‘ZPC could have saved about US$200m in Dema project’

THE Zimbabwe Power Company (ZPC) could have saved approximately USD$200 million over three years had it explored other alternatives such as the use of liquid petroleum gas instead of diesel powered generators at the controversial 200MW Dema Diesel Power Plant, it has emerged.

Elias Mambo

Sakunda, which is owned by Zanu PF benefactor Kuda Tagwirei, partnered President Robert Mugabe’s in-law, Derrick Chikore, brother to Simba who is married to the president’s daughter Bona, in the dodgy and costly deal without going to tender.

The project is set to trigger an electricity charge hike which will affect all Zimbabweans, while crippling the Zimbabwe Power Company and Zimbabwe Electricity Transmission and Distribution Company.

APR Energy Holdings, a company which initially won the tender, but was side-lined in favour of Sakunda Holdings, said the diesel-powered reciprocating engines were “not the most practical or cost-effective option available to ZPC or its customers.”

APR chairperson and chief executive officer John Campion said ZPC could have saved US$200 million if cheaper options were explored.

“Had the options for power generation truly been open-ended, we would have recommended a solution using state-of-the-art mobile gas turbines that could run on conventional fuels such as diesel, as well as lower-cost and widely available alternatives such as liquid petroleum gas, naphtha and kerosene. The turbines’ ability to switch seamlessly between fuels allows power generators to adjust fuel supply based on cost and availability,” Campion said.

“The primary cost factor for fossil-powered generation is fuel, and current economic forecasts widely agree that global petroleum prices are rebounding. However, with the growing availability of natural gas worldwide, prices for gas liquids such as LPG are expected to remain flat through at least to 2018, resulting in an anticipated cost differential of approximately 50% compared with diesel.

“Based on these assumptions, ZPC could save approximately US$200 million over three years while operating 200MW of turbine-powered generation on LPG.”

Campion said LPG also had significant environmental advantages compared to the use of diesel.

These include “up to 93% less NOx (nitrogen oxides) when compared to diesel generators, with virtually no sulfur dioxide emissions and far less particulate matter.”

“(LPG also produces) 20% less noise versus diesel generators and significantly smaller footprint required to generate the same amount of electricity due to the superior power density than diesel generators,” he said.

APR is a United States-based energy company with vast experience in energy generation.

It has installed over 3GW of capacity across more than 30 countries.

Sakunda was handpicked for the project after the intervention of the Office of the President and Cabinet despite not having experience in power generation unlike APR. The company also did not take part in the tender process.
The awarding of the project to Sakunda was contrary to tender requirements which stated that “the bidder must have experience in previous jobs of similar magnitude and expertise of staff.”

Sakunda Holdings is a fuel supply company that is now venturing into power generation without capacity and experience.

This came as it emerged that the Dema project will consume 12 million litres of diesel per month which will be imported duty free.

ZPC sources this week said the power plant whose costs were revised last week as reported by this paper after an outcry within and outside the power utility company “will use 12 million litres of diesel every month to produce 536GWh.”

Initially, as shown by the original tender documents, the Dema Diesel Power Plant was meant to consume 24 million litres of fuel per month. However, the deal — which was initially US$194 million a year — was revised last week and reduced by 50% meaning the fuel costs and amount were reduced by the same margin.

According to the original tender documents seen by the Zimbabwe Independent, “the contractor will be running the plant, supplying the diesel with costs exclusive of duty”. The documents also show that The Zimbabwe Electricity Supply Authority will bear other costs which include “site security, water supply and stock of non-standard equipment (duties and taxes).”

The Dema plant will produce electricity at 15,04c/kWh which is expensive compared to other plants.

By comparison, electricity generated at Kariba costs 4,11c/kWh, while that from Hwange Thermal Station costs 6,97c/kWh, making expansion projects far cheaper. The Dema deal, documents further show, will have serious cash-flow implications on ZPC, hence its recent application to increase the tariff by 49%. This means Zesa’s struggling customers, already battling with huge bills and poor service delivery, are now being asked to subsidise corrupt activities.

ZPC is also importing electricity from South Africa, Mozambique and Zambia at lower prices, compared to producing electricity using diesel generators, hence further objections from ZPC.

Zimbabwe imports electricity from the Zambia Electricity Supply Corporation at a cost of 5,18c/kWh, Mozambique’s Hidroeléctrica de Cahora Bassa (HCB) at 5,66 c/kWh, South Africa’s Eskom at 13,32 c/kWh) and Lunsemfwa of Zambia 8,00c/kWh.

The power utility prefers expanding local electricity generating infrastructure or increasing imports than engaging in a costly and crippling diesel power generation project to benefit government cronies.

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