Dema now strategic . . . For security of power . . . Gets duty exemption for plant fuel imports . . . Helps Zesa to reduce imports to 250MW

Dema now strategic . . . For security of power . . . Gets duty exemption for plant fuel imports . . . Helps Zesa to reduce imports to 250MW

Source: Dema now strategic . . . For security of power . . . Gets duty exemption for plant fuel imports . . . Helps Zesa to reduce imports to 250MW | Herald (Business)

Golden Sibanda Senior Business Reporter
THE 100 megawatt Dema diesel power plant has become strategic to security of power supply in Zimbabwe amid revelation Zesa may need to import up to 350 megawatts per given time if the plant stops supplies to the grid. This comes as the State power utility is battling to clear outstanding obligations for power imports from Eskom of South Africa, whom Zesa Holdings owe over $40 million in arrears only and more than $100 million in total.

As Zesa battles to clear the debt and arrears, Eskom has threatened on numerous occasions to switch off Zimbabwe unless the State power utility settled its liabilities, which have exceeded debt levels guaranteed by Government.

Government had guaranteed supplies to Zesa to the tune of R500 million, but the Zimbabwe utility exhausted the secured threshold and on top accumulated arrears, as it struggled to mobilise requisite foreign currency to pay. In recognition of the strategic importance of Dema to the power supply balance in Zimbabwe, amid a crippling shortage of electricity due to limited domestic generation capacity, Government has exempted fuel import duty for the plant.

Sakunda and Zesa have been allowed to get rebates on fuel imported for their respective projects, including Zesa’s ongoing Kariba South 300MW extension, through statutory instrument 126 of 2017, which helps secure supplies. Zesa said its distribution arm, Zimbabwe Electricity Transmission and Distribution Company is getting 100MW from Dema, in line with the power purchase agreement with Sakunda. Dema is located about 40 kilometres outside Harare.

Sakunda Holdings, through its subsidiaries, engages in energy, logistics, and trading businesses in Zimbabwe. Sakunda imports and supplies fuels, such as diesel, petrol, renewable biofuel, and kerosene into Zimbabwe, Malawi, and Zambia; operates and franchises petrol filling stations in Zimbabwe.

It also distributes commercial fuel products for mining, transport, agriculture, and industry sectors; and distributes a range of lubricants and chemicals in Zimbabwe. Zesa, a State power utility, confirmed Sakunda had become a strategic asset to the security of power supply in Zimbabwe, especially amid crippling shortage of foreign currency, which is also seriously affecting electricity imports.

“Without power supplies from Dema, ZETDC imports up to about 350MW during peak demand and supplies from Dema reduce the level of import by 100MW.”

The $250 million Dema Power Plant, set up to provide emergency power in the wake of electricity shortages due to low water levels in Kariba Dam, has capacity to supply 100 megawatts per hour into the national grid at $0,15c/MW.

“The tariff at which Sakunda eventually sells energy to ZETDC is almost halved and this in turn benefits the final consumers of the power,” Zesa said.

Consumers pay 9,83 cents per kilowatt hour, but Zesa has been ratcheting up pressure on Government to be allowed to hike tariffs, as they are sub-economic. It also argues it needs more resources to maintain and upgrade systems.

The low water levels in Lake Kariba, which powers the 750MW Kariba South hydro power plant, caused Government to seek quick solutions to meet emergency power needs, which resulted in the Dema diesel power plant project. The plant is, however, not consistently producing as per design capacity due to lake of water.

Zimbabwe and Zambia, which share Kariba water from the Zambezi River, had their allocations of water for power generation at Lake Kariba reduced by the Zambezi River Authority.

ZRA is responsible for managing the riparian river.

The Dema power plant requires about 12 million litres of diesel annually to power generators and the provision by Government allowing Sakunda to import fuel duty free helps lower the cost of importing fuel and ultimately power to consumers.

The plant has reduced the need for Zimbabwe to rely on imports to secure availability of power, at a time demand at an average 1 400MW outstrips supply of about 1 000MW.

The Reserve Bank, which faces a tough time to equitably share the little available foreign currency to the various priority needs of the country, recently committed to provide about $10 million a week to enable Zesa to clear its arrears.

However, there is no guarantee the foreign currency will always be available in time to meet power import obligations, given the magnitude of shortages and competing, making Dema strategic for consistent of power supply.