Zimbabwe Stock Exchange-listed mining company RioZim this week became the second owner of large coal deposits in Zimbabwe to announce plans to build a power station, to help alleviate the acute shortage of electricity in Southern Africa.
RioZim was considering a $2.1bn investment in a 1,400MW plant using its deposit at Sengwa to supply its own needs and to sell to Eskom and Namibia Power Corporation, Reuters reports.
Last year Makomo Resources, Zimbabwe's biggest private-sector coal producer, said it was considering building a $1.5bn, 600MW coal-fired power plant near Harare, to be financed partly by Chinese investors.
Both Zimbabwe and SA experience regular power cuts as their state-owned utilities have failed to invest timeously in adding new capacity to match economic growth.
This is creating opportunities for private-sector players. Later this year SA's Department of Energy is expected to invite bids from private companies for coal-fired power.
Neither RioZim nor Makomo could be reached on Tuesday to supply more details on their timeframes for delivering power or the price at which they expected to sell it.
Shaun Nel, an adviser to SA's Energy Intensive Users Group (EIUG), said building power stations to supply the region could be an opportunity for private-sector companies if they could finance them using their own balance sheets. However, most needed an offtake agreement with a utility such as Eskom to raise financing.
A number of South African companies had investigated building power plants to hedge against both supply interruptions and rising prices but the issue, particularly for mining companies, was that the cost of capital exceeded the returns from such projects.
Another hurdle for Zimbabwean power companies was the state of the transmission infrastructure in Zimbabwe, which was not designed for higher loads, Nel said. Someone would have to pay to upgrade the transmission network if Zimbabwe were to sell power to SA.
Phasiwe said Eskom had not signed any formal agreement with RioZim and price would obviously be a consideration. Eskom would not be willing to pay more for power from Zimbabwe than its own cost of generation, or more than it had agreed to pay independent power producers in SA.
Source: BDpro
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