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Old Mutual injects US$21,5m in solar project

OLD Mutual Investment Group Zimbabwe (OMIZ) is investing US$21,5 million into independent power producer, Centragrid Private Limited, to support its efforts to generate 25 megawatts (MW) of solar power which will be fed into the national grid.

Centragrid Energy Systems Africa (Centragrid) is a PV solar power plant in Nyabira where Old Mutual Limited (OML) and the National Social Security Authority want to expand the plant’s capacity from the current 2,5MW to 25MW.

The power plant is located at the 35km peg along the Harare-Chirundu Highway.

In its newly released financial results for 2022, OMLZ’s South Africa-domiciled parent company OML revealed that investment into solar projects was part of its commitment to support the Zimbabwe government’s renewable energy targets.

“Old Mutual Investment Group Zimbabwe is in the process of deploying US$21,5 million into Centragrid Private Limited, a licensed independent power producer,” OML said, in its climate report for the year ended December 31, 2022.

“This is an investment in Phase II of a 25MW grid connected solar PV plant and its associated transmission facilities in Nyabira at the 35km peg along the Harare-Chirundu Highway.

“Phase I (2MW out of the 25MW), which was funded by the promoter, is operational and feeding power into the national grid. This investment will enable the expansion of the current PV solar plant from 2,5 MW to 25MW.”

OML said the 25MW power plant was expected to power more than 4 000 households and to be operationalised this year and will generate more than 3 700MWh of clean, reliable electricity annually for the national grid.

According to OML, the project offers a supply of clean, emission-free, safe and renewable energy with an environmental, social and governance (ESG) green status. ESG is a framework used to assess an organisation’s business practices and performance on various sustainability and ethical issues.

Part of the reason behind the investment is for the project to align with OML’s environmental responsibility and goal to reduce its carbon footprint.

The project was also conferred with national project status which comes with attractive incentives such as an exemption from import duties.

“Demand for energy is inelastic in nature, hence steady cash flow streams are expected for the life of the project,” OML said.

“The project’s financial metrics are attractive and sustainable (internal rate of return and payback period). Tax benefits are reaped through investments into solar projects (corporate income tax exemption for the first five years of operation).”

OML added that the project was a long-term project of 25 years which matched Old Mutual’s long-term liabilities.

“It requires the availability of critical infrastructure to support the power plant (roads, communication lines, water and substations). It has prescribed asset status,” OML said.

“This means that a certain percentage of the assets of retirement funds (and possibly other institutional holders of assets) must be allocated to certain government-approved instruments. The investment will contribute towards prescribed asset compliance for investors.”

The investment comes at a time when Zimbabwe has a power deficit of between 600MW and 700MW as local generation has fallen between 300MW and 800MW from all the nation’s generation units.

This deficit is due to unfavourable weather conditions that lowered dam levels at the country’s biggest electricity generation station, the Kariba South Hydro Power Plant.

Further, old and antiquated machinery at the country’s second biggest generation plant, the Hwange Thermal Power Station, has left the unit unable to produce to full capacity.

Old Mutual is also setting up a US$100 million infrastructure fund to support several economic development projects, mainly those in renewable energy, according to the company’s head of alternative investments, Davies Musoso.

The fund will set aside US$30 million to support renewable energy projects.

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