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Bulawayo council considers US$75m solar joint venture

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BULAWAYO City Council (BCC) is considering an unsolicited bid to form a joint venture (JV) with Williams Engineering, a local firm, to set up a solar power-generating plant at its Ncema Farm that will generate up to 50 megawatts worth of energy at a total cost of US$75 million.

DUMISANI NYONI
According to a BCC finance and development committee report, the local authority is considering the proposal as it addresses the energy gap in the city and the country, while also boosting council coffers.
To be a part of the JV, council is expected to provide the necessary land to establish the solar farm.

Also, council is expected to take care of the environmental study or approval, building permits, grid connection study or permit, and any other local required permit, any kind of payments to municipality or government or similar, geological study, topographical and hydrological studies on the one hand.

On the other hand, Williams Engineering will take care of finance, engineering design, construction, performance of the contract, overseeing job site, production and reporting to and implementing the instructions of the JV.

If both parties are satisfied with the above specifications, the profits and losses will be shared in the following manner: Williams Engineering 75% and BCC 25%.

Williams Engineering will provide finance capital up to the sum of US$75 million and then recoup its investment through the sale of electricity to the state-run Zimbabwe Electricity Transmission and Distribution Company (ZETDC).

The labour required for the project will be pooled by both parties in the JV and Williams reserves the right of first refusal, while the wage bill is to be taken care of by the JV.

The construction of the project is projected to take up to 24 months and, after that, income is expected to be generated from the farm. The life span of the farm is set at 20 years and after that the venture parties reserve the right to either decommission the site or renew the JV.

As per the Williams Engineering model, the loan interest is fixed at a rate of 3.5% per year; the first three years of the loan have a grace period to not pay interest; a fixed amount of US$6.2 million will be paid effective year four up to year 20 with capital repayment/ loan instalment plus a variable interest element on top. Energy sales show an annual growth pattern from the first year of operation until capacity production is reached and expenditure is set to decline as the project commences. However, all expenditure is to be covered by Williams Engineering.

The Infrastructure Development Bank of Zimbabwe (IDBZ) recommended that the BCC sign a loose memorandum of understanding (MOU) valid for 12 months and which lapses in the event of non-delivery by Williams.

It also recommended that Williams take the responsibility to fund project preparation activities, including feasibility studies, designs and ESIA.

“They are the project promoters and it should be their responsibility to prove that the project is bankable. The current proposal to have BCC foot the bill is exploitative as Williams will eventually use the feasibility studies funded by council to raise funds for project implementation from investors. They should show their commitment and confidence by outlaying resources upfront,” the IDBZ said.

The IDBZ said the BCC should only cede the land at financial close otherwise the land will be tied to a non-existent project for a long time.

It also said the 25%/75% share ratio must be informed by valuations for the land from three valuers. Value of land must be established first before BCC can accept the 25% shareholding or equity.

The local authority’s finance department recommended that authority in principle be granted to embark on the project and thereafter the unsolicited bid be submitted to the joint venture committee; sign a loose MOU valid for 12 months and which lapses in the event of non-delivery by Williams.

It also said Williams should take the responsibility to fund project preparation activities, including feasibility studies, designs and environmental impact assessment.

The proposal was discussed in the full council meeting with councillor Silas Chigora seeking clarification on the criteria used to award tenders without expression of interest or open tender.

BCC deputy mayor Mlandu Ncube enquired about the policy on land alienation. He recalled that the committee had previously not acceded to a similar application and clarification had been sought on the policy aspect. He said if the policy was the same, the two applications should be treated similarly.

In response, Bulawayo town clerk Christopher Dube explained that because there was involvement of land alienation, council accepted unsolicited bids. However, there were procedures to be followed. He further explained that the applications were submitted to the Zimbabwe Investment and Development Agency (Zida) for further processes.

He confirmed that the current application was the same as the previous one. However, the previous application had some technicalities which needed to be looked into and the item would be re-submitted to the committee in the usual manner.

The council resolved to recommend that authority in principle be granted to embark on the project and thereafter the unsolicited bid be submitted to the joint venture committee; that council and Williams Engineering sign a loose MOU valid for 12 months and which lapses in the event of non-delivery by Williams; that Williams take responsibility for funding the project preparation activities including feasibility studies, designs and environmental impact assessment.

The committee also recommended that the BCC should only cede the land at financial close otherwise the land will be tied to a non-existent project for a long time.

According to council records, Williams Engineering is a Bulawayo-based company having been in operation since 1996.

It has many years’ experiences in electrical engineering and is currently involved with a number or upcoming solar stations in and around Zimbabwe.

The company offers a commercial model that includes the ability to work with the client as a turnkey engineering, procurement and construction or as the counterparty to a power purchase agreement as an independent power producer.

Williams Engineering has established a working relationship with Solventix Group. Founded in 2010, they are recognised as a global player in the solar generation market and have successfully realised more than 4 000 projects worldwide.

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