4 January 2013

Zimbabwe: Power Tender Sparks Furore

THE signing of a contract between Zimbabwe Power Company and SinoHydro, the winning bidder for the expansion of Kariba South Power Station, has sparked a furore amid indications that the deal breached procurement regulations.

This could delay the expansion of the power station that was expected to increase power generation by 300 Megawatts as the State Procurement Board might be forced to investigate the matter, sources said yesterday.

The SPB recently awarded SinoHydro of China - a sole bidder for the project - the tender for engineering, procurement and construction of the Kariba South Power Station expansion project.

This was after the firm tendered a bid for about US$368 million, which was reduced to US$355 million after Government resolved to scrap excise duty for the importation of equipment.

However, ZPC signed a contract with the Chinese firm last month for US$390 million, without consulting the SPB on the new changes.

SinoHydro representative in Zimbabwe, Mr Wu Yifeng, yesterday confirmed there had been a variation to the original price.

"The actual contract was for US$355 million, but the total price that we signed the contract for was US$390 million, including contingencies," said Mr Yifeng.

He said there was nothing wrong with the variation because both SinoHydro and ZPC had approved it.

"It is the final price that was approved by both sides. ZPC put variations for the contingencies. We did not include the contingencies in our bid because they had not requested for it," he said.

He said the contingencies were to be agreed upon during contract negotiations.

However, a well-placed source said this was in breach of the procurement regulations.

"Section 26 of the procurement regulations states that in the event of any variations, it should be approved by the SPB. Contingencies should be sanctioned by the SPB but in this case they (ZPC) sanctioned it on their own. Besides, the bidder should have indicated their contingencies in their bid.

"This is a breach of the procurement regulations because the ZPC usurped the powers of the SPB. We will obviously act to address that anomaly because laws are laws," said the source.

Efforts to get a comment from ZPC managing director Mr Noah Gwariro were fruitless.

Energy and Power Development Minister Elton Mangoma yesterday said he had not yet received communication from the SPB on the latest developments.

"I have not received any correspondence from the State Procurement Board if they have any concerns with regards to that. At this stage I am not aware of any additional issues to be sorted out.

"But let me say contracts for such big projects require an understanding of issues that are different. Timing comes into play because delay or fast tracking of the project will result in prices either going up or down," said Minister Mangoma.

He said Government set conditions for the contract in the implementation of the project.

"We have told them that we don't want them to blast into the rock like they were doing on the Zambian side (Kariba North). We don't want to weaken the foundation of the dam wall. The geology of the rock on the Southern side is different to the geology on the Northern side. We have agreed that they should not blast because the rock here is softer compared to the Zambian side," said Minister Mangoma.

SPB chairman Mr Charles Kuwaza said his office was yet to receive communication on the latest development.

Mr Yifeng said the project that is expected to take four years, would start as soon as the Export-Import Bank of China, the financers of the project, release the money.

This, he said, would be expedited if the Zimbabwean Government settled its US$27 million debt to the bank.

"The Ministry of Finance has already requested ZPC to pay the money, but they have a challenge in raising that money.

"They, however, agreed to talk to our head office in China to see if SinoHydro can help for the project to start soon," said Mr Yifeng.

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