THE parliamentary portfolio committee on Mines and Energy says it will lobby for deferment of all Zimbabwean-imposed statutory fees to lower the overall cost of the project to increase generation capacity at Kariba South Hydro Power Station. Kariba South’s capacity of 750 megawatts will be expanded by 300MW, as part of Government’s efforts to increase national output to close the electricity demand deficit. Other projects are planned in the country.
Zimbabwe requires 2 200MW at peak of demand, but it can only generate an average of 900MW due to limited generation capacity and shortage of water needed to generate power at the Kariba hydro power plant. The contract for expansion of Kariba South, was awarded to Sino Hydro at an engineering procurement and construction cost of $354 million, but it is expected that the total cost of extending Kariba South will be $533 million.
However, the EPC cost to increase the power plant’s capacity rose to $369 million due to inflation in China after implementation of the project was delayed. Project implementation would not start before financial closure.
Price adjustment was provided for in the contract with Sino-Hydro in the event the consumer price index rose in China, where the equipment for the project is being manufactured, before financial closure. Last week legislators visited Kariba to familiarise themselves with the ongoing Kariba South power plant expansion project and to get first hand insight into the extent of the falling water levels in the Kariba Dam.
The law makers have in the past expressed serious concerns about the total cost of expanding the power station’s production capacity and the impact on consumers as loans for the project will be paid from sale of electricity.
A special purpose vehicle had to be created to warehouse the assets of the newly formed. Kariba Hydro Power Station company, with revenue generated from the old and new plant ring fenced to clear the interest cost component and the loan capital borrowed from China to finance the project.
As such, legislators in the portfolio committee, which has oversight on mines and energy in the country, believe deferring the statutory fees would lower the project cost and potential burden on the consumers of the power.
Statutory fees payable by the Zimbabwe Power Company, which the lawmakers want deferred, include $4,4 million to National Parks and Wildlife Management Authority, $1,2 million to Zimbabwe Energy Regulatory Authority and $2,7 million to Environmental Management Authority.
Acting chairperson of the parliamentary portfolio, Simbaneuta Mudarikwa said extension of Kariba South’s capacity is a national project and that all statutory fees must be deferred for some time.
“Kariba South bank extension is a national project, so all other statutory fees must be deferred until such a time that the project is completed,” he said. “There is need for deferment of all statutory fees because we have no electricity and it is a national project, but we are the same people wanting to destroy the revenue base for the national project,” the MP said.
Deferring the statutory fees payable on the project would also lessen the financial burden of implementing the projected on ZPC, which has to raise other resources required for development of the national power project.
This is because the contractor, Sino Hydro, is only proving $369 million, while ZPC has to secure shortfall for the total project cost of $533 million. As such, ZPC borrowed $160 million from Standard Chartered Bank.
This would fund other obligations on ZPC, including $28 million for the escrow account holding the loan and for loan servicing, $48 million to spruce up the existing plant, which will finance interest payments, $15,7 million for advisors to different aspects of the deal and $7 million initial deposit.
Legislators also got first hand sight of the drastic drop in the water levels in Kariba Dam due to a poor hydrological year around the Zambezi River, which supplies the dam, catchment area in the last season.