eBusiness Weekly
Targets investors in India, China, SA, Japan n Discussions with Eskom for off-take ongoing
Golden Sibanda
RioZim Limited has been forced to refloat its tender aimed at raising $1,5 billion from global investors to finance a 1200 megawatt Sengwa thermal power project in Gokwe North, after initial efforts in China failed to yield results.
While the mining group is seeking roughly about $1,5 billion for the composite project, it has constituent parts that will entail development of a coal mine, power plant, water pipeline to the power station and transmission line.
RioZim, which has mining interests in gold, diamond and nickel processing also needs funding to build a town where workers at the power and coal mine will reside.
Former chief executive Noah Matimba last year said that RioZim had received many expressions of interest, most of which never materialized, but indicated that only Nigerian billionaire Aliko Dangote and a Chinese firm had recently shown “more aggression” for the project. The Sengwa power project is based on a coal resource of 1,3 billion tonnes.
Business Weekly gathered this week that RioZim had since widened its net targeting investors across the globe, especially financiers in Japan, India, China and South Africa. The request for funding proposals closed this week. However, RioZim may extend the window period depending on interest. Chief executive Bhekinkosi Nkomo confirmed the fundraise process. Nkomo said discussions with interested investors were still ongoing.
“The deadline was the August 31, 2017, but it might be extended depending on the responses that we get. So far, we have had good positive response, but if we look at it and find we need to extend we are going to do that.
“We are looking for people with a track record in the kind of project that we want to embark on because if you look at all these markets, they have had very successful projects in this area of building power stations and also capacity, so we are looking at China, India, Japan and South Africa,” he said.
This comes as RioZim acknowledged the fact that it would have to canvas in Asia and Arabia for funding with investors in the US and Europe unlikely to extend financial support to coal over environmental concerns.
“The company we were dealing with in China could not be approved by the Chinese government because it needed to be restructured. They said that it had no experience of investing overseas,” a source said. While still searching for a new partner in China, RioZim has cast its net wider amid revelations that several Chinese investors were interested.
“They said we should look for a different partner, they had put together a proposal, but State Power Investment Corporation of China, which controls all state power institutions, is the one that did not approve; they said we should ask another company so we are in the process of identifying a partner although State Nuclear Power (China) had already designed plant and other technical aspects such as bankable feasibility study.”
Business Weekly also understands that efforts to raise funding in China were being held back by concerns over the currency issues in Zimbabwe, especially the surrogate currency, bond notes, amid reservations by investors that the company might struggle to raise foreign currency to repay loans. “It is the biggest problem, but this is national, not project specific and so it does not affect us only, but it’s a major concern because when we first completed the project proposal, we did not have this problem.”
“Among their (Chinese) concerns is that they wanted to know how committed Government is to supporting the project and whether the project would get approval to operate in the Special Economic Zones because sometimes they hear of negative comments about Chinese investments, but those are concerns are manageable, the currency issue is the major problem.”
“This is because even if (we secure an investor) we will have to figure out a way to get around that issue, even the Japanese have raised it, it is a big issue to say how will you service the loan. South Africans and Indians also raised it.”
RioZim has also set its sights on thrashing out an off-take agreement with South Africa’s power utility, Eskom, to strengthen its chances of securing funding, since such arrangement guarantees revenue to clear the loans extended.
“With each transaction there are special conditions, which you get to know when you get the final close of the discussion so some funders will make that as a prerequisite, some will not make it a prerequisite,” Nkomo said.
He pointed out that RioZim will only know the exact terms of conditions the eventual partner or financier will demand at close of discussions. However, sources said getting an off-take deal with Eskom was critical.
“Our biggest problem, because of the slump in chrome prices, is that Eskom temporarily has excess currently that is why we (Zimbabwe) are able to import from them. But this (excess) is temporary although it is an issue to deal with.
Interest in the Sengwa project, which has been outstanding since the early 1990s has increased amid growing power shortage in Southern Africa, which has an installed capacity of 52 598MW against a demand of 49 563Mw. Output, however, stands at 46 910MW giving the region a shortfall of 8 247MW.
