Golden Sibanda: Senior Business Reporter
CHINESE firm, Sino Hydro, will have a 36 percent stake in a joint venture for the Hwange Power Station capacity extension project, as part of conditions from project financier, Export and Import Bank of China.Sino Hydro was contracted to extend Hwange’s generating capacity by 600 megawatts in 2014 with construction works expected to last 42 months from financial closure; which is expected in the first half of this year.
The Chinese company was awarded the engineering, procurement and construction (EPC) contract valued at $1,1 billion in October 2014 after a rigorous tender process conducted by the State Procurement Board.
Zimbabwe Power Company acting managing director Engineer John Chirikutsi confirmed the arrangement last week, but was not able to immediately provide full details on the joint venture deal.
“It’s a joint venture, Sino Hydro will have 36 percent and ZPC 64 percent. Sino Hydro will build, operate and maintain before handing over the plant to ZPC,” Eng Chirikuti said in a brief interview.
Another ZPC source said it was part of the conditions for the commercial loan provided by China Eximbank.
The highly placed source told The Herald Business that China Eximbank structured the funding deal differently from common tradition following observation of technical challenges on projects funded elsewhere.
“It was a funding requirement, the financiers sought to avoid unpleasant results from previous experiences where the contractor would leave the project soon after completing the construction, said the source.
For instance, Botswana now intends to sell a 600MW Chinese-built power plant after persistent technical problems since commissioning in 2012, according to the country’s state owned electricity utility.
Botswana’s Morupule B coal-fired power station, built by China National Electric Equipment Corporation at a cost of $970 million, has often broken down, leading to a reliance on diesel generators and imports.
As such, Sino Hydro will construct, maintain and operate Hwange power station for at least five years after its completion until the next major overhaul, which would fall due after the first five years of operation.
Sino will maintain interest and oversight of smooth and efficient functionality of the plant long after its completion.
In terms of the deal, ZPC and Sino Hydro formed a joint venture company, but finer details regarding the JV and obligations of each part were not immediately available at the time of publishing the story.
Nonetheless, it is understood the debt will be resident at ZPC.
The same arrangement, a source said, was used for Kariba South capacity extension project, which is being funded by Sino Hydro under a $354 million EPC contract deal, is a Government to Government arrangement between Harare and Beijing, but just like Hwange 7 and 8 is funded by China Eximbank.
The Chinese power plant specialist is also in the process of expanding Kariba South.
This is by adding units 7 and 8 for an additional 300MW. The existing six generators at Kariba have capacity to produce 750MW.
The Hwange (Thermal) Power Station is the biggest power plant in Zimbabwe with an installed capacity of 920 MW.
It was built in two stages and consists of 4 generating units of 120 MW each and 2 units of 220 MW each.
Technical problems due to funding induced inadequate maintenance, part replacement and upgrading exposed the plant to frequent breakdowns.
In 2009, Namibia’s NamPower agreed to help ZESA to revamp the plant’s capacity under a funding-for- power exchange deal.