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Industry unhappy with Zesa deal

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Zesa Holdings may be forced to rerun a tender notice inviting its large customers to purchase power from its small thermals in Bulawayo, Munyati and Harare under amended terms after noting interest in the deal is lower than anticipated, an insider said, exactly a week before the expression of interest closes.

In the tender notice, Zesa encouraged its bulk-power consumers to consider the independent power purchase deal, advising there would not be an end to Zimbabwe’s power crisis for the next three to five years.

“The national demand and supply gap remains wide with load shedding remaining excessive coupled with attendant drawbacks to commercial, industrial and mining productivity,” Zesa said.

“While strategies to correct this supply gap are being explored, the results will only register in the long term (three to five years) if investments (in additional power generation capacity) are made now.”

However, all key projects, notably Batonga Gorge and Kariba and Hwange Extension, are still gridlocked at pre-feasibility stage owing to funding constraints, implying the country’s power crisis will persist, and probably aggravate beyond the projected period.

A source with Zesa says a majority of those targeted want the national power utility to lease the assets under a rehabilitate operate transfer (ROT) arrangement, instead of a power purchase contract that would expose them to double the cost of drawing down on the national grid.

“Interest in the three thermals is quite high, but interested parties are not happy with the terms,” the source said, adding only one company had made a formal bid for the tender, which closes on Friday, in its second week.

Under the proposed power purchase agreement, Zesa would rehabilitate and retain control of the power plants and dedicate a specific load-flow to interested parties at $0,13 per kilowatt-hour —nearly double its retail price of electricity — guaranteeing uninterrupted power supply over the period covered by the agreement.

The coal-fired power plants with an aggregate installed capacity of 310 megawatts (MW) are currently operating at sub-optimal levels and jointly require more than $150 million to refurbish and re-rate.

Since the economy dollarised last year, local industry, through its representative bodies, has lobbied consistently for a cut in Zesa’s retail tariff of $0,0753, arguing the high cost power udermined their cost competitiveness in export markets.

Zesa says it crafted the power purchase deal with a three-pronged aim.

Firstly, the arrangement would offload the costs of running the aged plants from the government entity. Secondly, it would save the operations of bulk-power users currently exposed to unscheduled load-shedding.

Lastly, plant dedication would reduce drawdowns on the national grid and ameliorate the country’s power crisis for the time being while the country makes efforts to invest in additional power generation.

“Zesa is currently faced with capacity constraints to fully utilise these facilities commercially,” Fullard Gwasira, Zesa’s spokesperson, said.

“Producing power at these power stations is more expensive. It does not make commercial sense for Zesa to bring coal from Hwange to produce power at 13 cents per kilowatt-hour and retail it at 7,53 cents.”

Power demand has surged in the last 18 months as firms intensify efforts to recapitalise and boost capacity utilisation, led by mining and manufacturing industries.

From an all-time low of 750MW in 2008, peak demand has surged to 2 100MW to 2 700MW against average dependable supply of 1 450MW, creating a deficit of at least 650MW.

Harare’s base demand alone currently runs at 400MW.

Miners and timber producers are currently negotiating a deal to import power from Mozambique on their own and wheel it through Zesa to head off the power crisis increasingly stoked by rapid power demand growth.

Gwasira said the small thermals were the only conceivable interim relief measure for bulk power users as they still have a significant lifespan after undergoing refurbishments recently.

At 80MW against an installed potential of 120MW, the Bulawayo power station has the highest dependable capacity, followed by Munyati at 66,7% and Harare at 45%.

Munyati, the biggest of the three power stations, was built in 1938 to power gold, copper, stibnite and tungsten mines in the area.

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