Source: Chinamasa mulls power tariff review | The Herald December 15, 2016
Zvamaida Murwira Senior Reporter—
There is need to review current power tariffs upwards to fund several power projects most of which are being financed by multilateral financial institutions from Eastern countries, Finance and Economic Development Patrick Chinamasa, has said.Minister Chinamasa said he would soon distribute a position paper canvassing for support to review such tariffs so that they become more viable and competitive for both producers and consumers.
He said this last week while moving a motion calling for Parliament to ratify a $1 billion loan facility for Hwange power project being financed by China Export and Import Bank.
“Madam Speaker Ma’am, I need to emphasise that it is critical that, as Government, we approve tariffs that are viable both to the producer and the consumer, in order to ensure viability at all levels. We need tariffs that produce a win-win situation for both the producer and the consumer. In this regard, a paper will no doubt be prepared, to see whether we can achieve a viable tariff regime,” said Minister Chinamasa.
The $1 billion project is for the expansion of Hwange 7 and 8 Thermal Power Station and ancillary structures.
Minister Chinamasa said the expansion would increase power generation, reduce supply demand gap and that it was a lower cost alternative compared to other sources of power such as independent power producers and regional imports.
Bulawayo South MP Mr Eddie Cross (MDC-T) queried the logic for proposing a tariff review when Government had already made a commitment to the project with financiers. He said there was need for a study of a viable tariff structure in advance.
Mr Cross raised concern on projects being financed by the supplier given that the country had no control on the actual cost of equipment.
“Sometimes you can have inflation of the cost of the equipment that is being supplied or even inferior equipment. Under the new Public Procurement Act, which is currently going through the House, I just wonder, have the kind of limitations which are in the new Act which I think are excellent; have they been applied to this particular tender? Are the interests of Zimbabwe in terms of the quality of the equipment and the cost of the equipment being protected?” asked Mr Cross.
In response, Minister Chinamasa said it was critical to realise that the only source of capital for infrastructure projects was China.
“Obviously, it is usually at their own terms and we are desperate for this infrastructure. Yes, we try to negotiate but at the end of the day, the People’s Republic of China insists on three things. Any loan that we secure from the People’s Republic of China, the contractor must be Chinese and the equipment must also be manufactured in China,” said Minister Chinamasa.
“What I want to assure Hon Cross is that in terms of quality, I think our safeguard is that the contractor SINO Hydro is an equity partner with us in this company, Hwange Electricity Supply Company (HESCO) because China Exim Bank only grants 85 percent of the loan. It requires the borrower to secure 15 percent. What we did was, of that 15 percent, we gave a percentage to SINO Hydro to bring in as equity and they are going to bring in $176 million. Of course, the balance will be from us,”