SINOHYDRO, contracted by Zimbabwe Power Company (ZPC) to undertake the $1,4 billion extension of Hwange Power Station, will hold a 36 percent stake in the special purpose vehicle (SPV) created for the project.
The Chinese State power engineering and construction company shall hold shares in the SPV, the company in overall charge of the construction process, for a further 5 years after construction has been completed.
ZPC acting managing director Engineer Joshua Chirikutsi confirmed to The Sunday Mail Business that the Chinese firm would hold 36 percent stake in the SPV for a period of at least 5 years after construction.
“This is a (funding) bank requirement to make sure they remain involved. It is a bond so that when they finish they do not immediately move away due to the fact that they will hold shares,” he said.
“They will keep around overseeing operations and maintenance and remain responsible to clear any defects (which may arise on the plant).”
This will help avoid similar technical problems such as encountered by Botswana with its Morupule power plant at a time the southern African country was facing power deficit. The 600 megawatt Chinese-built power plant faced persistent technical problems since commissioning in 2012.
SPVs provide a good framework for raising funds, linking participants legally and assuring supply, production and marketing of products. SPVs bring together various parties like lenders, financial institutions, public sector and export credit agencies, guarantors, suppliers and off-takers.
A similar arrangement was put in place for the $533 million capacity extension project for Kariba South to add 300MW to the 750MW old plant, a project also undertaken and successfully completed by Sinohydro. President Mnangagwa commissioned the new plant last week.
The glamorous event was attended by several high profile officials from both Government and the private sector including Vice Presidents General Constantino Chiwenga and Kembo Mohadi as well as the host; Energy and Power Development Minister Simon Khaya Moyo.
The expansion projects are part of efforts ZPC, a power generation unit of State power utility Zesa Holdings, is undertaking to close the power deficit in the country, which currently stands at an average of 600MW.
Prior to extension of Kariba, Zimbabwe’s demand for power at peak periods stood at 1 600MW against the country’s internal generation capacity of 1 200MW. The deficit was met through import from the region.
Zimbabwe has been importing as much as 300MW from Eskom of South Africa and about 50MW from Hydro Cahorra Bassa of Mozambique, but the agreement with Eskom, for 300MW, was non-firm.
The South African utility would supply an amount of up to 300MW only when it had surplus. Imports have also been a daunting obligation for Zesa, which had to fork out at least $14 million monthly for imports.
Given the biting foreign currency shortage in the country, the power utility often struggled to make timely payments, and at one point raked up to $120 million in debt and arrears to the South African utility alone.
On countless, occasions Eskom threatened to cut off supplies, which would plunge Zimbabwe back into planned outages, disrupting industrial, commercial and household activities; a huge cost to the economy.
Hwange, currently the biggest producing power station, is critical to Zimbabwe’s power security given its position as a base load power plant, meaning it is the one that supplies the bulk of power in off peak periods. Due to the need to conserve water, at a time Lake Kariba levels are low, Kariba mostly comes on line during the peak periods.
Extending Hwange’s generation capacity will bring Zimbabwe close to energy sufficient, at least by current consumption standards; given the additional capacity at Kariba may this year cut imports by half.
Other projects in the pipeline include Sengwa in Gokwe South, which will generate 2400MW, Batoka, being developed jointly with Zambia and will add a further 1000MW to the Zimbabwean national power grid.
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