eBusiness Weekly
Golden Sibanda
Zimbabwe and the Export and Import Bank of India have concluded an amendatory agreement to extend the grace period on a US$28,6 million loan facility secured from the bank for the upgrade of Deka Pumping Station, from 3 to 5 years.
The Deka Pumping Station is a critical element of the power generation processes at Hwange Power Station (HPS). It draws water needed for power generation from the Zambezi River and pushes it down a 40 kilometre pipeline to the power plant in Hwange.
Presently, Hwange’s constrained generation potential uses 5 000 cubic metres of water to generate electricity, but will require about 6 000 cubic metres when the expansion of HPS by 600 megawatts is completed, making upgrading the pump critical.
The Deka Pumping Station system had also deteriorated over the years, affecting adequate and consistent water supply to the power station and Zimbabwe National Water Authority (ZINWA) water treatment plant.
This culminated in the Government of Zimbabwe seeking funding support from the Indian bank to upgrade the lower and upper lift pumps of the Deka Pumping Station.
The latest amendment to the original loan agreement also reduces the threshold of Indian local content in goods and services to be used in upgrading the pump station from 75 percent to 65 percent, according to Government’s general notice 79 of 2019.
This will create latitude for local suppliers to benefit from the Deka upgrade project by participating in the supply of goods and services needed to implement the project.
Finance and Economic Development Minister Professor Mthuli Ncube, in terms of sub-section 3 of section 300 of the Constitution of Zimbabwe-concluded the US dollar credit line amendment agreement in December last year. The facility was signed in 2013.
“The (US$28,6m) credit facility is for the purpose of financing the upgrading of Deka Pumping Station and River Water Intake System). (The credit facility remains in the amount of twenty-eight million six hundred thousand United States Dollars (US$28 600 000) over a period of ten years at an interest rate of 2% (two percent) per annum and a commitment fee of 0,5% (zero point five percent) per annum on the amount of credit remaining undrawn two months after approval of an eligible contract,” the notice reads.
The Export Import Bank of India (Exim Bank) early last year cancelled the tender awarded to an Indian contractor, Angelique, for the Deka Pumping Station due to non-compliance with an agreement.
Angelique wanted to implement the project in two phases rather than one phase, as initially agreed between the governments of Zimbabwe and India. This would result in the cost of the project rising by $11 million from $28,6 million to $39,6 million.
This resulted in the Eximbank of India rejecting the proposal by Angelique because it differed substantially from the original plan agreed by the two governments five years ago.
Exim Bank of India then engaged an Indian firm called Mahindra to carry out an independent assessment of the costs of implementing the Deka project in a single phase.
An independent assessment report, compiled by Mahindra, revealed that the expected cost to complete the project was now $48,1 million, creating a funding shortfall of $19,5 million.
The Eximbank of India has since reportedly agreed to provide additional funding for the Deka upgrade project and has undertaken fresh tendering process for another contractor.
The Deka Pump Station upgrade will allow Zimbabwe to increase power generation at Hwange Power Station, which forms part of Government intervention to bridge the power deficit.
Hwange Power Station will undergo a US$1,4 billion capacity extension through the addition of 2x300MW generators, from the current installed generation potential of 920MW.
However, Hwange Power Station can only generate an average of 450MW-550MW, as it has lost some of its capacity due to old equipment, which has outlived its 25 year life span.
Chinese firm Sinohydro, which completed the 300MW extension of Kariba South last year, will undertake the expansion works at Hwange Power Station.
Zimbabwe, following the Kariba South extension, now has average generation capacity of 1400MW against peak period demand for power of 1600MW.
