Sakunda Holdings, a cash-rich private company, has reportedly proposed to decommission the Dema diesel electric power plant barely two years after the project kicked-off, Business Weekly can reveal.
It is understood that Sakunda wants to sell the equipment to Government once the decommissioning has been concluded. The move follows serious viability challenges associated with the project.
The company was contracted to set up a 200 megawatt emergency diesel power plant in Dema at an estimated cost of $200 million. However, since the proposal and inception of the project, there have been question marks over the viability and sustainability of the project considering the huge generation costs.
Sources indicate that the project has been mothballed for “some time now” on the back of several challenges including fuel shortages, with unconfirmed allegations suggesting the fuel was being sold on the black market. Dema enjoyed duty free diesel imports to make it viable.
A well-placed source told Business Weekly that Sakunda made a proposal to Government, which some ministers reportedly supported. Energy and Power Development Minister Dr Samuel Undenge refused to accept the proposal, but faced resistance from some of his colleagues in Government. “Sakunda made a proposal to sell the Dema project or part of its equipment including generators to Government, but Minister Undenge declined the proposal.
“His biggest challenge now is that some of his colleagues from Government are pushing for this deal to go through. Truly speaking, how can Government buy a project that is not working and that has failed to produce the required output,” said the source.
Zesa Holdings chief executive officer Engineer Josh Chifamba said the proposal to sell the project would not be a good idea, adding it would be an unfortunate decision.
“The proposal is not yet in my office, but buying second-hand equipment will not be a good idea. This is out of the fact that we once proposed to get a decommissioned plant from China sometime back, but Cabinet refused saying we cannot commit funds on second-hand stuff,” said Eng Chifamba.
Dr Undenge was not available for comment up to the time of going to print.
Contacted for comment on whether the plant was going to be decommissioned, British supplier of temporary power generation equipment Aggreko, which is partnering Sakunda in the deal, was noncommittal.
Aggreko operations manager, Thulani Mazibuko told Business Weekly yesterday that: “I can neither confirm nor deny the allegations that we are decommissioning the plant at Dema. All I can say is that we still have presence at the Dema project.”
Business Weekly is also informed that Sakunda approached Helcraw Electrical, a company building the Mutare Peaking Power Plant, to buy part of the generators.
It could not be immediately established how Government expects to make the plant operate viably if it acquires it from its owners, since most market watchers have opposed the project from the very beginning.
The Dema project has also been dogged by reports of prolonged down time, despite the fact Dema came up as an emergency power plant.
Despite reportedly signing a power purchase agreement with the Zimbabwe Electricity Transmission and Distribution Company (ZETDC) – a subsidiary of Zesa – for the sale of power at 18 cents per kilowatt hour, the Dema project has failed to provide uninterrupted power to consumers.
At 18c per kWh, the power from Dema becomes the most expensive of the country’s energy mix since Kariba South Thermal Power Station, which generates electricity from water, is the cheapest at 4 cents per kWh.
Hwange Thermal Power Station produces at USc6,97c per kWh.
The current average tariff of USc9,86 per kWh.
The $200 million Dema project was mooted so as to provide electricity cover in the country due to declining water levels in Kariba Dam recently.