16 June 2017

Zimbabwe: Sino Hydro to Hold 36pc Hwange Equity

Sino Hydro, the Chinese company which won the engineering procurement and construction contract for the 600 megawatt expansion of Hwange Power Station, will have a 36 percent stake in the power project for at least six years.

National power utility Zesa Holdings will hold the balance of 64 percent in the special purpose vehicle, Hwange Electrical Supply Company, set up for the expansion project.

According to Zesa Holdings, the parent company to tenderer Zimbabwe Power Company said the arrangement was part of conditions precedent from the original equipment manufacturer for the project. "This was part of the conditions precedent that the Original Equipment Manufacturer (that Sino Hydro) has to be part of the process to ensure the smooth operation of the (Hwange) plant for at least a period of six years," said Zesa.

This will help avoid similar technical problems such as encountered by Botswana with its Morupule power station at a time the southern African country was facing power deficit. Zimbabwe cannot afford any slip ups in its power projects as it bids to close its supply deficit, with demand currently at 1 400MW while supply stands at around 1 100MW to 1 200MW.

The 600 megawatt Chinese-built power plant has faced persistent technical problems since it was commissioned in 2012. Hwange will also have its capacity extended by 600MW. Botswana's Morupule B coal-fired power station, built by the China National Electric Equipment Corporation at a cost of $970 million, has often broken down, leading to a reliance on diesel generators and imports from South Africa.

And the original equipment manufacturer for Hwange wants to avoid a situation that could jeopardise the investment. "This allows for quality control during the construction period as the OEM has responsibility of maintenance after completion of the project. It also allows for a smooth ZPC takeover as the OEM will be in place to effect training and skills transfer. After 6 years our partner has the option of a gradual pull out after reviews have been conducted," Zesa added.

Financial closure for the project to be undertaken, an engineering procurement and construction contract of $1,1 billion has already been reached with all conditions precedent issues having been met. The power utility said yesterday that it was only waiting Government approvals in China.

Sino Hydro was also contracted to extend the 750MW Kariba South Power Station by 300MW with construction having covered more than 80 percent of the works and one of the two generators will start feeding the grid in December.


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