NamPower heading for disaster: expert

AN electricity industry expert has painted a gloomy picture on the future of NamPower if political interference in the running of the power utility continues.

Imker Hoogenhout, who retired from NamPower in 2003 after 28 years of service, said both the company and the country’s electricity supply would be negatively affected in the long run if recent managerial and board decisions are anything to go by. “Recent developments at NamPower as well as the Ministry of Mines and Energy (MME) have prompted me to report on the matter.I am extremely concerned as I am convinced that things are going in the wrong direction,” Imker Hoogenhout said yesterday.Hoogenhout was Chief Technical Director at NamPower until his retirement a few years ago.”The more experienced and stronger persons are moved to positions where their influence is limited and their expertise is lost,” according to Hoogenhout.”It is my distinct impression that this is what has happened in NamPower with the recent changes to its management and these are disastrous.This does not bode well for NamPower, nor for Namibia.A management which says ‘yes boss’ or ‘yes ECB’ or ‘yes MME’ will lead to the type of decisions we are now experiencing.”Paulinus Shilamba took over as Managing Director last year from Dr Leake Hangala, whose contract was not renewed.More recently, Chief Technical Adviser Reiner Jagau was moved to a lower position.A few months before stepping down as head of state, former President Sam Nujoma appointed Leevi Hungamo, presidential economic adviser to State House, as board chairman of NamPower.Hungamo is deeply involved in a fuel-importing outfit, Namibia Liquid Fuels (NFL), which has not been without its own controversies.During the 1990s, and even up to the beginning of 2003, Hoogenhout wrote in his statement, there was good co-operation between the Ministry and NamPower.”The Ministry never entered NamPower’s engine room and meddled in (in those days)”.However the Ministry is now violating the Companies Act, Hoogenhout claimed.”Although the Namibian Government is the owner of NamPower, the one aspect where they transgress, but tolerated by NamPower, is the appointment of directors, including the Managing Director (MD).In line with the Companies Act, this is not the right or prerogative of the owner and/or Minister.”This has led to the appointment of directors with political agendas and without experience of electricity and/or business, in his view.EPUPA VS BAYNES “It is my specific perception that the MME is starting to take decisions that are beyond electricity policy and guidelines.To my knowledge there are no persons within the Ministry with operational experience concerning a power utility.Disastrous consequences are expected in the long term.Exactly the same goes for the Electricity Control Board.To my knowledge there is only one person with very limited experience in a specialised area, [that] of an operational electricity utility,” Hoogenhout added.In 1990, NamPower, strongly supported by the Ministry, initiated a study to develop a hydropower station on the Kunene River at Epupa or the Baynes Mountains.When the study was complete and Angola rejected the Epupa site and supported the Baynes site, the Ministry did not support Baynes despite presentations and motivations by NamPower.If constructed, Baynes would by now have ensured power supply for Namibia’s growing demands, Hoogenhout stated.In 1995 NamPower realised that a power shortage was looming in 1999 if timely action was not taken, given the then rate of growth.After convincing its board and the Ministry, NamPower immediately entered into negotiations with South Africa’s power utility Eskom for an inter-connector transmission line.The green light was given in late 1996 and construction started soon thereafter on a 400 kV interconnecting power line from South Africa.The first section was completed in May 1999, before the winter peak demand, and the looming power crisis was averted.Even so, NamPower then already realised that this 400 kV line would not suffice forever, and started negotiations with Eskom and Shell for the development of the Kudu gas power project.Although the 400 kV line was then almost completed, the Electricity Control Board (ECB) conducted its own study on the power line and concluded that NamPower had wasted its money and that the 400 kV line was not necessary.”I hardly need to mention that this line ‘saved’ the country and made the development of the Skorpion Zinc mine possible as well as the re-opening of Ongopolo.The general economic growth of Namibia would also not have been possible [had it not been for this line],” according to the former NamPower official.Hoogenhout further warned that an envisaged wind park of 102 wind turbines to be erected by a Dutch investor with a Namibian company, and the electricity from there to be sold to NamPower and fed into the national power grid, would result in very high electricity prices for consumers.Such a wind park would require access roads, collection power lines, a large collection substation and substation extensions.In addition, a power purchase agreement for and a guaranteed price would have to be concluded, he said.”NamPower is obligated to disclose the general financial effect on its business by paying for non-subsidised electricity from a very expensive source (the wind park) to its customers.I know of no such disclosure,” Hoogenhout argued.”In terms of NamPower’s financing agreements with the European Investment Bank, it must also inform the EIB fully of such developments and guarantees.””The power generation and transmission business is extremely capital intensive.If NamPower got involved in costly projects it could land in a precarious situation.If your electricity company is in trouble, goodbye economic growth and job creation,” Hoogenhout wrote.NamPower received N$500 million from Government this year.It also concluded a N$300 million dollar deal with Zimbabwe to refurbish a power station close to the Namibian border in return for electricity supply.Hoogenhout said back in 2001 he tried to have the ECB approve a fund for a future power station by introducing a very small levy on electricity sales.”It is now 2007 and such a fund, wisely invested, could now have been of significant proportions.”For many years NamPower’s applications to raise tariffs were not approved, Hoogenhout further criticised.”If these approvals had been granted, NamPower would have been in a position to fund the projects without having to receive an additional equity injection from Government,” he said.”Recent developments at NamPower as well as the Ministry of Mines and Energy (MME) have prompted me to report on the matter.I am extremely concerned as I am convinced that things are going in the wrong direction,” Imker Hoogenhout said yesterday.Hoogenhout was Chief Technical Director at NamPower until his retirement a few years ago.”The more experienced and stronger persons are moved to positions where their influence is limited and their expertise is lost,” according to Hoogenhout.”It is my distinct impression that this is what has happened in NamPower with the recent changes to its management and these are disastrous.This does not bode well for NamPower, nor for Namibia.A management which says ‘yes boss’ or ‘yes ECB’ or ‘yes MME’ will lead to the type of decisions we are now experiencing.” Paulinus Shilamba took over as Managing Director last year from Dr Leake Hangala, whose contract was not renewed.More recently, Chief Technical Adviser Reiner Jagau was moved to a lower position.A few months before stepping down as head of state, former President Sam Nujoma appointed Leevi Hungamo, presidential economic adviser to State House, as board chairman of NamPower.Hungamo is deeply involved in a fuel-importing outfit, Namibia Liquid Fuels (NFL), which has not been without its own controversies.During the 1990s, and even up to the beginning of 2003, Hoogenhout wrote in his statement, there was good co-operation between the Ministry and NamPower.”The Ministry never entered NamPower’s engine room and meddled in (in those days
)”.However the Ministry is now violating the Companies Act, Hoogenhout claimed.”Although the Namibian Government is the owner of NamPower, the one aspect where they transgress, but tolerated by NamPower, is the appointment of directors, including the Managing Director (MD).In line with the Companies Act, this is not the right or prerogative of the owner and/or Minister.”This has led to the appointment of directors with political agendas and without experience of electricity and/or business, in his view. EPUPA VS BAYNES “It is my specific perception that the MME is starting to take decisions that are beyond electricity policy and guidelines.To my knowledge there are no persons within the Ministry with operational experience concerning a power utility.Disastrous consequences are expected in the long term.Exactly the same goes for the Electricity Control Board.To my knowledge there is only one person with very limited experience in a specialised area, [that] of an operational electricity utility,” Hoogenhout added.In 1990, NamPower, strongly supported by the Ministry, initiated a study to develop a hydropower station on the Kunene River at Epupa or the Baynes Mountains.When the study was complete and Angola rejected the Epupa site and supported the Baynes site, the Ministry did not support Baynes despite presentations and motivations by NamPower.If constructed, Baynes would by now have ensured power supply for Namibia’s growing demands, Hoogenhout stated.In 1995 NamPower realised that a power shortage was looming in 1999 if timely action was not taken, given the then rate of growth.After convincing its board and the Ministry, NamPower immediately entered into negotiations with South Africa’s power utility Eskom for an inter-connector transmission line.The green light was given in late 1996 and construction started soon thereafter on a 400 kV interconnecting power line from South Africa.The first section was completed in May 1999, before the winter peak demand, and the looming power crisis was averted.Even so, NamPower then already realised that this 400 kV line would not suffice forever, and started negotiations with Eskom and Shell for the development of the Kudu gas power project.Although the 400 kV line was then almost completed, the Electricity Control Board (ECB) conducted its own study on the power line and concluded that NamPower had wasted its money and that the 400 kV line was not necessary.”I hardly need to mention that this line ‘saved’ the country and made the development of the Skorpion Zinc mine possible as well as the re-opening of Ongopolo.The general economic growth of Namibia would also not have been possible [had it not been for this line],” according to the former NamPower official.Hoogenhout further warned that an envisaged wind park of 102 wind turbines to be erected by a Dutch investor with a Namibian company, and the electricity from there to be sold to NamPower and fed into the national power grid, would result in very high electricity prices for consumers. Such a wind park would require access roads, collection power lines, a large collection substation and substation extensions.In addition, a power purchase agreement for and a guaranteed price would have to be concluded, he said.”NamPower is obligated to disclose the general financial effect on its business by paying for non-subsidised electricity from a very expensive source (the wind park) to its customers.I know of no such disclosure,” Hoogenhout argued.”In terms of NamPower’s financing agreements with the European Investment Bank, it must also inform the EIB fully of such developments and guarantees.””The power generation and transmission business is extremely capital intensive.If NamPower got involved in costly projects it could land in a precarious situation.If your electricity company is in trouble, goodbye economic growth and job creation,” Hoogenhout wrote.NamPower received N$500 million from Government this year.It also concluded a N$300 million dollar deal with Zimbabwe to refurbish a power station close to the Namibian border in return for electricity supply.Hoogenhout said back in 2001 he tried to have the ECB approve a fund for a future power station by introducing a very small levy on electricity sales.”It is now 2007 and such a fund, wisely invested, could now have been of significant proportions.”For many years NamPower’s applications to raise tariffs were not approved, Hoogenhout further criticised.”If these approvals had been granted, NamPower would have been in a position to fund the projects without having to receive an additional equity injection from Government,” he said.