via Funding stalls power project | The Herald January 9, 2014 by Golden Sibanda
PLANS to expand Hwange (Thermal) Power Station have stalled after the Chinese contractor who won the right to undertake the project, China Machinery Engineering Company, failed to secure funding eight months after winning the tender. The lack of progress has allegedlyraised strong reservations within Government, which is under pressure to close the demand supply gap that has spawned rolling power cuts. Zimbabwe produces about 1 200 megawatts against demand at peak periods of 2 200MW.
Government, through the Zimbabwe Power Company, is working to close the deficit through the expansion of Hwange for an additional 600MW and Kariba South for 300MW. Zimbabwe has not invested in expansion capacity since independence.
While significant progress had been made in concluding technical negotiations for the ramping up of electricity generation capacity at Hwange Power Station, there has been no progress on the critical funding required to get the project off the ground.
There are serious concerns that although ZPC has made headway towards concluding technical discussions for expansion of Hwange, with discussions about 95 percent done, the fact there is no progress on funding makes the effort futile.
Zimbabwe Power Company managing director Mr Noah Gwariro said while the company had made significant progress on funding for Kariba South expansion, things looked grim for Hwange with the contractor failing to honour his obligations.
“It has taken too long to conclude the funding arrangement, it is more than eight months now (since China Machinery Engineering Corporation) won the tender for Hwange.
“The challenge is that they (CMEC) have not secured funding and they keep saying they are working on it and they think they have got a good proposal,” he said.
“They have not showed us the term sheet, which explains whether the funding is a loan or grant. The term sheet would also show terms of the funding arrangement. They over promised on what they could do on the funding,” Mr Gwariro said.
Expansion of HPS requires US$1,3 billion, but the cost will increase to US$2 billion including interest during construction, cost of supervising the project, maintenance reserve and funds required for coal supplies, the ZPC boss said yesterday.
Mr Gwariro said ZPC, power generation unit of State-owned power utility Zesa Holdings, said Government had been briefed and would make a decision on the way forward.
Zimbabwe minimises power deficit through imports from the region. But, the severe shortage has had costly ripple effects on the economy, domestic, commercial and industrial consumers due to black outs caused by supply rationing.
Government and the China Eximbank signed a US$319 million loan agreement in early November last year for the expansion of Kariba South hydro power station’s generating capacity. The tender for this expansion was won by Sino Hydro.
Finance Minister Patrick Chinamasa signed on behalf of the Government, while China Exim Bank vice president Mr Zhu Hongjie represented the bank at function in Harare.
Mr Gwariro said a kick of meeting for the beginning of construction work for expansion of Kariba South generating capacity was in fact scheduled for the 20th of next month.
He added that ZPC had already paid about US$8,8 million of the US$15 million contribution it is obligated to contribute towards the cost of expanding the power plant.
Zimbabwe is also pursuing several projects through both Government and private sector initiatives for power projects on the Batoka Gorge along Zambezi River, in Gokwe North, Matabeleland North and several parts of Manicaland Province.
Government is battling to ease power shortage in the country in recognition to its critical importance as a key enabler to economic growth as Zimbabwe recovers from the debilitating blows of western sanctions that ravaged the economy for almost a decade.