RioZim seeks $2,1 billion to build coal mine, 1,400MW thermal power station

RioZim seeks $2,1 billion to build coal mine, 1,400MW thermal power station

By Bernard Mpofu, HARARE, May 4 (The Source) – Resources group RioZim is seeking $2,1 billion to build a 1,400 megawatt thermal power station and coal mine at Sengwa in the North West of Zimbabwe,  chief executive officer Noah Matimba said on Monday.

Zimbabwe, like many of its peers in the region has been battling to plug energy deficit due to limited investment in the capital intensive energy sector. The country is currently generating 940MW against peak demand of about 2,000MW, resulting in frequent power cuts that hit mines, industry and households.

Matimba told a parliamentary portfolio committee on mines and energy that the group is negotiating with potential power purchasers in a bid to make the proposed Sengwa thermal power station attractive to investors.

He said the setting up of the power station would improve the country’s energy exports and value add low grade coal deposits in Sengwa.

“Our view is we should look at the Sengwa project as an opportunity to value add our mineral as opposed to exporting coal as it is because the opportunity is there to generate electricity that can be exported at a much better value than exporting coal,” Matimba said.

“What we require for that to happen is that we need funding. Capital expenditure to establish such a plant will require $1,5 million per megawatt. Now if we are talking of 1,400MW, it means we are looking for $2,1 billion to establish that power plant. This can be done through equity, through debt and equity mixture and these are the avenues that we are exploring.”

The project, which has capacity to generate electricity currently being produced by the country’s existing five power stations was initially set to take off in 2004 has been on hold due to funding constraints and concerns over the country risk.

“Key to having that kind of investment is having a power purchase agreement with a purchaser whose balance sheet is acceptable to anyone who decides to lend money or to an investor who decides to put money into this. We do need a power purchase agreement in order that we can attract investors or attract those lenders that can give us debt,” Matimba said.

“The off-takers can be in the region or can be together with ZETDC but we still need to create a bankable portfolio of off-takers of that kind of power generated. Our current developments are that we are making a renewed approach to developing the project. A project of 1,400 MW is difficult to find a bankable off take for the $2,1 billion. It’s a very large sum for the Zimbabwean market. “

Under the proposed plan, Sengwa Power Station, a 50/50 joint venture between RioZim and EMC, a company owned by former Zesa Holdings chief executive Sydney Gata will buy coal from another RioZim subsidiary Sengwa Colliery.

Sengwa Colliery is a 50/50 joint venture between RioZim and Rio Tinto Plc. Out of the $2,1 billion required, $50 million would meet costs of the colliery, Matimba added.

Matimba said the coal resources can support multiple independent power producers with up to 4,000 MW in total adding that the group last carried out a feasibility study on the Sengwa project in 1997 after it partnered with National Power of the United Kingdom and the local power utility.

The initial feasibility study was assumed that RioZim would establish a 1,400 MW power station made up of four units of made up of 350 MW per unit under 40 hectares of land. The 1,3 billion tonnes of coal deposits can support the proposed power station for 40 years, Matimba said.

“Therefore the new approach that we are looking at is to develop smaller modules of between 250 and 300MW which are smaller and can then be packaged towards the 1,400MW. RioZim has WAPCOS, an engineering firm from India to upgrade the 1997 feasibility study in the hope that they can bring in an update on the technology side,” he said.

“We have signed an MOU with the Southern African Power Pool in the hope that we can begin to discuss a power purchase agreement with them and be able to create the necessary demand to attract investors and to attract debt if we should go that route. We are also in discussion with a  few major consumers in the country and hope that they can also come on board and be part of a consortium of consumers of the product. The key challenge is being able to set up that portfolio of consumers”

He added that RioZim had also agreed on $300,000 new study with an Indian firm due to technological advances in the energy sector. In total the group has invested nearly $20 million into the project, Matimba said.

Commenting on the restart of the group’s gold mining unit, Cam and Motor which had closed in 1968, Matimba said open pit mining operations resumed in March.