via $355m power project begins The Herald June 30, 2014 by Lloyd Gumbo
Expansion work at Kariba South Hydro Power Station is expected to officially start in August when the financier, China Export and Import Bank, releases funding for the project after Zimbabwe met most of the conditions that were set. Zim-Asset identifies energy and power development as key enablers to productivity and socio-economic development.
Zimbabwe Power Company, a subsidiary of Zesa Holdings and the contractor Sinohydro, said it expected China Exim Bank to avail money at the end of next month or early August.
ZPC managing director Mr Noah Gwariro said all things being equal, ZPC and the Government must have met all the 17 conditions that China Exim Bank set for it to release money for the project.
“We are currently working on condition precedents on our side as ZPC and Government so that we can fulfil conditions by China Exim Bank,” Mr Gwariro said.
“We are almost done with that because our plan is to complete all the conditions by end of July so that money can come through from early August.”
He said Sinohydro of China was already on site doing part of the works.
The project will cost about US$355 million, with Government supplementing 10 percent which is about $35 million.
The project is to build two generators that will boost Kariba South’s capacity from 750 megawatts to 1 050MW.
Mr Gwariro said some of the conditions set by the financier included the need for the loan agreement to be ratified by Parliament, establishment of a Kariba Hydro Power Company and appointment of its board as well as providing the $35 million.
Parliament has already ratified the loan while Energy and Power Development Minister Dzikamai Mavhaire, recently appointed the Kariba Hydro Power Company board chaired by Engineer James Chiuta Dube.
Mr Gwariro said they were negotiating with local banks to provide the $35 million adding that the other conditions would not be difficult to meet.
Sinohydro Zimbabwe (Pvt) Ltd director, Mr Wu Yifeng, said work had already started on site though they were still waiting for payment for the project to officially start.
“We expect the first payment would be released by the Bank at the end of July and once Sinohydro receive the payment, the project would be officially started though work is already underway.
“So far the primary design of the project has been approved by ZPC and its consultant, Hatch while excavation and blasting started in April.
“The camp for the contractor has been completed and we are now working on the road to the water intake and preparing for the excavation of water intake tunnel.
“Up to now, 40 Chinese engineers and 120 local employees are working on the project site. The material and equipment valued around $6 million has been mobilised to the site. We have signed the supply agreement of turbines and generators with the manufacturer and is waiting for the full advance payment to start the manufacturing,” said Mr Wu.
Some of the conditions that Zimbabwe is yet to meet are the need for ZPC to open a bank account with a local financial institution as well as finalisation of the Power Purchase Agreement between ZPC and the Zimbabwe Electricity Transmission and Distribution Company.
Mr Wu said the project was expected to take about three and half years to be completed.
The loan would be used for such services as engineering, procurement of equipment and actual construction of the two units that will add 300 megawatts to the national grid.
Government recently gave greenlight for the State Procurement Board to award the tender for the expansion of Hwange Thermal Power Station to Sinohydro.
The expansion of Kariba South and Hwange will see Zimbabwe producing at least 2500 MW upon completion of the projects.
Zimbabwe curretly produces about 1 200 megawatts against demand at peak periods of 2 200MW.s
COMMENTS
So the project hasn’t even begun, and already the country is failing to meet China’s reasonable requirements to secure the loan. In most cases, when a borrower needs money, the lender requires 10-20% cash down payment, to show good faith and the ability to repay the loan. However, the government can’t even come up with one single dollar to show good faith. They do it the ZANU way – force a local bank to “lend,” them the $35M that the Chinese require to disburse the balance.
Under these circumstances, the Chinese bank would be perfectly justified in cancelling the loan because government has still not shown good faith or an ability to repay.
It’s also interesting to note that China is also requiring Parliment to ratify the loan, something that rarely occurs. Typically it’s Mugabe or one of his ministers signing on the dotted line and once the money is disbursed, that’s the last it’s ever seen. By forcing Parliment to vote on this loan, they are creating a precedent protecting themselves if future administrations try to avoid paying. Now the Chinese will argue that even though ZANU-PF may have spent the money on vehicles and “consultants,” the balance is still due because the people’s representatives voted for it. They’re smart businessmen, unlike ZANU-PF!