HomeLocal NewsDema deal escalates to US$498m

Dema deal escalates to US$498m

THE cost of the corrupt Dema Emergency Power Plant has escalated alarmingly from US$249 million to US$498 million over three years, after the government directed the controversial project’s managers to double its output to 200 megawatts at US$166 million per year as Zimbabwe fails to pay for power imports.

By Elias Mambo

Dema Power Plant — mired in brazen corruption — has sparked outrage as it becomes increasingly clear that electricity consumers and taxpayers will be further burdened with the project’s unsustainable and unjustifiable costs.

The Zimbabwe Independent can further exclusively reveal that, as the scandal snowballs into a huge storm, the government has directed the Zimbabwe Energy Distribution and Transmission Company (ZETDC) to buy 200MW of power produced at the plant at a cost of US$166 million per year after regional suppliers switched off the country due to unpaid debts.

Just last month, while presenting his mid-term fiscal policy statement in parliament, Finance minister Patrick Chinamasa said that the ZETDC signed a three-year Power Purchase Agreement with Sakunda Holdings for the supply of 100MW from the Dema Emergency Power Plant, worth US$83 million a year.

However, it has emerged that the government two weeks ago instructed Sakunda to double its output from the originally envisaged 100MW.

A visit to the power plant this week confirmed that output had doubled, given that 230 generators are now in operation, compared to 115 when the plant was producing 100MW.

The development means that the cost of the Dema Power Plant has ballooned to US$498 million over three years — up from US$249 million.

Official statistics show that as of Tuesday, the country was generating 1 057MW against demand of 2 200MW.

The power deficit has been compounded by the ZETDC’s failure to pay regional power suppliers, which has seen the foreign companies switching off Zimbabwe. The ZETDC is failing to service debts totalling US$1,3 billion.

Sakunda, owned by Zanu PF benefactor Kuda Tagwirei has, however, cashed in on the man-made problems at Zesa.

Tagwirei’s company partnered President Robert Mugabe’s in-law Derrick Chikore for the project without going to tender.

The deal, which is being supervised directly by the Office of the President and Cabinet, was initially meant to cost US$194 million a year, before it was reduced to US$83 million a year but has now shot up to US$166 million a year.

To ensure the smooth flow of the corrupt project, the government put a waiver on the import duty for fuel used at the plant so that costs remain at US15,45cents per kilowatt hour (c/kWh) insteadof US18c/kWh the company initially applied for.

The tariff, however, remains high when compared to imports from the Southern African Power Pool as well as electricity produced at other power stations locally. Electricity generated at Kariba costs US4,11c/kWh, while that from Hwange Thermal Station costs US6,97c/kWh.

Engineers at ZPC have argued that it would have been cheaper to expand capacity at existing power stations rather than setting up the costly Dema Power Plant.

Zimbabwe imports electricity from the Zambia Electricity Supply Corporation at a cost of US5,18c/kWh, Mozambique’s Hidroeléctrica de Cahora Bassa (HCB) at US5,66 c/kWh, South Africa’s Eskom at 13,32c/kWh) and Lunsemfwa of Zambia 8,00c/kWh.

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