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Hwange colliery

Business Reporter
HWANGE Colliery Company Limited is negotiating with Chinese firm, Taiyuan Sanchin Economic and Trade Company to terminate the parties’ build, own, operate and transfer (BOOT) agreement for Hwange Coal Gasification Company.

The coal mining giant decided against its earlier plan to construct a new coke oven plant (battery) in the short -term, and wants to refurbish the old one. A new coke oven battery would be built in the future, HCCL said.

HCCL had entered into a BOOT agreement with TSEC, to build a coke oven battery with capacity to produce 300 000 tonnes annually, but instead the Chinese installed a battery of half the agreed capacity.

The relationship between the two parties has always been strained with HCCL earlier accusing TSEC of failing to meet some contractual obligations and also externalising foreign currency running into millions of dollars.

Chief executive Thomas Makore told The Herald Business that HCCL is negotiating with TSEC to terminate the 10-year BOOT agreement prematurely so that HCCL does not have to buy a new battery in the short-term.

“We are following a phased approach in terms of coke oven battery capacity. We are a 25 percent shareholder in Hwange Coal Gasification. That BOOT agreement had a tenure of 10 years, so we are negotiating to terminate it early so that we takeover that battery immediately,” Mr Makore said.

HCCL is experiencing serious production challenges after acquiring faulty equipment from Bharat Earth Moving Limited (BHEL) of India, which has seen output falling 30-40 percent behind the 350 000 tonne target by September.

HCCL said coal output declined to 1,55 million tonnes in the year to December 2015 from 1,88 million tonnes over the same period the prior year, 2014.

Production challenges come at a time when demand for coal is not growing given viability problems facing its major customer ZPC, most industrial users and the decline in usage by tobacco farmers.

Mr Makore said that while toll production of coke is an option, the company had not started pursuing this alternative option and so will not be producing coke, at least in the near foreseeable future.

HCCL’s loss widened to $115 million in the year to December 2015, from $38 million in the comparative period after the company recognised a liability to Zimbabwe Revenue Authority, which was accumulated over six years.