40 bid for Zesa

billion to raise generation capacity at Hwange thermal and Kariba South hydropower plants.
Fifteen of the potential suitors interested in acquiring shareholding in the debt-ridden power utility are reportedly very reputable companies.
The bidding process – which opened in July this year – will close on September 13 2011 and appraisal of submissions would begin thereafter. Financial modalities of the project are expected in place by December.
Hwange has a generation capacity for 920MW, but is currently only able to produce 460MW. Kariba South, on the mighty Zambezi River, churns out 750MW.
Expansion of Hwange will cost US$2 billion and add 600MW on to the national grid. Kariba South will chip in with an additional 300MW after expansion, which is expected to chew an estimated US$800 million.
Zimbabwe is currently experiencing acute power shortages and Zesa resorts to power rationing or load shedding to balance supply and demand.
The country has not invested in new generation since independence and is currently able to produce a maximum of 1 400 megawatts a day against national demand of 2 200MW. The deficit is covered by imports.
Zimbabwe imports from regional utilities about 16 percent of the power it consumes and this translates to plus or minus US$5 million a month.
Zesa Holdings chief executive Engineer Joshua Chifamba said expansion would start when funding modalities are in place, probably early next year.
Briefing the media on Friday, he said the power project will take three to four years from commissioning the plants after sealing funding modalities.
“So far we have had 40 companies coming to collect (bid) documents. What I can tell you is that 14 of them are very reputable companies,” he said.
The Zesa boss said funding for the project would come from equity investors and project finance while export credit finance will also be considered. The third option could fund up to 90 percent of engineering work.
But he pointed out the investment and power generation project would come at a price, as the cost of power would rise to US16c a kilowatt-hour.
Local power consumers will part with at least US9,45c per unit of electricity if the recent 31 percent increase in power tariffs is implemented.
It costs about US12c a kilowatt-hour to produce power at Hwange and the cost comes down slightly when blended with generation from Kariba.
There was an outcry, especially from the industrial sector, after the Zimbabwe Electricity Regulatory Commission announced it had approved the tariff hike.
Eng Chifamba argued the power utility was justified in raising the tariffs as the previous ones were sub-economic and constraint infrastructure maintenance, which caused supply interruptions that are avoid- able.
He said Zesa has failed to maintain infrastructure as it has for a long time been charging below cost tariffs leading to an infrastructure maintenance backlog.
But industry claimed the tariff hike by the utility, which is owed about US$450 million by consumers, would cause a sharp spike in prices and inflation.
Of the debt Government owes 10 percent, domestic users about 46 percent while industry, mining, agriculture and commerce owe over 30 percent.
Confederation of Zimbabwe Industries president Mr Joseph Kanyekanye says CZI will contest the new tariffs, as they will affect viability.
Zesa claimed lack of resources and proper billing systems had been constraining efforts to recover the funds owed by consumers of electricity.
Cost reflective power tariffs have over the years scared away potential investors who could have provided capital to boost the generation capacity.
Over 13 independent power producers have been licensed but none has started work and this has been attributed to the sub-economic electricity tariffs.
Eng Chifamba said the new electricity tariffs compare well with regional utilities, especially South Africa, where power retails at US12c a unit.