Govt dangles tax breaks for IPPs, power investors

Energy and Power Development permanent secretary Gloria Magombo

GOVERNMENT says it will give independent power producers (IPPs) tax incentives and guarantees to potential financiers of their projects, among a slew of measures to fix the energy crisis in the country.

This comes as Zimbabwe continues to suffer acute power shortages lasting up to 18 hours a day.

While there has been a general improvement in the power supply situation for industry, households are still experiencing rolling power cuts.

According to the Energy and Power Development ministry, more than 90 licences have been issued to IPPs for renewable energy projects, with only 20 being active.

In an interview with NewsDay Business this week, Energy and Power Development permanent secretary Gloria Magombo said government would be providing guarantees for projects to potential financiers.

“Government will work closely with IPPs through a continuous engagement process to increase access to foreign currency at the foreign currency auction system. The government has extended a package of support measures to IPPs that include expediting licensing of new projects, providing guarantees for projects to potential financiers to mitigate currency convertibility risks and tax incentives for capital goods for renewable energy projects,” she said.

“Government has engaged IPPs to support Zesa in supplying power to the nation. But it emerged that IPPs need government support on two fronts. They need to ramp up capacity in existing plants through access to foreign currency, and government must facilitate IPPs to set up new plants and expand existing ones.”

She said IPPs were experiencing operational challenges, chief among them being access to foreign currency for capacity expansion and payment of loans. 

The Energy and Power Development ministry is working on short- and long-term plans to build new capacity through various project structures including IPPs and public-private partnerships arrangements.

In February, Magombo revealed that authorities had made inroads in negotiations with the central bank to give priority to foreign currency allocation to IPPs.

The Reserve Bank of Zimbabwe’s auction system, launched in 2020, has failed to adequately service the foreign currency needs of firms seeking forex to import critical raw materials.

IPP investors blamed lack of progress on their projects on a poor power purchase agreement that put an emphasis on the free-falling Zimbabwe dollar.

This is despite IPP financiers and project suppliers requiring foreign currency.

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