Power projects doomed on arrival
OTHER than the failure to invest in electricity generation projects over the years — save for the expansion of the Hwange Thermal Power Station and the Kariba South power extension project — Zimbabwe is in a quandary because the majority of the projects which were mooted over the years were doomed from the word go.
As revealed by Zimbabwe Electricity Supply Authority Holdings (Zesa) executive chairperson Sydney Gata in October last year when the country’s editors, including those from The NewsHawks, visited Hwange Thermal Power Station last October, more than 100 projects have failed to take off over the years.
The projects are failing to take off due to country and currency risks, policy mis-steps and lack of bankable feasibility studies.
Projects by independent power producers (IPP) have also been affected.
The Zimbabwe Energy Regulatory Authority (Zera) has in the past five years licensed more than 100 small IPP projects with a capacity to produce around 1 300 megawatts (MW), but most of them remain non-operational.
One such project is the US$183 million Gwanda Solar Project awarded to controversial businessman Wicknell Chivayo.
The Gwanda project has been the subject of court battles after Intratrek Zimbabwe failed to deliver within the agreed timelines. The contract was signed in 2015.
In September 2020, Zesa abandoned its Mutare Peaking Power Station project, which was supposed to be completed in 2022. Zesa said it abandoned the project, which was envisaged to contribute as much as 120 megawatts to the national grid, because using diesel to generate electricity was costly.
The 100MW Dema Emergency Power Plant (pictured), powered by diesel and built in 2016 by Sakunda Holdings, has also been abandoned.
According to Gata, the failure of several other power generation projects to take off is not surprising mainly because they were either not bankable or were undertaken without due diligence and feasibility studies.
“We have a number of projects that have been reported in the media, but they have not proceeded because I believe as a nation we still have to learn a lot about what is called country risk,” Gata told editors during the visit.
“Quite a number of these (projects) were white elephants at birth. They were born deformed. If we are developing a project such as in Hwange here, there are phases that are mandatory to be followed and to be appreciated for their importance in the project development programme.”
China’s SinoHydro Corporation is undertaking the expansion project. The firm began working on Hwange’s units 7 and 8 in 2019.
Pre-commissioning tests at Hwange are expected to commence this month and, if successful, 300 megawatts could be added to the national grid, while another 300MW could come on board upon completion of the project in March next year.
China’s Export-Import Bank is providing a loan for the project, 80% of it at concessionary rates and 20% at commercial rates.
“Here is a list of projects that went ahead without bankable feasibility studies: Batoka Hydro; Mutare Peaking, which has been cancelled; Gwanda Solar, which is in difficulties; Dema, which has been cancelled; then we also have project start-ups without policy support,” Gata said.
“We have over 100 IPP projects that have been licensed that are paralysed because policy does not carry them. In the normal progression of what I call the development phase, before the joint development agreements, you are syndicating the equity and bringing investors in the process.
“In the projects that I listed, what killed them, those that were killed, is lack of market due diligence. We have a list of projects that the banks, all these big banks, are not coming to the party because they say how can we lend to ZETDC which is selling electricity at a loss? When you come to currency risk, the lender will say ‘how can I lend in US dollars if you are collecting RTGS to repay the loan?’.”
Zimbabwe has a deficit of over 1 000MW of electricity due to reduced power generation, as well as antiquated equipment at Hwange Power Station.
The low water levels at Kariba Hydro Power Station have aggravated the situation.
The Zambezi River Authority (ZRA), a bi-national organisation overseen by Zambia and Zimbabwe, ordered suspension of the Kariba Hydro Power station, until January 2023, plunging many parts of the country into darkness.
ZRA said the Kariba South Bank Power Station (KSBPS) had utilised 23.89 billion cubic metres (BCM) of water, accounting for 1.39 BCM (or 6.16%) above the 2022 water allocation of 22.50 BCM.