Mavhaire caught in US$654m dodgy deal

via Mavhaire caught in US$654m dodgy deal – The Zimbabwe Independent May 16, 2014 by Herbert Moyo

ENERGY minister Dzikamai Mavhaire is entangled in a US$654 million dodgy deal involving the Zimbabwe Power Company (ZPC), a subsidiary of power utility Zesa Holdings, in which the firm could be forced into huge cash outlays if a proposed controversial solar power project in which losing companies in the tendering process have been brought in via the political backdoor goes through.

Informed official sources say Mavhaire is caught up in the controversial affair in which a Chinese company, China Jiangxi Corporation (CJC), was in January this year awarded a US$183 million contract for a solar project aimed at generating 100 megawatts of electricity after a tender was floated in September last year.

The sources, however, say due to political interference ZPC was forced to bring in some companies through the political
backdoor two losing bidders, namely Intratrek Zimbabwe (Pvt) Ltd owned by Harare businessman, Wicknell Chivayo, and ZTE Corporation, without re-advertising the tender as required by law.

Chivayo is reportedly connected to the Zanu PF elite and recently held a meeting with President Robert Mugabe over undisclosed issues. He actually posted the pictures of himself and Mugabe after the meeting last year.

The shady deals will result in ZPC forking out treble its budgeted amount, as costs will balloon from U$183 million to US$366 million if all companies are to do their jobs at the rate subscribed by CJC.

Intratrek has, however, been allowed to hike its charges for the project to US$217 million amid indications other companies also plan to follow suit, which will push up the total cost of the project to US$654 million.

While the decision to increase electricity generation is laudable given the country’s power deficit which has contributed to capacity underutilisation by industry, questions are being asked as to the role played by Mavhaire in reportedly arm-twisting ZPC to award the projects to Intratrek and ZTE.

“ZPC is now saddled with three projects instead of the one that should have been constructed by CJC which won the initial tender,” said a government source, adding “the cost of the project could well balloon further should CJC and ZTE push ZPC into allowing them to implement their projects at a revised cost of US$217 million as Intratrek have been allowed to.”

The source added: “This is a scandal which involves Mavhaire and other senior government officials. To justify controversial interventions, they conveniently argued that the energy sector is a strategic matter of national security such that CJC could not be allowed to go it alone. This was an excuse to have Intratrek brought in, but how do they explain the inclusion of ZTE which is also a Chinese company?”

Mavhaire refused to comment on the issue saying “as a minister I don’t follow gossip.

“Where have you ever seen a minister handling tender issues? Why are you phoning me instead of phoning (State Procurement Board (SPB) executive chairman Charles) Kuwaza? The business of selling newspapers through writing mere gossip is very unfortunate. Thank you,” he said, before hanging up.

ZPC spokesperson Fadzai Chisveto did not respond to questions which she had requested in writing despite acknowledging receipt, while Kuwaza also did not respond to e-mailed questions.

Intratrek and ZTE were among more than 100 companies who responded to ZPC’s tender for engineering, procurement and construction of a 100 megawatt solar plant in Gwanda or Plumtree in Matabeleland South province. Despite being shortlisted, the companies eventually lost out to CJC after the SPB adjudged on January 16 that the latter had proposed a competitive bid.

Intratrek’s bid was pegged at US$248 million while that of ZTE’s was US$358 million. Sources say despite losing out in the tendering process, the two companies were given a second bite of the cherry on condition that they reduced their quotation to match the US$183 million put forward by CJC.

Official documents seen by this paper this week indicate that “political interference bordering on corruption which saw ZTE and Intratrek also being awarded similar 100MW solar power plant projects has created a huge nightmare for ZPC which is already confronted by serious financial challenges for project sponsorship”.

“Unless the three contractors are able to secure 100% self-funding, ZPC is unlikely to raise the necessary down-payments and insurance associated with loan disbursements. Thus the implementation of these projects is dependent on contractors raising 100% self-funding,” one document says.

ZPC sources say the company has earmarked 2017 as the earliest date for the completion of the solar projects, noting “2014 will only be about the completion of feasibility studies and sourcing funds”.

The matter has sucked in the SPB, with sources indicating that the board issued an 11th hour directive to stop the signing of the deal between ZPC and Chivayo’s Intratrek on April 30.

The SPB is reportedly under pressure to sanitise the deal with Intratrek by passing a resolution approving the price variation to US$217 million, according to the sources.

Chivayo said he was not at liberty to comment on “matters that are subject to on-going negotiations under the auspices of the SPB”.

“However, my understanding of solar projects,” he said, “is that they would aspire to achieve compatible tariffs given the many variables which would be in design, weather patterns, topographical conditions, output capacity of the equipment, proximity to the grid and supporting infrastructure. These are all unique to each site and will ultimately determine the final price that emanates from the negotiations.”