering (done)• National Solar Water Heating Programme & regulations• National Integrated Energy Resource Plan• Customer Supplied Prepaid Meter (done)• Public Safety Regulations

• Wind Resource Assessment • Solar equipment duty free (done)• Inefficient Lighting Products Ban – opportunity for local

production of LED lighting products • Up to 30 year license• Cocktail of incentives approved- tax holidays, national

project status

CREATION OF AN ENABLING ENVIRONMENT

7. WHY INVEST IN ENERGY ZIMBABWE’S ENERGY SECTOR

Country level• Working towards a stable macroeconomic policies & strong legal framework

& enforcement mechanisms • Policy consistency driven by political commitment• Transparent, consistent and fair regulation which includes cost reflective

tariffs for projects – Zera’s vision to be a Leader in regulatory excellence by 2025

• Restructuring of electricity sector-Positive steps to achieve efficiency and cost reflective tariffs for utilities through the new public sector reform agenda

• Coherent power sector planning (NIERP& IPP policy & competitive procurement framework)

• Political will – Zimbabwe is open for business mantra has unlocked huge interest from international community , increased competition & reduced cost of money- has impact on project costs and long term- lower tariffs

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• Zimbabwe is strategically located at the centre of SADC and COMESA

• Power evacuation can be to various SADC and COMESA countries

• Access to markets beyond Zimbabwe• Unsatisfied local market- 40% access to

electricity • Vast opportunities – diverse renewable

and fossil energy yet to be fully utilised• Robust energy regulations• Growing economy• SAPP Pool Plan – prioritizes large hydro

projects on Zambezi – Batoka, Devils Gorge, Mphanda Nkuwa& Inga as key to lower energy costs

• Committed transmission investments projects

• Zimbabwe has the market and skilled personnel as well as vast and untapped energy resources

• Renewable energy and energy efficiency is the future – development of renewable energy policy (final draft available)

• Zimbabwe is targeting an energy mix that speaks to lower costs and low carbon economy through implementation of the right infrastructure and increased energy security

• Acceptance of radical ideas – increase in distributed energy through solar pv plus storage > over 20 000 solar home systems supplied in rural communities from 5W to pumping systems

• List of over 30 energy projects looking for various levels of investor participation- large hydro, solar (PV) farms and potential wind sites with direct link to regional markets

• Call to Australian companies to participate – through equity participation, FDIs, supply of RE technologies, new products development (innovation) ,as IPPs, JVs (pvt sector) , PPPs – BOT, BOOs, etc