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A Chinese company duped the State Procurement Board and the Zimbabwe Power Company and was awarded a billion dollar tender for the expansion of Hwange Thermal Power Station when it did not have funds for the project.The bungling by the SPB in awarding the company such a big project of national importance has raised eyebrows on its selection process and lack of due diligence.

Even ZPC officials who flew to the offices of China Machinery Engineering Company in Sri Lanka and China to familiarise with its work returned happy and convinced.

It then took the SPB and ZPC officials more than a year to realise that the Chinese company did not have the funds to carry out the project, before settling for the second highest bidder, Sino-Hydro, another Chinese firm.

The situation is now complicated as Sino-Hydro has already been contracted on another mega project — the Kariba South Hydro Power Station — and it remains to be seen if it has the stamina to carry out two projects con-currently.

CMEC won the tender after bidding US$1,3 billion in April 2013, but made no headway in accessing funding for the project more than a year after being awarded the tender.

“Problems emerged when contract negotiations started and CMEC suddenly shifted goal posts and failed to provide the funding solution as initially promised,” said ZPC public relations executive Ms Fadzai Chisveto in a statement yesterday.

“This brought Government and ZPC to the realisation that CMEC were not capable of providing what they had promised, hence the cancellation of the contract award.”

It has emerged that the firm failed to raise the performance guarantee fee that a winning bidder is obliged to pay as security.

Sino-Hydro has taken over the project on the basis that it was the second highest bidder with a price of US$1,1 billion.

“Part of the reasons for the award to CMEC included the organisation’s technical competence as well as their commitment to 100 percent funding for the project,” said Ms Chisveto.

“As part of due diligence, a team of technical and financial experts from ZPC flew to Sri Lanka and China to investigate CMEC’s capability to handle a project of this nature.

The results did not disappoint and while in China, CMEC committed itself to a superior funding proposal which entailed 100 percent funding for the project, a proposal which was ideal for ZPC.”

The expansion of Hwange Power Station is expected to see two units with a combined capacity of generating 600MW being built.

Sources yesterday said that the required performance guarantee fee was usually 5 to 10 percent of the total amount involved.

“The fact is that the CMEC officials lied that they could raise the security, yet in actual fact they knew they did not have the money,” said a source from ZESA Holdings, the parent company for ZPC.

“When due diligence was done, assets and examples could have easily told ZPC and SPB officials that the company was not capable.”

Energy and Power Development Minister Dzikamai Mavhaire confirmed that Government had cancelled the CMEC contract.

“CMEC failed to conclude the contract within stipulated time frame that they had agreed upon with the Zimbabwe Power Company and the Government of Zimbabwe hence  the tender was cancelled in May 2014,” he said.

“The Government, through the Ministry of Energy and Power Development has therefore directed that the tender be awarded to Sino-Hydro. We would like to assure the nation that the Hwange Power Station expansion project remains one of our major priorities and we will continue to update the public on its status.”

The six units at Hwange are producing about 607MW despite having an installed capacity to generate 900MW.

The decision by the Government not to re-tender could indicate a need to expedite the commencement of the project and negotiating a contract with one of the initial bidders is within normal practice.

Zimbabwe produces about 1 200MW against a demand at peak periods of 2 200MW.