By Dhiladhila Magazine · Issue 18
The cheapest power on a grid is the kind you own outright. Omburu was funded from tariffs, not a foreign loan.
The Omburu solar plant is usually described in megawatts. Its more interesting number is on the balance sheet: NamPower built the N$317 million (US$20 million) station without an equity partner or a foreign lender taking a cut of the electricity, funding it instead from its own resources. As the utility set out, the aim was to add cheaper new-build power and pull the average tariff down.
That financing choice decides where the value stays. A plant paid for from internal funds and recovered through the tariff keeps both the asset and the margin inside a state-owned utility, rather than routing them to an independent producer selling the power back at a contracted price.
The quiet economics of ownership
NamPower financed Omburu through what it calls Long Run Marginal Cost funds – money recovered through tariffs and set aside for building the next generation of capacity. In plain terms, customers pre-funded the plant through their bills, and in return they own an asset that now produces power at a fixed, low running cost for decades.
That is a different model from the independent power producer route, where a private developer funds and owns the plant and sells the output to the grid under a long contract. Both deliver megawatts; only one leaves the utility holding the asset once the capital has been repaid.
Sunlight is free; the only real cost is the capital, and Omburu keeps that cost at home.
Why a solar plant is a payments story
Once built, a solar plant has almost no fuel bill, so its economics are dominated by how it was financed. A megawatt-hour from Omburu is mostly the repayment of upfront capital spread over the plant’s life, which means the cheapest way to run it is to fund it as cheaply as possible and keep it producing for as long as possible.
That reframes the plant as a financial instrument as much as an engineering one. It converts a large one-off payment into twenty-five years of low, predictable unit costs, which is exactly the kind of certainty a utility buying volatile imported power struggles to find.
The tariff link is where the money reaches customers. Because the fuel is free and the plant is owned outright, its output can be priced near its running cost, so each solar unit blended into the grid dilutes the more expensive imported and thermal power in the average bill. The managing director framed the build precisely as a way to introduce affordable new power and reduce the overall tariff, which is the payments logic stated plainly.
A solar plant is a bill paid once and collected against for decades.
Keeping the money in the country
The N$317 million was spent largely at home. The engineering, procurement and construction contract went to a joint venture of two Windhoek firms, HopSol Africa and Tulive Private Equity, and semi-skilled and unskilled labour was drawn from the Omaruru community. The capital did not simply buy imported hardware; a share of it circulated in the local economy.
For a national utility, that domestic spend matters twice. It keeps part of the build cost onshore, and it develops local firms capable of delivering the next plant, which lowers the cost and the foreign-exchange exposure of the programme that has to follow.
Money spent building at home buys two things: a plant, and the firms to build the next one.
The financier's read
For a treasurer or a development financier, Omburu is a demonstration that a state utility can self-fund renewable capacity and recover it through tariffs, without ceding ownership to reach the megawatts. It is a model that scales only as far as the tariff base can carry it, which is the binding constraint on doing it again quickly.
The exposure is that customers carry the risk. Tariff-funded build means ratepayers, not shareholders, absorb any cost overrun or underperformance, so the discipline of the original N$317 million budget – met, by the utility’s account – is not a detail but the whole safeguard.
Self-funding works only while the plant lands on budget, because the customer is the backer.
For a lender, a utility treasurer or a regulator, Omburu marks a financing choice as much as an engineering one: build and own with tariff money, or contract the megawatts from a private producer and rent them. The decision it puts to NamPower is whether the self-funded, utility-owned model can be repeated fast enough on the tariff base available, or whether the next tranche of solar has to bring in outside capital and share the output to move at the speed the grid needs.
Sources: NamPower 2022 Annual Report; NamPower inaugurates N$317 million Omburu 20 MW PV station (Eagle FM); NamPower invests N$317m in Omburu plant costs (The Namibian)
