ED works magic in Zesa deal

Source: ED works magic in Zesa deal | Sunday Mail (Business)

PRESIDENT Emmerson Mnangagwa’s impact on the country’s economy has started to be felt after he managed to convince China to de-link Zimbabwe’s previous debt with the Hwange Thermal Power Station (HPS) expansion programme.

Zimbabwe mooted the expansion of HPS in 2010 but the project could not gain traction as the Asian tiger demanded that Harare must first honour its US$217 million arrears from various loans extended to the Harare City Council, Government and Zesa.

But since President Mnangagwa’s inauguration on November 24 last year, Sino-Zim relations have dramatically improved and were further strengthened after the five-day State visit to Beijing.

Last week, Chinese Ambassador to Zimbabwe, Mr Huang Ping said the ground breaking ceremony for the HPS expansion programme would not have taken place if Chinese President Xi Jinping had not been swayed by his fresh relations with Harare.

“It would not have been possible without the close relationship and cooperation between the leaders and governments of Zimbabwe and China.

“It was during His Excellency, President Mnangagwa’s State visit to China in early April this year that Chinese President Xi Jinping made a special political decision of de-linking the financing of the three projects, including the Hwange Power generation project, from the debt issue,” said Ambassador Ping.

Ambassador Ping said de-linking the existing debt from the Hwange power project was a “gesture of utmost goodwill” of China towards Zimbabwe.

Energy and Power Development Minister, Ambassador Simon Khaya-Moyo said financial closure for the power project was reached in the first quarter of this year.

“The project was mooted in 2010 (and) things moved faster after His Excellency President Mnangagwa’s successful State visit to China in April this year,” he said.

“I would like to thank your leadership, without which this project wouldn’t have come to fruition. Let me mention that this project took more than a decade to reach financial closure.

“Your leadership in the new dispensation has worked magic . . .”

Last week, Permanent Secretary in the Ministry of Finance and Economic Planning Mr Willard Manungo told The Sunday Mail Business that negotiations to achieve financial closure had stalled as Beijing demanded arrears on other loans to be settled first.

“Remember we had other arrears with China for which they said if we were to go by the book, Zimbabwe needed to clear its arrears before funding could be released for the Hwange project.

“The arrears at the moment are US$217 million, a lot of which is from China Eximbank,” said Mr Manungo.

China Eximbank has agreed to extend the US$1 billion loan required to finance the HPS extension project while US$500 million would be provided by the African Export-Import Bank (Afreximbank) and Standard Bank.

Nitty-gritties of the

Hwange project

The Hwange expansion project will see 300MW capacity being added to generating units 7 and 8.

A transmission line to Insukamini will also be constructed, together with two substations and associated works.

An ash handling plant will also be installed to process the ash released from boilers.

A sulphur scrubbing plant will be installed to remove sulphur and smoke from the exhaust gases which will be emitted by boilers.

This is expected to make the HPS project more environmentally friendly, said Ambassador Khaya-Moyo.

Upon completion, the project will modernise Zimbabwe’s power generation terrain, using the latest clean coal technology while caring for the environment and observing the highest standards of safety and workmanship.

Sinohydro Corporation of China will undertake the expansion project.

Construction is scheduled to last 42 months, implying that the country will soon be enjoying power from this mammoth project.

Ambassador Khaya-Moyo said the project will go a long way in “easing the base-load challenges” currently being experienced.

Zimbabwe has 2 245MW of installed generation capacity but only 1 600MW of electricity is achievable. Constraints in water supply for hydropower generation at Kariba, coupled with coal supply challenges, have impacted on power generation.

On average, 1 200MW is generated daily against an average peak demand of 1 600MW.

This has forced the country to import power from Mozambique and South Africa to cover the deficit. But Ambassador Khaya-Moyo said the costs of importing power are huge, particularly during peak periods, making the HPS expansion project a “means of import substitution in addition to improving the energy security of the country”.

China Eximbank will provide 85 percent of total project cost while Zimbabwe Power Company (ZPC) and Sinohydro will provide the balance.

A special purpose vehicle, the Hwange Electricity Supply Company (Hesco), has since been formed to run the project.

ZPC and Sinohydro are the equity holders in Hesco, with 64 percent and 36 percent respectively.

Centrality of the power project

The project will result in HPS having an installed capacity of 1 520MW from the current 920MW. Experts say the new project, which comes immediately after the expansion of Kariba South to feed an additional 300MW of power into the grid, will ensure steady supply of electricity for domestic and commercial consumers.

Sinohydro president Mr Liang Jun believes the expansion will help in mitigating the power deficit and reducing imports.

Last week, Zimbabwe Energy Council (ZEC) executive director Mr Panganai Sithole said the project was a positive move as it increases power generation in the country.

“We have a deficit of 400MW and we are generating 1 200MW. This means we will have 200MW which, if the distribution to rural areas is not addressed, would be exported and we generate foreign currency,” said Mr Sithole.

Mr Sithole further said the size of investment for the project, US$1 billion, will demonstrate to other investors that Zimbabwe is open for business in the energy sector.

“The project also shows that the energy sector has drifted from just being an economic enabler to become an employer considering the number of people to be employed,” added Mr Sithole.

About 7000 jobs are expected to be created at the peak of the project — 3000 directly and 4000 indirectly, in sync with Government aspirations.

Sinohydro said it will mainly employ locals for the project, sentiments also echoed by President Mnangagwa.

The Zanu-PF 2018 election manifesto prioritises employment creation to improve the lives of people.

Ambassador Ping said the 600MW to be generated will bring “hundreds of millions of dollars in economic benefits”.

Availability of power is seen as central to re-industrialisation, with the Zanu-PF manifesto proposing to increase capacity utilisation in the manufacturing sector to at least 90 percent by 2023. Sinohydro, which also expanded Kariba South, has completed several power projects across the world, which can generate over 200 000MW.