P64658 SAPP AnnRep'06 24/07 - Southern African Power Pool Annual Report 2006.pdf · Southern...

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Southern African Power PoolA N N U A L R E P O R T 2 0 0 6

Contents

Vision and Objectives ........................................................................................................................................................................................................................... 2

Organogram and Members ............................................................................................................................................................................................................... 3

About SAPP ....................................................................................................................................................................................................................................................... 4

Highlights of SAPP Activities ........................................................................................................................................................................................................... 5

SAPP Executive Committee ................................................................................................................................................................................................................ 7

Executive Committee Chairman’s Report .............................................................................................................................................................................. 8

Management Sub-Committee Report ........................................................................................................................................................................................ 12

Operating Sub-Committee Report ................................................................................................................................................................................................ 14

Planning Sub-Committee Report 2005/6 ................................................................................................................................................................................ 18

Environmental Sub-Committee Report ................................................................................................................................................................................... 21

SAPP Co-ordination Centre Report ............................................................................................................................................................................................. 23

Statistics 2005/6 ............................................................................................................................................................................................................................................ 27

Report of the Independent Auditors ........................................................................................................................................................................................... 31

Statement of Accounting Policies ................................................................................................................................................................................................. 32

Income Statement ........................................................................................................................................................................................................................................ 33

Balance Sheet .................................................................................................................................................................................................................................................. 34

Cash Flow Statement ................................................................................................................................................................................................................................ 35

Notes to the Financial Statements ................................................................................................................................................................................................ 36

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Vision and Objectives

Vision

The Southern African Power Pool will:

• Facilitate the development of a competitive electricity market in the SADC region.

• Give the end user a choice of electricity supplier.

• Ensure that the southern African region is the region of choice for investment by energy intensive users.

• Ensure sustainable energy developments through sound economic, environmental and social practices.

Objectives

The Southern African Power Pool aims to:

• Provide a forum for the development of a world class, robust, safe, efficient, reliable and stable

interconnected electrical system in the southern African region.

• Co-ordinate and enforce common regional standards of Quality of Supply; measurement and monitoring

of systems performance.

• Harmonise relationships between member utilities.

• Facilitate the development of regional expertise through training programmes and research.

• Increase power accessibility in rural communities.

• Implement strategies in support of sustainable development priorities.

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Organogram and Members

SAPP Membership

Full Name of Utility Status Abbreviation Country

Botswana Power Corporation OP BPC Botswana

Electricidade de Mocambique OP EDM Mozambique

Electricity Supply Corporation of Malawi NP ESCOM Malawi

Empresa Nacional de Electricidade NP ENE Angola

ESKOM OP Eskom South Africa

Lesotho Electricity Corporation OP LEC Lesotho

NAMPOWER OP NamPower Namibia

Societe Nationale d’Electricite OP SNEL DRC

Swaziland Electricity Board OP SEB Swaziland

Tanzania Electricity Supply Company Ltd NP TANESCO Tanzania

ZESCO Limited OP ZESCO Zambia

Zimbabwe Electricity Supply Authority OP ZESA Zimbabwe

OP = Operating Member NP = Non-Operating Member

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• SAPP was created in August 1995 at the SADC

summit held in Kempton Park, South Africa, when

member governments of SADC (excluding

Mauritius) signed an Inter-Governmental

Memorandum of Understanding for the formation

of an electricity power pool in the region under

the name of the Southern African Power Pool.

• SAPP is governed by four agreements: the Inter-

Governmental Memorandum of Understanding

which enabled the establishment of SAPP; the

Inter-Utility Memorandum of Understanding,

which established SAPP’s basic management and

operating principles; the Agreement Between

Operating Members which established the specific

About SAPP

rules of operation and pricing; and the Operating

Guidelines, which provide standards and operating

guidelines.

• SAPP has twelve member countries represented

by their respective electric power utilities

organised through SADC.

• SAPP has three working committees: the Operating

Sub-Committee, the Planning Sub-Committee and

the Environmental Sub-Committee under a

Management Committee which in turn reports to

the Executive Committee.

• SAPP coordinate the planning and operation of

the electric power system among member utilities.

• SAPP provide a forum for regional solutions to

electric energy problems.

• SAPP has established and is operating the Short-

Term Energy Market.

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The year under review had seen considerable progress

in the following areas:

• Finding a solution to the diminishing generation

surplus capacity that the SADC region is currently

experiencing. The expansion of the SAPP priority

generation and transmission infrastructure

projects is associated with the proposed solution

together with the review of the SAPP Pool Plan of

2001.

• Continuation of SAPP restructuring and

documentation review following the restructuring

of the SADC Secretariat and within SAPP member

countries.

• Continuation of the development of a competitive

electricity market for the SADC region and also

the associated development of long-term

transmission pricing policy, implementation

procedures and ancillary services market, and

• Implementation of the SAPP telecommunications

project that is aimed at linking the three control

areas; Eskom (South Africa), ZESA (Zimbabwe)

and ZESCO (Zambia) via a VSAT link in the short-

term and fibre optic in the long-term.

• Launch of the Westcor Office in Botswana; and

Training and capacity building of SAPP Members

and exposure to new changes in technology and

practices.

1. Diminishing Generation Surplus Capacity

The Southern African Power Pool (SAPP) in

collaboration with the Regional Electricity

Regulators Association (RERA) hosted the

Regional Electricity Investment Conference

(REIC) in Windhoek, Namibia, from 19-21

September 2005. The meetings coincided with

the SAPP 10th anniversary celebrations. The aim

of the conference was to:

• Provide a platform for investors both from

the private and public sectors and to share

ideas and discuss the challenges facing the

SADC Electricity Supply Industry.

• Facilitate financing and investment in the

SADC short-term and long-term generation

and transmission projects.

• Identify the financial needs of each SADC

member state in both generation and

transmission infrastructure and encourage

the sharing of strategic financial and

investment information.

• Identify potential investors in the SADC

electricity sector and formulate a regional

approach to investment in the electricity

sector and discuss ways of removing red tape

to investment in the electricity sector in the

region.

The conference attracted more than 250 delegates

from 32 countries. A total of 36 papers were

presented at the conference covering a wide range

of areas. On the last day of the conference, 21

September 2005, the SAPP Executive Committee

held a consultative meeting with financiers,

investors and cooperating partners to map a way

forward and to consider recommendation and

outcome from the conference.

2. Restructuring of the Southern African Power Pool

At a meeting of the SADC Council of Ministers

Committee that took place in Gaborone,

Botswana, on 23 February 2006, the Ministers

responsible for energy in the SADC region

signed the Revised SAPP Inter-Governmental

Memorandum of Understanding. The signing

of the Revised SAPP Inter-Governmental

Memorandum of Understanding was facilitated

by the following: the restructuring of the SADC

Secretariat that lead to the changes in the

reporting structure for the SAPP; electricity

sector reforms in SADC Member Countries that

have led to the introduction of Electricity

Regulators in many SADC countries; and the

need to include other participants in the SAPP

other than the national power utilities such as

Independent Power Producers and the

expansion of the SAPP membership. The SAPP

is now working to revise the remaining base

documents: Inter-Utility MOU, Agreement

Between Operating Members and Operating

Guidelines. It is hoped that these would be

completed during 2006.

Highlights of SAPP Activities

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3. Competitive Market Development

The development of the SAPP competitive

electricity market accelerated during 2006

following a formal approval of the project by the

SAPP Executive Committee. On 21 November

2005 and at a special meeting of the SAPP

Executive Committee held in Johannesburg,

South Africa, the Executive Committee agreed

to the Management Committee’s proposal to

continue with the development and

implementation of the SAPP competitive

electricity market for the SADC region. The

Norwegian Government is funding the project.

In May 2005, the SAPP engaged Power Planning

Associates of the UK for consulting services for

the Development of long-term Transmission

Pricing Policy, Implementation Procedures and

Ancillary Services Market Development for the

Southern African Power Pool. Sida (Sweden) is

financing the project and a budget of SEK

9,800,000 (nine million eight hundred thousand

Swedish Kronor) has been made available over a

period of approximately two years from May

2005.

4. Implementation of the SAPP VSAT Project

In September of 2001, a World Bank sponsored

telecommunications study was completed. The

study recommended a VSAT solution in the

short-term and a fibre-network in the medium to

long-term. The implementation of the short-term

solution, VSAT network, started in August 2005.

The Contractor moved on site and installed the

dish at the ZESA control centre in Zimbabwe

including all the necessary communications

equipment and at the Coordination Centre.

Thereafter, the contractor moved to Lusaka,

Zambia, in November 2005 and installed the

equipment at ZESCO control centre. The

remaining work is the installation of similar

equipment in South Africa at the Eskom control

centre and the initialisation of the VSAT system.

5. Other Achievements

Training and capacity building of SAPP Members

and exposure to new changes in technology and

practices. A one-week training on the use of the

PSSE Software was conducted for SAPP members

between 24-28 April 2006. A total of 15 delegates

registered for the training that was sponsored by

the Norwegian Government.

WESTCOR (Pty) Ltd, formed under the auspices

of SAPP to develop the Western Power Corridor

was officially launched in Gaborone on 7

September 2005. The signing of the Shareholders

Agreement ceremony preceded the launch.

Dignitaries attended the ceremony from Namibia,

Angola, South Africa, Botswana, the Democratic

Republic of Congo (DRC), the SADC Secretariat

and Chief Executive Officers of the five

participating utilities, SNEL of Democratic

Republic of Congo, ENE of Angola, NamPower

of Namibia, Botswana Power Corporation of

Botswana and Eskom of South Africa. At a

WESTCOR (Pty) Ltd meeting held in Gaborone,

Botswana on 23 February 2006, the Steering

Committee of WESTCOR approved the

appointment of Mr Jean T Lokala, as the Chief

Operating Officer of WESTCOR with effect from

1 May 2006. Mr Jean T Lokala was working for

SNEL, the national power utility in the DRC.

Highlights of SAPP Activities

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Dr Sydney GataZESA

SAPP Executive Committee

April 2005 to March 2006

Mr John KaluziBPC

Mr Manuel CuambeEDM

Mr Kandi PondamboESCOM

Mr Edward NelumbaENE

Mr Thulani GcabasheEskom

Mr Cosmas GutuLEC

Dr Leake Hangala NamPower

Mr Vika di PanzuSNEL

Mr Pius GumbiSEB

Mr A J Van Der MerweManaging Director, TANESCO

Mr Rodnie P SisalaZESCO

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Opportunities for sustainable development in the

Southern African power sector”.

The Honourable Minister of Mines and Energy

of Namibia, Honourable Erkki Nghimtina, gave a

welcome speech. The Right Honourable Prime

Minister of Namibia, Hon. Nahas Angula, gave

the opening keynote address and officially

opened the conference.

The REIC conference attracted more than 250

delegates from 32 countries. A total of 36 papers

were presented at the conference covering the

following areas: investment climate in the power

sector in SADC; overview of the SAPP; overview

of the regional electricity regulatory developments;

selected power generation projects; financing of

power projects; the new partnership for African

development (NEPAD); coal, gas and hydro

technologies; renewable energy; information and

communications technology; and private sector

participation in the SADC power sector.

There were three panel discussions covering

topics such as how can SADC governments attract

investments into the power sector; are regulatory

policies encouraging and attracting investments

in the SADC region and how to access finance

for power projects in southern Africa.

Executive Committee Chairman’s Report

The Southern African Power Pool (SAPP) is faced with

the challenge of a diminishing generation surplus

capacity. In order to reverse the trend, the SAPP

hosted the second regional electricity investment

conference in Namibia as a way of attracting

investments into the SADC power sector. The first

investment conference was held in Zimbabwe in

September 2001. The second conference was a follow

up to the first one and was well attended.

The second challenge the SAPP is faced with is the

embracement of cost reflective tariffs and the

adoption of regulatory principles that would enhance

the tariffs. The tariffs in most southern African

countries are some of the lowest in the world and

have remained so for a while making it difficult to

sustain the operations of the grid.

1. Regional Electricity Investment Conference

(REIC)

The coming years are crucial to the reliability and

security of supply in the Southern African

Development Community (SADC) region in that

the SAPP had years before predicted that the

SADC region would run out of generation surplus

capacity around the year 2007 if no new

investments in generation and transmission

infrastructure were done.

As a way of attracting investments into the SADC

power sector, the SAPP in collaboration with the

Regional Electricity Regulators Association (RERA)

hosted the Regional Electricity Investment

Conference (REIC) in Windhoek, Namibia, from

19-21 September 2005.

The REIC conference focused on investment in

electricity sector in SADC region. The theme of

the conference was “Emerging Investment

Mr Manuel Cuambe

Executive Committee Chairperson

(Left to Right)

The Honourable Minister Hon. Erkki Nghimtina,

Minister of Mines and Energy of Namibia, and

Right Honourable, Hon. Nahas Angula,

Prime Minister of Namibia.

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Executive Committee Chairman’s Report (Continued)

Listing, which is expected to act as a project

investment guideline to Investors, the Public

and the Private Sector. The SAPP Priority

projects have been agreed as follows:

• Rehabilitation projects: These projects

are currently in progress and most of

them are under construction and would

be completed before the end of 2007.

Once completed, they would add about

3,200MW of power to the SAPP grid at

an estimated cost of US$1,4 billion.

• Short-term generation projects: The

short-term generation projects are

expected to be completed in 2010.

Feasibility studies and environmental

impact assessments on the projects have

been completed. Some of the projects

have secured funding and others have

not. Once completed, the short-term

generation projects will add about

4,200MW to the SAPP grid at an

estimated cost of US$3,8 billion.

• Transmission projects: These aim to

interconnect the three non-operating

members of the SAPP (Angola, Malawi

and Tanzania) to the SAPP grid. The

transmission projects also aim to relieve

congestion on the SAPP grid and to

evacuate power from the generating

stations to the load centres.

• Medium to long-term generation

projects: These are meant to supply

power to the SADC region in the

medium to long-term. Notable among

them is the Western Power Corridor

Project, Westcor, which is expected to

move 3,500-4,000MW of power from

Inga-3 in the DRC to southern Africa and

to pick up 6,500MW of generation at

Kwanza River in Angola.

(ii) Marketing of SAPP Priority Projects

The SAPP via the NEPAD initiative is

working with the Ministers responsible for

Various conference activities were sponsored by

the following companies: SAPP, Electricity Control

Board of Namibia, RERA, Shell, New Era, NamDeb,

NamCor, emCON, Alstom, Coal Investment

Corporation, Meepong Investments, NamPower,

BP, NBC, Bank of Windhoek, SAHA International,

Standard Bank, Republikein, Eskom, Citigroup, De

Deers and Telecom Namibia.

Amongst the financiers, investors and cooperating

partners that were represented at the conference

included the European Commission, World Bank,

Development Bank of Southern Africa, INFRACO,

Barclays Bank, African Development Bank,

Citigroup, Bank of Tokyo-Mitsubishi, European

Investment Bank, YTL Malaysia and GE of the

USA.

On the last day of the conference, 21 September

2005, the SAPP Executive Committee held a

consultative meeting with financiers, investors

and cooperating partners to map a way forward

and to consider the recommendations and

outcome from the conference.

Following the REIC conference, the SAPP being

a regional organisation responsible for the supply

of power to the SADC region had put in place the

following measures to avert an impending power

crisis:

(i) Implementation of Priority Projects

The SAPP has formulated a Priority Project

Dr Vicente Veloso (left) with some of the delegates who

attended the conference.

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energy in the SADC region to market the

priority projects and attract funding for

the short and long-term generation and

transmission projects. The REIC conference

was aimed at marketing the SAPP priority

projects and attract investors into the SADC

power sector.

(iii) Energy Regulation and Tariffs

The Ministers responsible for energy in the

SADC region pledged to address regulation

and implement cost reflective tariffs and

adopt regulatory principles that would

enhance those tariffs. Political support from

the SADC governments is essential for cost

reflective tariffs to be implemented.

2. Tenth Anniversary Celebrations

On 21 September 2005, the SAPP celebrated the

10th anniversary that coincided with the REIC

conference. Over 200 delegates attended the

celebrations. High profile dignitaries who

attended the conference included the Chief

Justice of Namibia, the Minister of Mines and

Energy of Namibia, the Ministers responsible for

energy of Angola, Swaziland and Zimbabwe.

Speakers at this function included the Permanent

Secretary in the Ministry of Mines and Energy of

Namibia, the SAPP Executive Committee

Chairperson, the SADC Deputy Executive

Secretary and the Minister of Mines and Energy

of Namibia.

3. Acknowledgements

I would like to acknowledge the contributions

made to SAPP by the following former members

of the SAPP Executive Committee:

• Dr Vicente Veloso, the former Chairman of

EDM and the also the former Chairperson of

the SAPP Executive Committee from April

2005 to October 2005. Dr Veloso is no longer

with EDM but is now working for the Ministry

of Foreign Affairs of Mozambique.

• Dr Leake Hangala, the former Managing

Director of NamPower and also the former

Chairperson of the SAPP Executive Committee

from April 2003 to April 2005. Dr Hangala is

no longer with NamPower but is now in the

Private Sector.

4. Tribute

I would like to pay tribute to the late Managing

Director of LEC, Mr Simon Mhaville, who passed

away on 20 December 2005. At the time of his death,

Mr Simon Mhaville was the Vice Chairperson of

the SAPP Executive Committee. He died of a heart

attack in Tanzania whilst on holiday and was buried

in Tanzania on 22 December 2005. May his soul

rest in peace.

5. New Executive Committee Members

The following members joined the SAPP Executive

Committee during the year under review.

Executive Committee Chairman’s Report

Dr Vicente Veloso

Dr Leake Hangala

NamPower

The late, Mr Simon L Mhaville,

former Managing Director of LEC

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Mr Adriaan Jacobus Van Der Merwe

Managing Director, TANESCO

• The Board of LEC appointed Mr Cosmas

Gutu, Managing Director of LEC, with effect

from 1 January 2006.

• The Board of Directors of TANESCO

appointed Mr Adriaan Jacobus Van Der

Merwe as Managing Director of TANESCO

with effect from 1 January 2006. Mr Adriaan

Jacobus Van Der Merwe is a graduate engineer

from University of Stellenbosch, and also

holds MCom degree from University of

Free State. He is a registeredMProfessional

Engineer with ESCA and has various awards

to his credit.MAdriaan has also participated

in many career and professional committees.

• The Board of EDM officially appointed Mr

Manuel Joao Cuambe as the new Chief

Executive Officer of EDM with effect from 8

November 2005. Mr Cuambe also became the

Chairperson of the SAPP Executive

Committee, taking over from Dr Vicente

Veloso who left EDM. Mr CuambeMjoined

EDM 17 years ago, having played an

outstanding role in the development of EDM’s

national grid. At SAPP level, Mr Cuambe

participated as active member of the SAPP

Planning Sub-Committee and Management

Committee from 1995 to 1999.

Executive Committee Chairman’s Report (Continued)

Mr Cosmas Gutu

Managing Director of LEC

Mr Manuel Cuambe

Chairperson, SAPP Executive Committee

Honourable Minister of Energy of Mozambique,

Hon Salvador Namburete, speaking during the

official opening ceremony of the

20th SAPP Executive Committee Meeting, 26 April 2006.

(Left to Right): Mr Cosmas Gutu, Managing Director of

LEC and Vice Chairperson of the Executive Committee;

Mr Manuel Cuambe, Chairman of EDM and Chairperson

of the Executive Committee; and Dr Lawrence Musaba,

Coordination Centre Manager.

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Management Sub-Committee Report

The SAPP is undergoing a restructuring process and

the Management Committee is the one responsible

for revising the SAPP documents and aligning them

to suit the new environment. During the period under

review, the Inter-Governmental MOU was completed

and circulated to all members for approval. The

Management Committee also started the reviewing

of the Inter-Utility MOU, Agreement Between

Operating Members and Operating Guidelines. The

Management Committee is also the link between

SAPP and other stakeholders.

1. SAPP Documentation Review

The meeting of the SADC Council of Ministers

took place in Gaborone, Botswana, on 23 February

2006. In the evening of the same day, the

Ministers responsible for energy in the SADC

region signed the Revised SAPP Inter-

Governmental Memorandum of Understanding.

The signing of the Revised SAPP Inter-

Governmental Memorandum of Understanding

was facilitated by the restructuring of the SADC

Secretariat that lead to the changes in the

reporting structure for the SAPP; electricity sector

reforms in SADC Member Countries that have

led to the introduction of Electricity Regulators

in many SADC countries; and the need to include

other participants in the SAPP other than the

national power utilities such as Independent

Power Producers, and the expansion of the SAPP

membership.

2. SAPP Priority Projects

On 22 September 2005, a special SAPP Executive

Committee meeting was held in Namibia to map

a way forward in the marketing and sourcing of

funds for the SAPP priority generation and

transmission projects. It was during the meeting

that the SAPP Executive Committee agreed to

develop prioritisation and selection criteria that

could be used to prioritise the projects in the

SAPP. The Executive Committee also agreed that

the final list of the SAPP priority projects could

be promoted by SAPP for funding.

The task of developing the criteria and using it to

select priority projects in the SAPP was given to

the Management Committee and the Management

Committee went ahead and developed the criteria

that was later approved by the Executive

Committee.

Mr Augusto De Sousa Fernando

Management Committee

Chairperson

(Left to Right): Retired Lt. General Mike Nyambuya,

Honourable Minister of Energy and Power Development of

Zimbabwe and Mrs Lindiwe Hendricks, Honourable

Minister of Energy and Minerals of South Africa, signing

the Revised Inter-Governmental MOU, at a ceremony in

Botswana on 23 February 2006.

(Left to Right): Minister of Mines and Energy of Namibia,

Hon. Erkki Nghimtina, and the Swaziland Minister of

Energy and Natural Resources Hon. Mfomfo Nkambule,

signing the Revised Inter-Governmental MOU.

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Management Sub-Committee Report (Continued)

3. Cooperation with other power pools

The 37th General Assembly of the Union of

Producers, Transporters, and Distributors of

Electric Power in Africa (UPDEA) took place in

Lusaka, Zambia, from 24-25 November 2005. The

Honourable Vice President of Zambia, Mr

Lupando Mwape, officially opened the assembly

and the exhibitions.

In the framework of NEPAD, UPDEA has set itself

the goal of being a development-oriented

institution to serve the African Power Sector. The

purpose of UPDEA extends to participation in the

development of the power sector in conjunction

with regional, continental and international

players. Its vision is to be the primary catalyst in

the realization of access to electricity of all the

peoples of Africa.

The five power pools operating in Africa signed a

cooperation framework under which the parties

agreed to cooperate and share information. The

purpose of signing the cooperation framework was

to record an understanding between the parties

on their working relationship and technical

cooperation. The cooperation framework does not

make any legally binding or otherwise enforceable

commitments on behalf of any of the parties. The

parties that signed the cooperation framework

included:

• Central African Power Pool, CAPP

• COMELEC of North Africa

• East African Power Pool, EAPP

• Southern African Power Pool, SAPP, and

• West African Power Pool, WAPP.

The parties agreed to co-operate in the following

areas:

• Harmonization of policies concerning sub-

regional power interconnections,

• Harmonization of master-plans and pro-

grammes between sub-regional power pools,

• Promotion of an integrated electricity plan

that can lead to electricity market in Africa

as a region,

• Exchange of experiences in regional co-

operation, codes of practice, electricity

pricing methodologies and wheeling charges,

and

• Exchanges of information and know-how.

4. Acknowledgements

I wish to acknowledge the support that I received

from Members of the SAPP Management

Committee during the year without whom

nothing would have been achieved.

May I take this opportunity and congratulate

Messrs Mr Lovemore Chilimanzi and Mr Mbuso

Gwafila, who were elected to the positions of

Chairpersons of the Operating and Planning Sub-

Committee’s respectively. Also congratulations to

Mr Vusimuzi Simelane, the newly elected Chair-

person of the Environmental Sub-Committee.

Special thanks also goes to the SAPP Coordination

Centre for the work the centre is doing in

coordinating the activities of the SAPP.

Mr Augusto de Sousa Fernando

Management Committee Chairperson

The Honourable Vice President of Zambia,

Mr Lupando Mwape (front row in a cream/white suit)

poses with UPDEA Executive Members.

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Operating Sub-Committee Report

Mr L Chilimanzi took over from Ms Erica Johnson as

Chairperson of the OSC from September 2005.

1. The Short-Term Energy Market (STEM)

STEM reached its 5th year of operation in April

2006. The demand has been rising every year

from 766-GWh in 2001 to 4,222-GWh in 2004.

The supply side for the first four years has been

around 2,500-GWh. The energy traded was on the

rise in the first two years and then declined

steadily in the last two years. It reached a high of

842-GWh of energy traded in 2002 and dropped

to 178-GWh in 2005. Figure-1 shows a detailed

comparison.

The total sales in monetary value have been

increasing every year. The highest sale was

recorded in 2004 when total sales amounted to

USD4,4 million. The year 2005 saw a decline in

sales due to reduced energy trade. This was

mainly due to few members participating in the

STEM. HCB of Mozambique and ZESCO of

Zambia did not participate in the STEM as the

two utilities embarked on major power generation

rehabilitation and maintenance works in their

respective countries.

The STEM has also seen prices firming up since

inception. The highest average price of 1,24 USc/

kWh was recorded in 2005. This is characteristic

of the increasing demand and declining supply

as highlighted above.

2. Bilateral Market

Energy trading via bilateral contracts picked up

from around 16-TWh in 2004 to 19-TWh in 2005.

In general, the region is experiencing an increase

in bilateral energy trading amongst SAPP

members. However, there was a reduction in in

2004 due to major power rehabilitation and

maintenance work in Mozambique and Zambia.

Mr Lovemore Chilimanzi

Operating Sub-Committee

Chairperson

Figure 2: Energy Trade versus monetary value Summary

from year beginning 2001 to 2005.

Figure 1: Energy Trade Summary

from year beginning 2001 to 2005.Figure 3: STEM Energy Prices (2001-2005).

15


Operating Sub-Committee Report (Continued)

3. SAPP Telecommunications Project

Minimum telecommunications requirements for

SAPP are embodied in the SAPP Operating

Guidelines of August 1996. In September of 2001,

a World Bank sponsored telecommunications

study was completed. The study recommended

a VSAT solution in the short-term and a fibre-

network in the medium to long-term. The

implementation of the three terminal short-term

VSAT solution started in August 2005. The

Contractor moved on site and installed the dish

at the ZESA control centre in Zimbabwe

including all the necessary communications

equipment at ZESA control centre and at the

Coordination Centre. Thereafter, the contractor

moved to Lusaka, Zambia, in November 2005 and

installed the equipment at ZESCO control centre.

The remaining work is the installation of similar

equipment at the Eskom control centre in South

Africa and the initialisation of the system. There

is a delay in the installation of the system in South

Africa due to licensing problems.

On 16 November 2005, Telecommunication

experts from Eskom (South Africa) and ZESA

(Zimbabwe) met at the Coordination Centre in

Zimbabwe to discuss VSAT integration with the

existing SAPP infrastructure and particularly

detail how the SCADA and trading information

will pass from the Energy Management System

(EMS) to the SAPP Server and vice versa to enable

operational personnel to receive useable

information. The experts also agreed that the

required information would be made available

in phases and that individual members would

cater for integration expenses such as software

level upgrades or Interface Hardware (Cards or

Modules) as required by the member utility

infrastructure.

4. Working Group Reports

4.1 Traders and Operators Forum

SAPP continued to support the Traders and

Operators forum. The second Traders and

Operators Forum meeting took place in

Gaborone, Botswana, from 28-29 November

2005. The Forum discussed many trading

issues which were referred to the OSC for

resolution.

The Forum also discussed operational issues

that included the monitoring of system

reserves, frequency control, time error

correction, coordination of information

under abnormal conditions and adherence

to the SAPP Operating Guidelines.

In addition, participants were trained on the

use of the Internet based trading system that

was implemented at the SAPP Coordination

Centre during the year.

Figure 4: Bilateral Trading (2002-2005).

Installed VSAT dish at the ZESA control centre

in Harare, Zimbabwe.

16


Operating Sub-Committee Report

4.2 Markets Development

The Norwegian Government is funding the

development of a competitive electricity

market for the SADC region.

Nord Pool ASA (NP) of Norway won the

tender for the supply, installation and

implementation of the SAPP Trading

Platform in February 2005 after a competitive

tender. The tender award was approved by

the SAPP Executive Committee in November

2005. Contract negotiations between SAPP

and NP then started. Final contract

negotiations took place in Harare from 18-

19 January 2006 culminating in the two

parties signing two agreements stated below.

• SAPP-NP Delivery Contract, 19 Jan 2006.

• SAPP-NP Support Contract, 19 Jan 2006.

Queries on specifications for the SAPP Day

Ahead market were agreed and finalized by

SAPP and Nord Pool at the OSC meeting in

Tanzania on 1 March 2006. Points discussed

were relating to the treatment of bilateral

contracts, block bids; value added tax, fees

and the level of security that will be required

by SAPP from participants. The two parties

confirmed that the trading platform will be

delivered in November 2006 and market

trials would be expected to start after

January 2007. The creation of a balancing

mechanism for handling imbalances

consistent with the proposed SAPP market

platform is now under consideration.

5. System Operations

5.1 SAPP Transfer Limits

The SAPP Study Group finalised the transfer

limit studies. The report was finalised and

the applicable transfer limits were distributed

to the Planning and Operating Sub

Committees for consideration.

5.2 Treatment of Losses

Part of the terms of reference for the

consultant appointed for the Sida funded

project on the development of transmission

pricing policy, implementation procedures

and ancillary services market, is to address

treatment of losses arising from trans-

national wheeling. The work is in progress

but in the meantime, the OSC has agreed

that members would continue to settle

losses in kind and financially.

5.3 Transmission Wheeling Path

The three Control Areas in the SAPP

(Eskom, ZESA and ZESCO) submit and

exchange their trading schedules in advance

before the day of trade. However, it has been

observed that in many cases, the declared

schedules are exceeded. This is a violation

of the SAPP Operating Guidelines (OG) as

the changes need to be agreed in advance.

In 2005, a lot of instances for exceeding

schedules were observed by the wheeling

members and the incidences were reported

to the SAPP Coordination Centre. The SAPP-

OG do not cover the issue of unscheduled

wheeling. The OSC has a challenge to come

up with guidelines when the declared

schedules are exceeded.

At an operational meeting held in Harare

on 15 August 2005, the importance of

adhering to the operational discipline

stipulated in the SAPP-OG was stressed.

Improvements are yet to be realised.

5.4 Inadvertent Energy Management

The three Control Areas have finalised their

inadvertent energy figures from 2004 up to

December 2005. The agreed figures have

been reconciled and were made available

to the SAPP Coordination Centre on 31

March 2006. Among the three control areas,

agreements have been reached for the

payback of the energy.

5.5 Emergency energy rates

The OSC mandated the SAPP Coordination

Centre to negotiate emergency energy rates

for all members with the three control areas

17


Operating Sub-Committee Report (Continued)

(Eskom, ZESA and ZESCO) and to thereafter

make a recommendation. The intention was

that the new rates would take effect from

15 June 2006.

5.6 Maintenance Schedules

SAPP Members submitted their maintenance

schedules to the SAPP Coordination Centre

for the coming year that starts on 1 April 2006

for reconciliation and publication.

5.7 System Disturbances

In the period under review, over 20 system

disturbances occurred on the SAPP network.

The 16 major disturbances are summarised

in the Table above. Most of the disturbances

that occurred in Botswana were attributed

to line faults on the Phokoje-Matimba line

within Botswana and resulted in a total

blackout on 3 November 2005. The

disturbances in Zambia were known and

were mostly due to the act of God. The

disturbances in the DRC could have been

prevented if regular checkups on the tower

lines and maintenance were done to avoid

further collapse of the towers.

Mr Lovemore Chilimanzi

Operating Sub-Committee Chairperson

Table 1: Table indicating the SAPP major System faults in 2005

No. Member Country Major Disturbances Main Cause of Disturbance

1 BPC, Botswana 2 Line faults on the Phokoje-Matimba line

in Botswana.

2 EDM, Mozambique 2 Transformer tap-changer fault and broken

junction of a line conductor.

3 Eskom, South Africa 4 Problem with transformer, fault on reactor and

fire under transmission line.

4 SNEL, DRC 3 Collapse of towers and broken conductors.

5 ZESCO, Zambia 5 Landslides due to heavy rains and thunderstorms.

Total 16

18


Planning Sub-Committee Report 2005/6

1. Introduction

The Planning Sub Committee is pivotal to the

provision of reliable information regarding the

power supply situation in the SADC region. It is

this proactive approach that issue of the

diminishing generation surplus capacity is

actively being addressed. Generation projects are

being tracked to assess their status and progress

to meet their target commissioning dates. In the

year under review various projects were

commissioned. Most countries experienced a

positive demand growth with Botswana,

Mozambique, Namibia and Malawi recording the

highest demand growth of 7,96%, 7,1% 6,51%

and 6,5% respectively. Negative growth was

recorded in South Africa and Zimbabwe with –

2,2% and – 0,1% respectively.

Mr. Mbuso Gwafila of BPC was nominated to be

the Planning Sub Committee Chairperson taking

over from Mrs Angela Dava of EdM. The Planning

Sub-Committee thanked Mrs Dava for her

excellent leadership for the past two years

2. Diminishing Generation Surplus Capacity

It is the objective of SAPP to have a robust

generation capacity plan with adequate reserve

margins to cater for forced outages and load

forecast error. The annual demand is increased

by 3 percent. Different projects were identified

in the following classes:

• Rehabilitation Projects

• Short term generation projects

• Long term generation projects

• Transmission interconnector projects aimed

at interconnecting the SAPP non-operating

members namely Angola, Malawi and

Tanzania.

• Transmission projects, which relieve

congestion within the major wheeling

countries that would increase trade.

Graph 1 below highlights the demand and supply

situation when the rehabilitation and short-term

projects are commissioned. It can be noted that

the capacity shortfall can be contained if all

planned projects are commissioned.

A 150 MW unit was returned to service in

December 2005 at Kariba North hydro power

station in Zambia. Construction work started at

the Tedzani I and II hydro power plant

rehabilitation programme. 40 MW would be

available to Malawi when the rehabilitation is

completed in June 2007.

It remains a challenge for SAPP to meet the ever-

increasing demand to ensure security of supply.

3. Transmission Pricing and Ancillary Services

Market Development

SAPP secured funding from Sida for the

development of a long-term transmission pricing

policy, implementation procedures and ancillary

services market development. In May 2005,

Power Planning Associates of the UK was

awarded the contract to carry out the study. The

methodology for determining transmission

pricing was agreed to be a nodal pricing approach.

Transmission loss factors across the SAPP

network were also determined.

On the ancillary services market development,

three broad categories of services were agreed

upon and are to be evaluated further as follows:

• Reactive Power and Voltage Control

• Frequency Control Services

• Instantaneous reserves

• 10 – minute reserves

• Regulating Reserves

• Black Start Capability

The high-level market design principles and

criteria have been developed. A methodology for

charging and remunerating services is to be

agreed upon. The costing components for each

service were developed. The ancillary services

market is expected to be operational in 2007.

Mr Mbuso Gwafila

of BPC (Botswana)

Planning Sub-Committee

Chairperson

19


Planning Sub-Committee Report 2005/6 (Continued)

4. SAPP Pool Plan Review

In December 2005, the World Bank informed

SAPP that the Bank had approved funding to

SAPP for the review of the SAPP Pool Plan

through an Africa Region Energy Sector

Management Assistance Program (ESMAP)

facility. Tenders were floated and six companies

were short-listed and the World Bank was still

reviewing the tenders by the time of writing this

report. The Pool Plan would be a regional

integrated generation and transmission plan

highlighting the benefits of optimizing the

generation resources. The studies would start in

July 2006.

5. Transmission Interconnector Projects

5.1 WESTCOR

The Project Office for the WESTCOR Project

was set up in Gaborone, Botswana. The

Chief Operating Officer was also appointed.

Feasibility studies for the transfer of 3500

MW from Inga in DRC to Botswana, Namibia

and South Africa using the HVDC technology

would be done. Options for connecting the

Cunene hydro power plants in Angola would

be investigated.

5.2 DRC – Zambia

SNEL, Copper Belt Energy Corporation and

ZESCO carried out detailed studies to

evaluate the maximum transfer limit on the

existing DRC – Zambia 220 kV line. It was

concluded that the line could carry a

maximum of 310 MW.

ZESCO of Zambia has finished the con-

struction of a 330 kV line from Luano to

Solwezi in Zambia where a large copper

mine was opened.

With the construction of a 330kV line the

transfer capability of the DRC-Zambia

interconnector would increase from the

present 260MW to over 800MW. The

transmission line that will run from Solwezi

in Zambia to Kolwezi in the DRC would be

approximately 200 km.

5.3 Mozambique – Malawi

HCB of Mozambique and ESCOM of Malawi

finalized the negotiations on the Power

Purchase Agreement.

This would lead to the construction of a 219

kilometer 220 kV transmission line from

Tete in Mozambique to Phombeya in

Malawi, construction and extension of

related substations in the two countries. The

estimated construction period is 24 months.

Bankable documents were prepared and

finalized.

5.4 Zambia – Tanzania – Kenya

• A grant of approximately USD 1,2

million was secured from World Bank,

ADB and DBSA for the feasibility

studies

• Scoping Studies on the Tanzania side

were completed for the EIA

• ZESCO completed studies on the

Zambian side. Negotiations with a

transactions advisor who is a

Consortium comprising of Technical,

financial and legal specialists are to be

undertaken.

• Discussions are underway with Kenyan

government who are interested in taking

part in the project.

5.5 Zambia – Namibia

60% of projects works were completed on

the Zambian side including substation

works at Victoria Falls. For the 3,5 km stretch

of the AC line on the Namibian side, the

Zambian Contractor was assigned to carry

out the works. The EIA was completed on

the Namibian side. The commissioning date

was shifted from May 2006 to June 2006.

The project would enable Namibia to have

an alternative route for power imports.

5.6 Luano – Solwezi - Lumwana 330 kV line

The second phase of the 65 km Luano-

Solwezi- Lumwana 330 kV line in Zambia

is aimed at supplying a new copper mine at

20


Lumwana. The Power Purchase Agreement

was already signed and the project would

be commissioned in December 2007. With

the Kolwezi - Solwezi 330 kV line complete

the transfer capacity would be increased

from the DRC to Zambia.

6. Technical Issues

SAPP Transfer Limit Studies

A special Study Group was set up to determine

the transfer limits in the SAPP interconnected

system. Transmission Congestion has been noted

on some points in the system especially the

transmission bottlenecks within the ZESA system

in Zimbabwe, which geographically lies on the

centre of SAPP. This bottleneck is hindering the

electricity trade between the northern and

southern countries. Special projects were

identified to relieve the congestion.

Counter trade in some hours is assisting to relieve

congestion.

Transmission Wheeling Charges

SAPP successfully implemented the full rate for

the wheeling charges on 1 January 2006. The rates

were being increased every six months starting 1

January 2003.

7. Coordination Meeting of Power Pools

SAPP has been active in different forums. A

Coordination meeting of Power Pools was held

in Addis Ababa, Ethiopia. It was attended by

representatives from Southern, Central, Western

and Eastern African Power Pools. The Union of

Electric and Distributors of Electricity (UPDEA)

arranged the meeting.

Mr Mbuso Gwafila

Planning Sub Committee Chairperson

Planning Sub-Committee Report 2005/6

21


1. Introduction.

The year 2005/6 witnessed a lot of achievements

in SAPP’s vision of ensuring sustainable energy

developments through sound economic,

environmental and social practices.

2. Evaluation of Environmental Impacts of SAPP

Projects.

2.1 WESTCOR

Activities for this project are proceeding

according to plan. A Chief Operations

Officer has been appointed. Environmental

studies are to be done with the aid of

satellite images (remote sensing techniques)

and the ESC will be involved at all stages.

2.2 DRC – Zambia Inter-connector

The survey works and the way leave

acquisition have been completed.

Compensation and relocations issues are

being worked out in both countries.

Environmental Management Plans for both

the line and sub-station have been

completed and will be part of the

implementation contracts

2.3 Zambia – Tanzania – Kenya Inter-

connector

Environmental Scoping has been done and

the report is ready for review by authorising

agencies. The Environmental Impact

Assessment is to commence as soon as the

Environmental Scoping report is approved.

2.4 Mozambique – Malawi Inter-connector

Compensation evaluation is currently in

progress in Malawi. Route pegging has been

completed. Environmental Impact

Assessment has not yet been done.

Environmental Sub-Committee Report

Mr Vusumuzi F Simelane

Environmental Sub-Committee

Chairperson

2.5 Zambia – Namibia Inter-connector

Environmental Impact Assessment as well

as Environmental Management plans have

been done for the project. Consultants are

yet to undertake an in-depth study on birds

at sensitive river crossings. Environmental

monitoring of the implementation of the

project is being done.

2.6 Lower Kafue – Gorge Power Station

– 750 MW

The EIA is yet to be submitted to the

authorising agency. A site selection study

has been completed and detailed design

works are to commence.

2.7 Open Cycle Gas Turbines at Atlantis and

Mossel Bay (SA) – 1000MW

Construction works at both sites com-

menced on 17 and 24 January 2006

respectively. Actions have been taken to

ensure compliance of conditions of approval.

2.8 Matimba Coal Fired Power Station (SA)

The scoping report for Matimba B EIA has

been issued to the authorities and the public

for review. It is anticipated that final EIA

will be submitted to authorities in May 2006

for the issuance of the Record of Decision.

2.9 Morupule Coal Fired Power Station

(Botswana) – 400MW

The scoping report for the project has been

approved and the Terms of Reference for the

EIA are being finalised.

22


3. Working Groups

3.1 Environmental Impact Assessment (EIA)

Guidelines for Hydropower Projects

A consultant (Nexant INC), was contracted

to develop EIA Guidelines for Hydropower

projects. The consultant has completed a

draft report, which is scheduled to be

presented to ESC members at a workshop

to be held in South Africa during the month

of June 2006.

3.2 Training

Two Training Sessions were held during the

period under review. Members received

training on Social Impact Assessment and

Triple Bottom Line Reporting and GRI

Guidelines for Sustainability Reporting at

Stellenbosch and Dar Es Salaam

respectively. These sessions are useful as

capacity building initiatives within ESC

members.

3.3 SAPP Position on Climate Change

The Management Committee approved the

ESC document on Climate Change and

agreed to have the document implemented

in SAPP as per ESC proposal.

3.4 Negative Impacts of Climate Change

The Research Project on Emission Factors

(EFs) in the power sector in Southern Africa

has achieved the following results to date:

• Fuel characteristics in four countries

(South Africa, Tanzania, Zambia and

Zimbabwe)

• Plant characteristics of the region

• EFs for each fuel quality considered

• Methodologies for treating flue gas

measurements for coal, diesel and coal

mining methane.

Outstanding Issues on the Research are:

• Developments of a publication for phase

1, 2 and 3 results for peer review and

depositing EFs into IPCC database

• Additional measurements are to be

undertaken in Botswana, Namibia and

Mozambique

3.5 Guidelines on Environmental Management.

The following Environmental Management

Guidelines were approved by the

Management Committee at the MANCO

Meeting Held in Tanzania, on 1st march,

2006. Utilities were urged to use the

guidelines.

i. Guidelines on Management of Oil Spills

ii. Guidelines on Management of Asbestos

iii. Guidelines on Animal Interactions

3.6 Environmental Management Policy

A Draft SAPP Environmental Management

Policy was prepared and circulated to all

utilities for comments and inputs. The

Policy is expected to be finalised during the

next SAPP ESC Meeting to be held in

Zambia in September 2006.

3.7 Pool Plan Review

The ESC made a presentation to the

Management Committee on the role of the

Strategic Impact Assessment to the Pool

Plan. The Management Committee

approved the inclusion of SEA into the

SAPP Pool Plan under Environmental

Scoping Study and at negotiation level with

the selected consultant.

4.0 ESC Coordination

A major milestone was the appointment of the

Environmental Officer at the Coordination Centre

in Harare. The major tasks for the EO is to provide

strategic and operational direction to SAPP on

environmental issues.

Mr Vusumuzi F Simelane

Environmental Sub-Committee Chairperson

Environmental Sub-Committee Report (Continued)

23


SAPP Co-ordination Centre Report

Dr Lawrence MusabaCo-ordination Centre Manager

Mr Alison ChikovaActing Chief Engineer

Mrs Joyce MutsauFinance & Admin Officer

Mr Johnson MaviyaEnvironmental Officer

Mr Elisha MutambudziSTEM Finance Officer

Ms Daisy MudangweSTEM Finance Officer

Miss Caroline GanyaniIT Specialist

Mr Simon JarichaMessenger

24


1. Introduction

The activities of the SAPP Coordination Centre

are funded by SAPP members through yearly

contributions to the Coordination Centre budget.

The activities of the Coordination Centre in the

past year included, but were not limited to STEM

operations and management, prioritisation of

SAPP projects, organising REIC, system studies,

competitive market development, ancillary

services development and many other activities.

The Coordination Centre successfully imple-

mented the full wheeling rate on 1 January 2006.

Over the past year the Coordination Centre

actively disseminated information on the

activities being undertaken to address the

diminishing generation surplus capacity in SAPP.

The Coordination Centre is focused to meet the

SAPP challenges into the future.

2. Human Resources

The SAPP Coordination Centre appointed Mr

Johnson Maviya to the position of SAPP

Environmental Officer with effect from 1 March

2006. Prior to his appointment, Mr Maviya

worked as a Lecturer at the University of Bindura,

Zimbabwe. He has a Masters degree in

Environmental Policy and Management from the

University of Zimbabwe.

3. Host Country Agreement

On 13 March 2006, the Government of Zimbabwe

and the Southern African Power Pool (SAPP)

signed a Host Country Agreement between the

Government of Zimbabwe and SAPP for the

hosting of the SAPP Coordination Centre in

Harare, Zimbabwe. Signing on behalf of the

Government of Zimbabwe was the Minister of

Energy and Power Development of Zimbabwe,

Retired Lt. General Mike Nyambuya, and on

behalf of SAPP was Dr Lawrence Musaba, the

SAPP Coordination Centre Manager.

Representatives from SADC countries such as

Angola, Botswana, Malawi, Mozambique and

Zambia graced the occasion. Other representatives

included officials from the Royal Norwegian

Embassy in Harare, ZESA Holdings, Zimbabwe

Electricity Regulatory Commission, Ministry of

Foreign Affairs and the Ministry of Energy and

Power Development of Zimbabwe.

The host country agreement would help the SAPP

Coordination Centre:

• To be fully recognized as a SADC Institution

in Zimbabwe,

• Achieve its stated aims, goals and objectives,

• Reduce its operating costs and tax burden on

member states, and

• Receive support and donations from

cooperating partners without difficulties.

4. Conferences and Workshops

4.1 IEEE PES Conference

The IEEE Power Engineering Society in

association with SAPP, the University of

KwaZulu-Natal (UKZN) and the South

African Institute of Electrical Engineers

(SAIEE) hosted the inaugural 2005

conference and exposition in Africa in

Durban, South Africa, from 11–15 July 2005.

The conference consisted of four targeted

panel sessions comprising invited papers

from both local and international experts.

The themes for the sessions were: energy

development without impacting on global

warming; extra long distance economical

bulk power transmission; security and

quality of supply in national and regional

electricity markets; and, experiences in

energy intensive industrial power

consumption at the world’s lowest cost. The

conference was covered by South African

Broadcasting Corporation (SABC) and was

SAPP Co-ordination Centre Report (Continued)

Mr Johnson Maviya

SAPP Environmental Officer

25


televised on news hour. Dr Musaba and Mr

Naidoo were both interviewed by SABC.

In the closing plenary, the President of IEEE

Power Engineering Society, Dr Teddy

Puttgen, expressed delight on conference

arrangements and technical discussions and

called for the establishment of an IEEE

Power Engineering Society to be chaired by

Mr Pat Naidoo of Eskom. He also requested

southern Africa to host a second conference

in 2007.

4.2 Cigré Conference

Cigré conference took place in Cape Town,

South Africa, from 24–27 October 2005.

Cigré, the International Council on Large

Electric Systems, was established in 1921

and is a non-profit organization. It consists

of specialist study committees with

membership of experienced engineers from

over 80 countries who provide practical

inputs to identified study and problem

areas. It is a forum for the exchange of

information on experiences and development

in the field of generation, transmission, and

distribution.

The aim of the Cigré Conference held in

South Africa was to provide a platform for

Cigré members and non-members alike to

address the challenges in the Southern

African region, and to network with world

experts in their chosen technical fields. The

SAPP Coordination Centre presented two

papers; one on the development of the

competitive electricity market, and the other

on the development of an ancillary services

market.

4.3 Coordination Meeting of Power Pools in

Africa

A coordination meeting of the power pools

in Africa was held at the African Union

Headquarters in Addis Ababa on 22–24

March 2006 where presentations were made

on the activities of the power pools. Mr

Alison Chikova represented SAPP.

Representatives attended the coordination

workshop from the Central African Power

Pool (CAPP), East African Power Pool (EAPP),

Dr L Musaba represented SAPP at the Cigré Conference.

Mr Alison Chikova

Acting Chief Engineer

(Left to Right): Dr Lawrence Musaba, SAPP Coordination

Centre manager; Dr Teddy Puttgen, President of the

Power Engineering Society of IEEE and Mr Pat Naidoo,

Senior General Manager of Eskom.


26


Southern African Power Pool (SAPP), West

African Power Pool (WAPP), and the Nile

Basin Initiative. An inauguration meeting of

Ministers responsible for Energy in Africa

followed the workshop.

4.4 Annual Meeting between SAPP, Sida and

the Norwegian Embassy

The Annual General Meeting between SAPP,

Sida and the Norwegian Embassy took place

at the SAPP Coordination Centre in Harare

on 21 April 2006. A detailed presentation

on the power supply situation in SAPP was

done highlighting the initiatives being

undertaken by the SAPP to address the

anticipated 2007 energy shortfall. All the

parties expressed satisfaction at the way the

competitive market development project

and the transmission pricing and ancillary

services market development projects were

progressing.

5. Technical Issues

5.1 Transfer Limits across SAPP

The transfer limits across the SAPP inter-

connectors were updated after a special task

force carried out a detailed analysis of the

steady state and dynamic conditions of the

SAPP interconnected system.

Recommendations were put in place to

alleviate transmission congestion and

improve the transfer limits.

Incremental transmission losses recon-

ciliation due to wheeling transactions was

timeously done during the year under

review including inadvertent energy

reconciliation between the control areas.

5.2 Quality of Supply Data Base

The Quality of Supply Working Group

agreed on a piggy back on Day Ahead Market

(DAM) System. The proposed new scope of

implementation includes the following:

• Installation of a quality of supply data

base service as part of the DAM client

side database system,

• Configure SAPP QOS to load, store and

display the cross-border interconnections,

and

• Design, build and test an integration

adaptor between Eskom QOS data (for

cross border inter-connectors), and the

SAPP QOS database.

Dr Lawrence Musaba

SAPP Coordination Centre Manager


Dr L Musaba represented SAPP at the

26th SAPP Meeting in Dar Es Salaam, Tanzania.

27


Statistics 2005/6

Graph 1: SAPP Demand Supply Situation.

Table 1: Key Statistics 2004/5

Generation Number ofUTILTY (Peak Demand) Sent Out Customers Energy Sales

MW/Employee GWh/Employee per Employee GWh/Employee

ENE 0.934 0.623 34 0.62

BPC 2.076 0.467 73 1.43

SNEL 1.615 1.101 57 0.81

LEC 2.050 1.016 105 1.01

ESCOM 1.007 0.490 56 0.49

EDM 0.960 0.050 114 0.05

NamPower 5.511 1.863 4 3.77

ESKOM 11.267 7.475 127 7.33

SEB 2.579 0.155 73 1.53

TANESCO 1.093 0.756 113 0.77

ZESCO 3.487 2.329 78 2.31

ZESA 3.485 1.584 94 1.99

28


Statistics 2005/6 (Continued)

Graph 3: Performance Analysis 2005/6

Graph 2: Number of Customers per Employee 2005/6

Number of

UTILTY Customers

per Employee

ENE 34

BPC 73

SNEL 57

LEC 105

ESCOM 56

EDM 114

NamPower 4

ESKOM 127

SEB 73

TANESCO 113

ZESCO 78

ZESA 94

29


Graph 4: Peak Demand Growth 2005/6


Table 2: Utility General Information


Trans-

Country Utility Installed Maximum MD Sales Sales Number of Number of Generation Net Net mission Revenue Debtor Rate of Net

Capacity Demand Growth Growth Customers Employees Sent Out Imports Exports System US$ Days Return Income

losses Million USD

MW MW % GWh % GWh GWh GWh % % Million

Angola ENE 745 397 9 1,843 12,7 143,937 4,250 2,649 0 0 25 87,94 82 n/a -18,58

Botswana BPC 132 434 7,96 2583,7 7,5 152,744 2,091 977 2,006.50 0 10,96 121,8 37,79 -2,35 22

DRC SNEL 2,442 1012 2,53 4,656 13 360,329 6,268 6,904 0 1,800.00 6,3 149,2 n/a n/a n/a

Lesotho LEC 72 90 0 354 12 46,173 439 446 8 11 20 25,6 57 -0,9 -0,96

Malawi ESCOM 285 242 6,5 970 4 135,000 2,400 1,177 0 0 19 5,319 110 1 2,218

Mozambique EDM 233 285 7,1 1,308 11,8 338,597 2,969 147,418 1,501 1,496 5 110,9 64 n/a n/a

Namibia NamPower 393 491 6,51 2,976 6,5 3,403 891 1,660 1,703.0 0 8 169 34 0,97 10,4

South Africa ESKOM 42,011 33,461 -2,2 207,921 0,8 3,758,569 29,697 221,985 8,730 13,107 8,9 5,388 22 8,4 592

Swaziland SEB 51 172 1 852,8 2,5 48,500 667 103,5 916,8 0 16 59,7 85 4,5 5,1

Tanzania TANESCO 839 531 4,3 2,549 10,3 550,863 4857 3674 43 0 24 188 92 n/a n/a

Zambia ZESCO 1,732 1,330 2,8 8,457 3,1 297,000 3,814 8,884 0 69 3,6 217,6 207 n/a n/a

Zimbabwe ZESA 1,975 2,066 -0,1 10,480 3,5 559,766 5,928 9,391 2,666 255,5 12,6 29,463 33 -23 -372

30


Table 3: Annual Maximum Demand – MW


Table 4: Annual Generation Sent Out – GWh



HISTORIC FORECAST

YEAR 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Angola 209 326 250 291 330 342 374 397 846 871 898 924 952 981 1010

Botswana 239 256 285 337 362 393 402 434 452 479 507 534 562 591 609

DRC 830 841 895 929 991 994 1012 1012 1,070 1,100 1,138 1,172 1,207 1,244 1281

Lesotho 69 77 85 88 89 90 90 90 115 125 130 136 142 148 152

Malawi 190 185 205 212 236 261 227 242 311 330 350 371 394 414 426

Mozambique 245 214 231 234 250 258 266 285 305 326 349 374 400 428 441

Namibia 292 314 320 335 362 371 393 491 670 681 692 703 713 724 746

South Africa 27,803 27,813 29,188 30,599 31,621 30,154 34,195 33,461 35,100 36,200 37,032 38,144 39,288 40,467 41681

Swaziland 145 153 154 159 160 172 171,5 172 185 191 196 202 208 215 221

Tanzania 368 394 426 465 474 506 509 531 654 700 747 786 873 910 937

Zambia 1,126 1,069 1,085 1,087 1,118 1,255 1,294 1,330 1,374 1,399 1,426 1,499 1,529 1,560 1606

Zimbabwe 1,950 2,034 1,986 2,013 2,028 2,007 2,069 2,066 2,208 2,287 2,363 2,446 2,527 2,610 2688

Total

Interconnected 32,699 32,771 34,229 35,781 36,981 35,694 39,893 39,341 41,479 42,788 43,832 45,209 46,576 47,986 49,426

Total SAPP 33,466 33,676 35,110 36,749 38,021 36,803 41,003 40,511 43,290 44,689 45,827 47,290 48,795 50,291 51,800

HISTORIC FORECAST

YEAR 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Angola 1,319 1,516 1,104 1,840 1,866 1,993 2,344 2,649 2,870 3,090 3,320 3,665 3,820 3,935 3,935

Botswana 1,543 1,645 1,880 2,043 2,150 2,282 2699,8 977 2,717 2,880 3,054 3,237 3,431 3,637 3,637

DRC N/A N/A N/A N/A 5,907 6,084 6,904 6,904 6,648 6,848 7,053 7,264 7,482 7,707 7,707

Lesotho 271 267 427 393 378 429 428 446 490 512 528 554 576 600 600

Malawi 1,023 1,087 902 1,091 1,134 1,177 1,177 1,177 1,327 1,380 1,435 1,492 1,552 1,614 1,614

Moxambique 1,076 1,186 1,212 1,257 1,307 1,392 102,2 147,418 158 169 181 193 207 221 237

Nambia 1,881 1,676 1,978 2,016 2136 1,421 1,379 1,660 4,400 4,456 4,512 4,567 4,623 4,679 4,679

South Africa 185,583 188,475 194,601 198,790 207,233 210,112 210,218 221,985 234,555 240,377 251,834 256,013 261,458 267,955 267,955

Swaziland 718 760 820 847 765 991 1005 1000,9 979 1,008 1,039 1,070 1,102 1,135 1,135

Tanzania 2,096 2,240 2,394 2,654 2,708 3,052 3674 3674 3,556 3,782 4,025 4,238 4,820 5,021 5,021

Zambia 7,868 7,656 7,798 8,152 8,308 8,466 8,512 8,884 8,974 9,209 9,373 9,542 9,728 10,224 10,224

Zimbabwe 11,529 12,811 12,090 11,972 8,587 8,799 9,719 9,391 12,937 13,349 13,800 14,295 14,777 15,271 15,779

Total

Interconnected 210,469 214,476 220,806 225,470 236,771 239,976 239,210 251,395 271,857 278,808 291,373 296,735 303,384 311,429 311,953

Total SAPP 214,907 219,319 225,206 231,055 242,479 246,198 246,405 258,895 279,610 287,060 300,153 306,130 313,576 321,999 322,523

31


Report of the Independent Auditors

TO THE MEMBERS OF SOUTHERN AFRICAN POWER POOL

We have audited the annual financial statements set out on pages 32 to 40 for the year ended 31 March 2006.

Respective responsibilities of the executive committee and auditors

The financial statements are the responsibility of the executive committee of the organisation. Our responsibility

is to express an opinion on these financial statements based on our audit.

Scope

We conducted our audit in accordance with approved International Standards on Auditing. Those standards

require that we plan and perform the audit to obtain reasonable assurance that the financial statements are

free of material misstatement. An audit includes:

• examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,

• assessing the accounting principles used and significant estimates made by management, and

• evaluating the overall financial statement presentation.

We believe that out audit provides a reasonable basis for our opinion.

Audit opinion

In our opinion, the financial statements, in all material respects, give a true and fair view, of the financial

position of the organisation at 31 March 2006 and of the results of its operations and cash flows for the year

then ended in conformity with International Financial Reporting Standards.

Ernst & Young

Chartered Accountants (Zimbabwe)

HARARE

10 May 2006

32


Statement of Accounting Policies

The following principal accounting policies have been consistently applied throughout the period:

ACCOUNTING CONVENTION

The financial statements are prepared under the historical cost convention. No procedures are adopted to

reflect the impact on the financial statements of specific price changes or changes in the general level of

prices.

CURRENCY

The financial statements are expressed in United States dollars. Assets and liabilities are translated to the

relevant currencies at the exchange rate ruling on the balance sheet date, income and expenditure items are

translated at the ruling average monthly rates for the period to which they relate. Realised exchange differences

are taken to the income statement in the year in which they arise. Surpluses and deficits on translation are

dealt with in the income statement in the determination of net income.

DEPRECIATION

Fixed assets are depreciated over their expected useful lives on a straight line basis as follows:-

Computer equipment – 3 years

Office equipment – 5 years

Office furniture and fittings – 10 years

The carrying amounts of fixed assets are reviewed at each balance sheet date to assess whether they are

recorded in excess of their receivable amounts and where carrying values exceed this estimated recoverable

amount, assets are written down to their recoverable amount.

SPECIAL FUND

Funds granted for specific purposes are not included in the income and expenditure account, but are accounted

for separately as Special Fund on the balance sheet. They are maintained in a separate bank account and any

interest earned on the unused funds is credited to the Special Fund.

PROVISIONS

Provisions are recognised when the Organisation has a present obligation (legal or constructive) as a result of

a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle

the obligation and a reliable estimate can be made of the amounts of the obligation.

RETIREMENT BENEFIT COSTS

Retirement benefits are provided for the organisation employees through the National Social Security Authority

(NSSA) scheme.

Employer’s contributions to the NSSA scheme are charged to the income statement when due.

REVENUE RECOGNITION

Funds Income

Income received is based on a set budget agreed upon by all members of the organisation and contributions

made by members are based on set percentages and proportions based on electricity usage. The income is

brought to account per issued invoice to each of the member countries.

Interest

Revenue is recognised as the interest accrues.

STATEMENT OF COMPLIANCE

The financial statements of Southern African Power Pool have been prepared in accordance with International

Financial Reporting Standards (IFRS’s).

33


Notes 2006 2005

US$ US$

INCOME

OPERATING INCOME

Operating members 121 085 69 000

Imported energy 45 407 69 000

Exported energy 45 533 –

Peak demand 30 145 46 000

Thermal rating 30 271 23 000

Host member 30 271 23 000

Short Term Energy Market 31 810 51 482

Non-member participation fees 29 940 30 000

364 462 311 482

OTHER INCOME/EXPENSES

Anniversary celebrations 50 000 –

Special fund – Telecoms Project 15 000 392 409

Sundry income 11 725 6 980

Foreign exchange loss (19 069) (2 013)

Foreign exchange difference on fixed assets 115 –

Interest received 31 436 9 856

Profit on disposal of fixed assets – 237

453 669 718 951

EXPENDITURE

Administration expenses 2 442 549 737 453

(DEFICIT)/SURPLUS FOR THE YEAR

TRANSFERRED TO ACCUMULATED FUND 3 11 120 (18 502)

Income Statement

For the Year Ended 31 March 2006

34


Notes 2006 2005

US$ US$

FUNDS AND LIABILITIES

FUNDS

Accumulated funds 3 217 691 231 571

Special funds 4

– Norwegian Government Grant – Botswana 4.1 699 445 72 805

– Norwegian Government Grant – Norway 4.2 1 651 155 –

– Sida Grant 4.3 416 143 –

General reserve 100 000 75 000

CURRENT LIABILITIES

Accounts payable 5 68 518 139 470

TOTAL LIABILITIES 3 152 952 518 846

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 6 20 709 29 213

CURRENT ASSETS

Accounts receivable 7 33 923 148 225

Cash at bank and on hand

– Co-ordination centre funds 331 577 268 603

– Special fund

– Norwegian Government Grant – Botswana 699 445 72 805

– Norwegian Government Grant – Norway 1 651 155 –

– Sida Grant 416 143 –

TOTAL ASSETS 3 152 952 518 846

L Chilimanzi

Co-ordination Centre Board Chairperson

L Musaba

Co-ordination Centre Manager

10 May 2006

Balance Sheet

As at 31 March 2006

35


Notes 2006 2005

US$ US$

NET CASH INFLOW FROM OPERATING ACTIVITIES 1 34 104 11 329

RETURNS ON INVESTMENTS

Interest received 31 436 9 856

Interest paid – (319)

INVESTING ACTIVITIES

Capital expenditure (3 029) (4 751)

Disposal of fixed assets 461 237

FINANCING ACTIVITIES

Grants received 3 637 501 –

Grants utilised/remitted (943 561) (470 911)

INCREASE/(DECREASE) IN CASH RESOURCES 2 2 756 912 (454 559)

NOTES TO THE CASH FLOW STATEMENT

1. NET CASH INFLOW/(OUTFLOW) FROM

OPERATING ACTIVITIES

This is arrived at as follows:

Surplus/(deficit) for the year 11 120 (18 502)

Depreciation 11 187 15 758

Interest receivable (31 437) (9 856)

Interest payable – 319

(Increase) in accounts receivable 114 302 (95 261)

Increase in provisions 9 434 41 362

(Decrease)/increase in accounts payable (80 387) 77 746

Profit on sale of fixed assets (115) (237)

34 104 11 329

2. (DECREASE)/INCREASE IN CASH RESOURCES

The (decrease)/increase in cash resources is

represented by a movement in balances, as follows:

At 1 April 2005 341 408 795 967

At 31 March 2006 3 098 320 341 408

2 756 912 (454 559)

Cash Flow Statement


36


1. ACTIVITIES

The main object of the organisation is to co-ordinate the planning and development of electricity inter-

connections between members’ respective networks and to expand the Interconnected Power System and

electricity trading in the region.

2006 2005

US$ US$

2. ADMINISTRATION

Cleaning 895 828

Audit fee

– current year annual audit 8 750 8 788

– prior year charge (421) 2 430

– STEM review 6 250 2 944

Advertising and promotions – 438

Bank charges 14 688 14 693

Computer expenses 1 974 3 086

Courier and postage 4 718 6 602

Depreciation 11 187 15 758

Entertainment 70 379

General expenses 659 –

Insurance 1 669 2 477

Interest paid – 319

Legal fees 265 –

Leave pay expenses 6 392 –

Leasing and hiring costs 274 –

Magazines and books 168 50

SAPP Anniversary Celebrations and other costs 51 086 –

Printing and stationery 1 182 2 211

Recruitment and relocation 1 501 656

Rent paid 17 394 12 500

Repairs and maintenance 443 1 198

Salaries and wages 222 660 194 862

Staff expenses 335 292

Staff training 1 648 1 737

Subscriptions 1 678 405

Sundry expenses 2 300 2 387

Telephone and fax 3 679 7 519

Internet 4 565 6 092

Travel and accommodation 46 620 45 223

Withholding tax on interest – 5

Reports and periodicals 16 670 7 446

Telecommunications – VSAT Project – 396 128

Telecommunications – Training 13 250

TOTAL ADMINISTRATION EXPENSES 442 549 737 453

3. ACCUMULATED FUND

At 1 April 2005 231 571 275 073

Surplus/(deficit) for the year 11 120 (18 502)

Transfer to General Reserve (25 000) (25 000)

At 31 March 2006 217 691 231 571

Notes to the Financial Statements


37


2006 2005

US$ US$4. SPECIAL FUNDS

4.1 NORWEGIAN GOVERNMENT GRANT – BOTSWANA

Balance as at 1 April 2005 72 805

Advance 934 652

Payments: (314 943)

Nordpool Consulting 04.05.05 (35 302)Nordpool Consulting 17.05.05 (35 303)Nordpool Consulting 29.06.05 (35 303)Norwegian Water Resources 30.06.05 (16 594)Nordpool Consulting 27.07.05 (29 492)Nordpool Consulting 04.08.05 (35 303)Nordpool Consulting 01.09.05 (25 000)Nordpool Consulting 04.10.05 (25 000)Nordpool Consulting 11.10.05 (12 500)Norwegian Water Resources 14.11.05 (11 128)Norwegian Water Resources 18.11.05 (1 196)Nordpool Consulting 11.01.06 (12 500)Nordpool Consulting 24.01.06 (12 500)Nordpool Consulting 13.02.06 (12 500)Norwegian Water Resources 20.02.06 (2 822)Nordpool Consulting 15.03.06 (12 500)

Bank charges (569)Interest received 7 500

Balance as at 31 March 2006 699 445

Balance as at 1 April 2004 543 716

Additional advance 04.10.04 297 937

Payments: (769 612)

Nordpool Consulting 21.04.04 (75 465)Nordpool Consulting 28.05.04 (63 848)Nordpool Consulting 08.06.04 (65 500)Nordpool Consulting 07.07.04 (64 187)Nordpool Consulting 06.08.04 (62 200)Nordpool Consulting 09.09.04 (61 307)Shaw Technologies Incorporation(Planning Software) 29.10.04 (69 250)Nordpool Consulting 04.10.04 (61 307)Nordpool Consulting 22.11.04 (63 228)Nordpool Consulting 20.12.04 (52 007)Nordpool Consulting 04.01.05 (35 303)Nordpool Consulting 07.02.05 (35 303)Nordpool Consulting 02.03.05 (35 303)Nordpool Consulting 24.03.05 (17 069)Norwegian Water Resources 17.11.04 (8 337)

Bank charges (477)Interest received 1 241

Balance as at 31 March 2005 72 805

Notes to the Financial Statements (Continued)


38


2006 2006

NOK US$4 SPECIAL FUNDS (continued)

4.2 NORWEGIAN GOVERNMENT GRANT – NORWAY

Balance as at 1 April 2005

Advance 08.12.05 12 000 000 1 791 903

Payments: (1 099 335) (162 469)

Nordpool ASA 14.03.06 (1 098 575) –Bank charges 01.08.06 (200) (31)Bank charges 01.09.06 (80) (13)Bank charges 05.10.05 (80) (12)Bank charges 01.11.05 (80) (12)Bank charges 01.12.05 (80) (12)Bank charges 02.01.06 (80) (12)Bank charges 01.02.06 (80) (12)Bank charges 01.03.06 (80) (12)

Interest charges 31.12.05 (14) (2)

Interest received 31.12.05 5 855 875Rate variance 30.03.06 – 20 848

Balance as at 31 March 2006 10 906 506 1 651 155

The goal of the project funded by the Norwegian Government is to provide least cost, environmentallyfriendly and affordable energy and increase accessibility for rural areas in Southern Africa throughthe development of a competitive electricity market. The project is expected to run until 2007.

2006 2006SEK US$

4.3 Sida GRANT

Balance as at 1 April 2005

Advance 03.06.05 3 999 999 533 860

Additional advance 21.02.06 2 825 347 377 085

Payments: (3 726 734) (497 389)

Power Planning Associates 12.07.05 (66 819) (8 918)Power Planning Associates 04.08.05 (612 168) (81 703)Power Planning Associates 07.09.05 (299 282) (39 944)Power Planning Associates 05.10.05 (238 312) (31 806)Power Planning Associates 16.11.05 (674 937) (90 081)Power Planning Associates 14.12.05 (546 007) (72 873)Power Planning Associates 14.12.05 (634 481) (84 681)Power Planning Associates 02.02.06 (240 602) (32 112)Power Planning Associates 14.03.06 (414 126) (55 271)

Bank charges (5 336) (712)Interest received 24 719 3 299

Balance as at 31 March 2006 3 117 995 416 143

The goal of the project funded by Sida is the development of a long term transmission pricing policy,implementation procedures and ancillary services market development for the Southern African

Power Pool. The project is expected to run until 2007.



39


2006 2005

US$ US$

5. ACCOUNTS PAYABLE

Provisions 31 649 22 215

United States Agency for International

Development (USAID) 30 872 30 872

Other creditors 5 997 86 383

68 518 139 470

6. PROPERTY, PLANT AND EQUIPMENT

6.1 Summary

Computer equipment

Cost 46 736 45 091

Aggregate depreciation 42 142 36 992

Net book value 4 594 8 099

Office equipment

Cost 20 000 20 000


Net book value 369 1 755

Office furniture and fittings

Cost 35 422 35 422



Total

Cost 102 158 100 513



6.2 Movements for the year

Net book value of total property,

plant and equipment at 1 April 2005 29 213 40 220

Capital expenditure – at cost

Computer equipment 3 029 3 866

Office furniture and fittings – 885

3 029 4 751

Depreciation

Computer equipment 6 189 8 182

Office equipment 1 386 3 971

Furniture 3 612 3 605

11 187 15 758

Disposals – at net book value

Computer equipment 346 –

Net book value of total property,

plant and equipment at 31 March 2006 20 709 29 213



40


2006 2005

US$ US$

7. ACCOUNTS RECEIVABLE

Trade debtors 18 922 132 164

Prepayments 6 939 14 371

Other debtors 8 062 1 690

33 923 148 225

8. RELATED PARTY TRANSACTIONS

W Balet

Transaction Relation Amount

Sale of computer Ex. Senior Advisor US$ 461,40



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