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Covid-19, funding constraints delay Hwange expansion project

By Tinashe Mungazi

Delays in contractual payments and Covid-19 have seen progress at Zimbabwe Power Company 600MW stage 7 and 8 expansion project delaying by 10 months.

The USD1.4 billion project being undertaken by Chinese contractor, Synohydro Corporation was supposed to commission the first 300MW unit sometime in October this year but will now likely go online in January 2022.

The contractor is reportedly owed USD128m.

The project is envisaged to improve power supplies and reduce the import bill of electricity from other countries.

According to the site project manager, Engineer Forbes Chanakira the Covid-19 pandemic as well as late payments to the contractor dealt a blow to progress at the power station.

“We are expected to have started paying towards the loan that was extended to us by the government of China but of late we have paid about usd15m and efforts are underway to mobilise more funds to pay towards this facility. So in total we are owing about USD33m and we have paid about USD15m and require USD18m towards payment of this so that we can normalize the disbursements on the payments.

If you could assist us with the unlocking this usd18m as well as motivate for a tariff adjustment with which we should be able to sustain payments of these obligations. As result of these delays in payments the contractor instituted a contractual clause were they reduced the rate of work. It’s a repertory remedy which is afforded to the contractor through the contract which they invoked. From the reduction in the rate of work they are saying because of the slowness they have incurred a cost of about USD90m as well as financing charges to tune of USD9m.  Another key reason for delay is we have Covid 19 which has affected design because that time when it happened especially in China they couldn’t do design face to face, manufacturing and logistics, ” he said.

Eng. Chanakira who was briefing the minister of State for Provincial Affairs and Devolution for Matebeleland North, Richard Moyo during a tour of the station today said they were engaging the contractor on the matter to speed up on lost time while calling on government intervention.

“Of-course we are still deliberating and negotiating with the contractor on the calculation of the actual figures. We should have been in the 34 month were we should have expected to have started up the unit 7 but we haven’t done so. We expect to scale up so that we meet the adjusted timelines.”

He said the project was now 64.63 percent complete with adjusted timelines indicating that that unit 7 is expected online in January next year.

“In terms of progress we should have been at 90.08 percent in terms of the overall project completion however because of the twin effects of Covid 19 and reduced rate of work or delayed payments we are at 64.63 percent making a variation of about 25.45 percent. From our evaluation we currently have a delay of about 258 days which delay is still being evaluated and negotiated between ourselves and the contractor because we have slight variation in terms of how we approach calculation of delays however we are now doing the final process of computing. We expect now the unit startup which was supposed to happen in April to now happen on 8 January 2022 for unit 7 and the handover Is expected in July 2022 that is if all things become equal. Otherwise, the main delay will continue as long as the major issue, which is funding is not addressed.”

Meanwhile, Moyo commended the progress arguing that he would engage the minister of finance to intervene in the delay of payment challenge as the project was essential in the country’s economy growth.

“I’m impressed with the work done so far given challenges of Covid-19 and the issue of payment. Yes they say they are behind with 250 days and we are going to push the ministry of finance to release funds on time so that they can be able to meet set timelines, ” said Moyo.

The project is has so far employed over 2000 locals while some local businesses have also been contracted.

A special purpose vehicle,  Hwange Electricity Supply Company (HESCO) in which ZPC has a 64 percent shareholding with Synohydro having a 35 percent stake will run the stage 7 and 8 project after which the later will assume total control in 6 years time after all contractual agreements have been met.

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