The need for 20-year power tariff plan

22 Dec, 2017 - 00:12 0 Views
The need for 20-year power tariff plan

eBusiness Weekly

Mamvura’s Market Minute
Which company would market operators say is the most volatile on the ZSE? Here we are talking boom-bust and not perennial loss maker such as Ariston.

Certainly over what he has read over the past few decades, Bindura Nickel Corporation has been bust and recapitalised more than three times while the major shareholder has also changed numerous times.

Relying on a model entirely dictated by the vagaries of the global price of nickel, BNC has been recapitalised at various points in the commodity cycle . . . only to come unstuck in again in the bust cycle.

Interim results for BNC reported on December 7 were little changed on a year previous. The company is broadly milling the same tonnages, producing the same amount of nickel and any difference in profit comes down to the price.

The smelter restart project, ostensively what it raised the bond for, remains in abeyance as it is cheaper to process its concentrate abroad. And where does BNC export its concentrate to? Umm, Canada.

Now something must be wrong if you can send a bulky product half the way around the world — to a western country no less — and it’s cheaper to process it than it is in Zimbabwe.

The same goes for the chrome ore – Chinese smelters can process chrome cheaper because power costs less than 5c/kWh and it takes a lot of magetsi to process these metals. What has Ethiopia’s most recent gains been built on?

Cheap power from its hydro projects, built mostly by Salini Impregilo, the successor to the company that built Kariba.

Ultimately BNC’s future, along with the rest of the mines in this country, need the right power tariff. You can talk about “God given mineral resources” all you want and platinum refineries, but the cost of power will be the singularly biggest inhibitor to growth and beneficiation in this industry.

Therein lies the rub. At the outset in 1955, the great Kariba project gave projections of power costs through to 1973, which broadly turned out to be correct.

Kariba provided cheap power for the copper mines in the north and import substitution industries and irrigated agriculture in the south.

Zesa continues to gouge customers on the pretext of there being some “regional average” which creates expectations that other rent seekers can come in here with their power projects and enjoy plus 10c/kWh tariffs.

We need a 20-year outlook here. Consider that Kariba still produces power at 2.2c/kWh.

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