The Zimbabwe government has moved to underwrite the push into renewable energy, after issuing a sovereign guarantee for the 30MW Vungu Solar project in a step aimed at unlocking investment into independent power production.
The guarantee, published in Friday’s Government Gazette, effectively assures investors that the State will step in to meet payment obligations, should the Zimbabwe Electricity Transmission and Distribution Company (ZETDC) fail to honour its commitments under the project’s power purchase arrangements.
“It is hereby notified… that the Minister of Finance… has issued a government guarantee for the payment obligations of the ZETDC,” the notice reads, adding that the guarantee covers payments “in respect of the purchase price payable under… the Project Development Support Agreement entered into with Vungu Solar (Private) Limited (Vungu Solar)”.
The intervention follows the signing in January of a 25-year Power Purchase Agreement (PPA) between Vungu Solar and ZETDC, a deal that secures a long-term buyer for the electricity generated and provides predictable revenue streams for financiers.
Officials say the guarantee is part of a broader policy framework introduced in 2022 to attract private capital into power generation, with licensed independent power producers (IPPs) expected to deliver up to 1,000MW of new capacity.
Under the Government Project Support Agreement, IPPs are offered cost-reflective tariffs, guaranteed offtake of electricity, and assurances on the repatriation of profits – measures designed to address long-standing investor concerns around pricing, currency risks and capital mobility.
The Vungu Solar project, founded by Energywise Equipment and Impala Power and being developed by the UK-based Private Infrastructure Development Group through its development arm, is among the first internationally financed IPPs solar project in Zimbabwe.
The gazette notice also outlines how the guaranteed purchase price would be calculated, including “outstanding debt”, “shareholder contributions”, “equity return” and “termination costs”, less any insurance proceeds.
Energy analysts say such guarantees are critical to lowering risk perceptions and unlocking funding, particularly in a sector long constrained by underinvestment and power shortages. – TML