Energy

Govt To Buy Dormant Dema Power Plant

TINASHE MAKICHI/TAURAI MANGUDHLA

The government is considering buying the dormant 100MW Dema Emergency Power Plant from Sakunda Holdings and Aggreko at a time the economy is facing erratic fuel supplies as it seeks to ease electricity shortages currently affecting industrial and domestic consumers, Business Times can report.

The proposed acquisition, however, is likely to raise eyebrows given the controversy surrounding the establishment of the plant as well as the current fuel shortages. Zimbabwe, which requires about 1800MW but is currently generating less than 600MW, is experiencing blackouts on a daily basis due to a reduced water level at the Kariba Dam and inefficiencies at the thermal power plants at Hwange, Bulawayo, Munyati and Harare.

This has seen the state-owned power utility ZESA importing expensive electricity from regional suppliers, mainly from Eskom of South Africa and Hydro Cahora Bassa of Mozambique. The government’s bid to buy the Dema project comes after Sakunda and Aggreko had expressed their intention to resume power production at the emergency diesel power plant, which has been under care and maintenance since last year.

It is understood that the process to dispose of the plant began last year when the government started working on a multimillion-dollar structure to pay the UK-based global technology firm Aggreko for electricity supplied from Dema to the national power grid.

Aggreko directors, according to sources, visited Zimbabwe last year and met government officials to finalise the terms of the facility, but the proposal faced resistance from some bureaucrats. Information gathered by this paper shows that the Dema plant has 230 generators which consume 400,000 litres of diesel a day, running for at least 12 hours.

The plant was constructed without the prerequisite environmental impact assessment. Sakunda Holdings which has also been funding Command Agriculture was contracted to set up a 200MW emergency diesel-powered plant in Dema together with its technical partner Aggreko.

This paper was told this week that Sakunda plans to dispose of the asset following revelations that the company had accumulated a debt of close to US$2m to Aggreko for being the custodian of the plant, which has been dormant for over a year now.

The Minister of Energy and Power Development, Fortune Chasi, confirmed that the government was “definitely looking at various solutions of power generation and that includes Dema”. Well-placed sources familiar with the developments said negotiations between the government and the two current owners of the plant were going on.

No figure has been agreed yet.

“The government approached Sakunda and Aggreko with a proposal to buy the Dema power plant for an undisclosed fee. Negotiations are ongoing on the fee to be paid by the government,” the source said.

“There are various issues that need to be ironed out before an agreement could be reached. This is the cheapest emergency source of power in the PTA SADC region.”

Sakunda Holdings is owned by business tycoon Kuda Tagwireyi while Aggreko is a UK-based supplier of temporary power generation and temperature control equipment. The Dema project was mooted by the government, together with Sakunda and Aggreko, as a measure to ease Zimbabwe’s acute power shortages.

The US$250m plant was set up to provide emergency power in case of electricity shortages. But it has been mothballed because of several challenges. Business Times is informed that the plant has not been operational for some time now as Sakunda has been struggling to access fuel to service it.

Initially awarded National Project Status, the project saw Sakunda being exempt from paying duty on fuel imported for it. The Dema plant was built in 2016. It has an installed capacity of 200MW from 228 diesel generators.

However, this was reduced to 100MW with 111 generators. Between 25,000 to 27,000 litres of diesel are needed to produce the 100MW. The Zimbabwe Electricity Transmission and Distribution Company (ZETDC) decided to purchase power from Eskom in South Africa because ZETDC was buying electricity from Dema at too high a cost, at US$0.1345 per kilowatt/hour.

This led to the plant ceasing operations in mid-2018.

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