Zesa reconsiders Dema power plant

Source: Zesa reconsiders Dema power plant | Herald (Business)

Tawanda Musarurwa Senior Business Reporter
The Zimbabwe Electricity Transmission and Distribution Company (ZETDC) has approached Sakunda Holdings over possible resumption of electricity generation at the private firm’s Dema diesel power plant.

The Dema power plant has been mothballed for the past 18 months after Zesa’s transmission and distribution arm said it no longer required power from the plant. The plant has design capacity of 100 Megawatts (MW).

Sakunda Holdings chief operating officer Charles Chitambo, yesterday told a touring Parliamentary Portfolio Committee on Energy and Development that the diesel powered plant could resume power production.

He said this was because drought conditions that necessitated establishment of the plant in 2015 had resurfaced.

“The reason why we are not producing any power is technically that some 18 months ago ZETDC said they no longer require this power.

“From the best of my understanding, at that time Eskom was able to give them power and they were able to obtain power cheaper from Eskom than ourselves. Right now Eskom can’t give them that power,” he said.

“At that time there was no drought in the nation, which is what we had in 2015 when we started. And this time we are in a different situation so I am aware that ZETDC has asked Sakunda if they can restart the plant, but as we speak we are not transmitting.”

There, however, are serious concerns over the sustainability and economic cost of using the plant given the price of diesel in the country as well as its availability at a time the country is experiencing shortages.

“I get charged for the equipment and the power generation, the sum total of all the charges that I pay means I have to at least cover over 0,10 to 0,11 cents per kilowatt hour in US dollars. I am in business so I do not charge ZETDC the same tariff rate, I charge them starting at US0,13c,” said Mr Chitambo.

“The primary reason why we charge in US dollars is that we are pricing against what we transmit to Aggreko Plc (Sakunda’s technical partner for the Dema plant) eventually.

“When we were operating we were exempt and as we seek to restart we have to seek the same exemptions. The US0,13c per kWh took into account that were had (fuel duty) exemptions. If we did not receive the exemptions the cost of power would be in the order of 0,22 to 0,23 US cents per kWh.

Meanwhile the Sakunda COO said the restart of the Dema power plant will also give impetus to a deal that was struck between Zimbabwe and Zambia over the clearance of a debt relating to the now defunct Central African Power Corporation (CAPCO), a power firm jointly owned by the two governments when they were still part of the Federation of Rhodesia and Nyasaland, which was dissolved in 1963.

The debt was for the shared cost of the Kariba Dam construction and associated infrastructure during the tenure of the CAPCO.

In December 2017, then Secretary for Finance and Economic Planning Willard Manungo said Zimbabwe had struck a deal with Zambia on payment modalities for US$114,8 million interest on the federation-era debt that Lusaka is owed by its southern neighbour.

Mr Manungu would not offer more details.

The interest component originated from a US$70,8 million debt which Zimbabwe inherited after taking over power generation assets that had been shared with Zambia before the collapse of the federation.

Mr Chitambo told Parliamentarians Sakunda was optimistic that the Zambia deal would materialise if the Dema plant resumes operations.

He said the deal would depend on Sakunda getting certain exemptions, which would enable Zimbabwe export power to Zambia at a prescribed tariff rate to amortise its arrears.

“And because my discussions with the Government are not yet complete I could not come here and restart the plant. And the Zambians are not taking because the Zimbabwean side as a whole are not ready,” he said.

“So what would be in it for the Government is, the same way that Sakunda paid off the nation’s debt of maize consumed from Malawi, basically the foreign debt would be reduced by the power that was generated by Sakunda.

“It was not national service. We asked that we would be paid the equivalent of that foreign currency in RTGS$.”

“My take is that we and Government will have to put the national interest first in considering whether to consummate the Zambian deal or to activate the plant and put the power on the national grid for use within Zimbabwe,” said Mr Chitambo.

With a local demand of about 1 700MW, Zimbabwe has a supply of just under 1 000MW and relies on imports to plug the deficit.