Zesa needs US$300m to address backlog

ZESA Holdings has a backlog of 305 000 domestic customers who need to have electricity connected to their homes, but requires a whooping US$300 million to connect all of them, a senior official has said.

In a presentation at last week’s Chamber of Mines of Zimbabwe annual conference in Victoria Falls, Zesa consultant Engineer Cletus Nyachowe told delegates that the power utility was facing a number of challenges in providing uninterrupted power to customers, and even connecting new customers.

He called for support from the private sector.

This comes as Zesa has clinched a deal for 100MW from Zambia, with the details set to be thrashed out soon.

Additional power is being negotiated with Mozambique from its 450MW Temane gas project, in a bid to connect as many customers as possible to the grid.

Officially opening the miners’ conference, President Mnangagwa directed Zesa to ensure mining projects were speedily connected to the grid so that they start operations.

There are indications that about 25 mining projects are on the electricity waiting list, with three of them, as confirmed by Eng Nyachowe in his presentation, being lithium miners.

In respect of the domestic consumers backlog, Eng Nyachowe said: “We have a backlog of 305 000 customers that are not connected. These are customers who have built their houses and have sent in applications and want to be connected.

“We are looking at a Capex (capital expenditure) of about US$300 million to connect those customers in the next three years. So we are negotiating a facility that should help us do that. We should be able to close that very soon.”

Turning to mining companies, Eng Nyachowe said to speed up their connection to the grid, they should consider emulating the deal signed between Zesa and Dinson Iron and Steel Company last week for the construction of a 100km powerline from Sherwood in Kwekwe to the company’s steel plant in Mvuma.

Dinson is the operating arm of global steel giant Tsingshan Holdings, which has invested in a steel plant at Manhize, which will require up to 500MW, presently about a third of national power demand.

Eng Nyachowe said the mining sector was on a rapid growth trajectory which has seen capacity utilisation rising in most sub-sectors, resulting in the industry generating US$5,3 billion last year, despite challenges associated with Covid-19 and power shortages.

Formal employment in the mining sector also rose to over 37 000 last year, plus the over 500 000 artisanal and small-scale miners mainly in the gold sector.

“The mining industry is on steroids. We can actually confirm it on the supply side. Currently, we have applications for connections of up to 12 100MW in the next three years.

“Presently, mining industry capacity utilisation is 80 percent and when more capacity is achieved, demand will rise further. Right now we have three lithium mines who want power like yesterday and we are negotiating similar deals (Public-Private Partnerships). “We will offset their investment through a reduction in tariff over an agreed period,” said Eng Nyachowe.

Zimbabwe has two major power sources of electricity, Kariba South and Hwange Thermal power stations.

Kariba has an installed capacity of 1 050MW but that output cannot be obtained all the time given variables such as water levels, considering that the water is shared between Zimbabwe and Zambia.

So, dependable capacity from Kariba South is up to 600MW, while dependable output at Hwange is up to 450MW, again due to challenges including aging equipment.

The country’s three small thermal power stations in Munyati, Harare and Bulawayo are equally dogged by challenges and are generating an average of 30MW, despite having an installed capacity of about 90MW each.

In the short-term, Eng Nyachowe said they have the 100MW deal signed with Zambia and they are “just going through the final stages of exchange control approval to access that 100MW”.

“Then we have another route of Mozambique; we concluded the negotiations recently. And then of course the route to South Africa.”

The forecast for the year 2025 is that Zimbabwe would require 3 943MW, which is about double the 1 700MW demanded today, at a time when production is about 1 300MW, with the balance being met through imports.

In fact, Zesa had obtained an investor to refurbish one of the small thermals, but the deal was cancelled at the last minute following last year’s recommendations made during the climate change conference held in Glasgow, Scotland, including that nations should considerably cut investments into coal in favour of green energy.

Now, Zesa is back in the market, looking for an investor for the small thermal station.

“The drive for green energy is real, that is the reality we need to face as a power utility,” said Eng Nyachowe, adding that they will be investing in photovoltaic plants.

“It’s something we need to look at, with the help of the private sector,” he said.

To increase internal generation, Zimbabwe is expanding life at Hwange, over and above the expansion programme that will generate 600MW when construction of Units 7 and 8 is completed.

Eng Nyachowe said for the expansion of Hwange Thermal Station’s life, Zesa has secured funding of up to US$310 million from the India Eximbank.

He said they recently concluded discussions with the project management consultants on the execution of those works.

With a current production of between 350MW to 400MW from Hwange, it is expected that after the life extension, 400MW more could be added, taking the dependable capacity to about 750MW.

The life extension will be for another 20 years and the works will be extensive, running for about 36 months.

It would be done on a Unit by Unit basis,  and we will entail taking out the Unit that would be worked on, implying a decrease in capacity during the period of life extension.

Zimbabwe will also get additional power from a new gas plant coming from Mozambique, with Eng Nyachowe saying they have already received a “formal offer”.

“We have told them that we need some more if it is available. Of course, we had to compete for that power, but 100MW has been committed to us.

“In terms of Independent Power Producers, currently there are about 94 licensed IPPs with a potential of

7000MW. Government is actively pursuing measures to get those IPPs to take off,” said Eng Nyachowe.

He said while they don’t  expect all the IPPs to take off at the same time, Zesa expects to get about 500MW from them by 2025.

There is also the recent formation of an “intensive power user group” where they expect to realise 300MW from energy efficient measures.

Under the arrangement, Zesa engaged most of the heavy electricity users, who are mainly mines, and a constitution guiding the way they operate has since been crafted.

The heavy power users will be able to import electricity directly from any power generator outside or inside the country.

“When this is operational, what this means is that we should be able to unlock those IPPs that have been sitting. The reason is that the ZETDC, which has signed off-taker agreements with those IPPs, is not viewed as a credible off-taker because of our payment history.

“So we said while we correct that, why can’t we partner with the private sector who have got more solid balance sheets, who have good cash flows and these cash flows are in US dollars.

“What we have done is to market this arrangement in the region and so far we have started in Mozambique. There is excitement about it. The 100MW coming from Temani, they actually said come with your companies, let’s talk about the pricing, let’s talk about other commercial issues,” said Eng Nyachowe.

In the long-term,  Zesa is looking forward to getting more electricity of up to 16 000MW under the 10 Gorges Initiative, which includes Zimbabwe, Zambia and Mozambique.

The 10 Gorges Initiative will generate electricity from water, which dovetails with the call for green energy.

Zimbabwe and Zambia are also re-engaging to expedite the Batoka Gorge project which has capacity to generate 2 400MW, to be shared equally between the two countries.

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