16 March 2018

Zimbabwe: Gwanda Solar Project Collapses

Photo: Sir Wicknell/Facebook
Businessman Wicknell Chivayo.

The US$200 million Gwanda solar project has all but collapsed as controversial businessman Wicknell Chivayo has expressed fears that the fraud and corruption charges levelled against him by the Zimbabwe Power Company (ZPC) will deter potential project funders including China Exim Bank, resulting in the termination of funding negotiations.

Chivayo's company Intratrek (Pvt) Ltd and ZPC signed an Engineering, Procurement and Construction (EPC) contract for the 100-megawatt solar project in October 2015.

Letters between Intratrek and ZPC reveal that Chivayo believes ZPC had breached the contract between the two parties by calling in investigators.

Intratrek was paid US$2 million to carry out a feasibility study and US$5 million for site establishment works, ground clearance and construction access roads at the project site, despite not having a bank guarantee.

Nothing meaningful has been done at the site.

In a letter dated January 15, 2018 to ZPC acting managing director, Joshua Chirikutsi, Chivayo argued that the parties should solve the dispute before the matter is referred to the Dispute Adjudication Board.

"As a direct consequence to the employer's ill-advised and duplicitous conduct, Zacc has instituted a misled criminal investigation into the affairs of the contractor. These investigations have only served to be an antagonistic and hostile factor to the conclusions of negotiations on funding the EPC contract with institutions such as CBZ bank. Zacc has since served CBZ with a warrant of search and seizure empowering the investigating officials the authority to among other things, inspect the contractor's bank statements and enquire on information pertaining to the operation of the account," Chivayo highlighted.

"The net effect has not only been that of a breach of the EPC contract with regards confidentiality and non-disclosure by the employer, but more detrimental in that the EPC funders are likely poised to suspend and or terminate all funding negotiations with regards the EPC contract, much to the negation of commendable steps taken by the contractor towards achieving financial closure."

Chivayo said: "In the spirit of achieving financial closure in the most expedient of time, we also engaged CBZ to issue bonds as a mechanism of funding the project."

He highlighted that the company was among other actions ". . . expediting the issue of the loan application letter to China Exim Bank, as well as arrange various meetings with China Exim Bank and Sinosure Shangai branch which resulted in term sheets being issued."

Chivayo in the letter said he wants the matter to be settled according to the EPC contract which he said ZPC had violated when they filed fraud charges against him in December 2017.

He accuses ZPC of violating provisions of the EPC contract to evade liability from a government probe.

"In the process of doing so the employer has callously demonstrated its disregard of the principle of sanctity and privity of contact which the EPC contract is fully subject to," Chivayo said.

He accuses ZPC of disclosing and volunteering "unsolicited" confidential information to the Zimbabwe Anti-Corruption Commission (Zacc) and financial institutions who are key in the funding of the EPC contract, prejudicing his company.

"Equally damaging has been the employer's negligent leakage of the confidential information into the public domain in a manner calculated at inviting undeserved censure and condemnation of the contractor and its managing director as a fraudulent, corrupt and duplicitous organisation bent on unduly benefitting from state funds," Chivayo said.

Citing various clauses, he said the conduct of ZPC amounts to a gross violation and a material breach of the peremptory.

According to Chivayo, the repudiation of the terms of the contract demonstrates the lack of any intention for ZPC to remain bound by the terms of the EPC contract.

In defence of the funds paid to him, Chivayo said the contract states that prior to the commencement of the EPC contract, the employer and the contractor may, subject to availability of funds agree to undertake all or part of the initial activities following the contract's effective date.

"Of the pre-commencement works the contractor was contractually obliged to obtain, establish or conclude the following as the case may be: obtain a feasibility study in the manner outlined in the schedule 11 and at a total cost of

US$2 117 960 . . . carry out site establishment works, ground clearance and construct access roads at the project site in the manner outlined in the schedule 11 and at a total cost of US$5 111 224.

He said the feasibility study was carried out consequently and in compliance with the provisions of the contract and was dutifully certified by ZPC's executive management.

In the letter, Chivayo goes on to explain that site establishment works were carried out and ZPC paid the sub-contractors directly.

He said the works include ground clearance, fencing, signage, as well as construction of temporary housing and ablution facilities.

The works, according to Chivayo, were to be completed on or before December 31 2017, but the timeframe for the implementation was delayed and hindered as a result of ZPC's "unwarranted and uncontractual" institution of "speculative and fictitious" criminal charges against him.

"As a direct result therefore, the subcontractor's limbo and anxiety with regards the credibility, veracity and ultimate outcome of matter stalled progress on site and the due date for completion became impracticable," he said.

"Further the employer has inordinately delayed in effect the payments due for the works carried out by the sub-contractors, thus further delaying the completion of the works within the contractual timeframe."

Chivayo said Intratrek requested an extension of the period of the site establishment activities.

He said he does not understand why ZPC filed fraud and corruption charges when it had signed an amendment to extend the period of pre-commencement works and conditions precedent to commencement.

Chivayo argued he did not misrepresent any facts to ZPC as alluded to in the allegations being investigated by Zacc, given the obligations of each party to the other were governed by the terms of the EPC contract. He also argued that ZPC had a contractual obligation to refuse processing any payment without satisfaction of the relevant conditions and in the case demand advance payment guarantee.

"It goes without saying that this matter which has cunningly found its way before the criminal justice system is, in fact, a civil dispute, which must be resolved through the manner provided for in the EPC contract," Chivayo said.

In a telephone interview this week, he said despite many meetings being held "the EPC issue has not been resolved as yet but we are in the process of negotiating".

Appearing before the mines and energy parliamentary portfolio committee this week, ZPC board confirmed Chivayo was paid US$7 million before the parastatal had secured land for the project.

Energy minister Simon Khaya Moyo last month said government had ordered a forensic audit to look into the administrative, labour and financial matters. The probe will also look at energy deals entered into by ZPC.

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