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Chairman's mid-year statement
July 03, 2011
As Chairman of Zimbabwe Power Company, whose raison
d'étre is to provide power to the nation, I believe
that it is important, from time to time, to keep all stakeholders
and customers informed directly.
builds on information already given in my earlier résumé
of January 2011. I urge readers to remind themselves of what was
said in that statement.
Status (3 July 2011)
Over the past few weeks ZPC's generation has
been fairly stable and at levels we consider will be the maximum
for the next year or so - around 1,400 MW. In other words,
until the circumstances allow us to add new units at Hwange Power
Station, the generation output will remain (short of unexpected
outages) at recent levels. Of the 12 large units (six at Kariba
and Hwange respectively) there have been 11 operational. In addition
between 80 and 100MW are being produced from the "Small Thermal
Stations" (Harare, Munyati and Bulawayo). I must stress, however,
that our main focus is now on trying to achieve stability of production.
The generation forecasts can be thwarted by aging pumps, pipelines,
boiler tubes etc. at any moment.
At the time
of writing this statement (3rd July) we took Unit 5 at Hwange off-load
to attend to a pump on Friday night (1st July) and intend bringing
it back on Monday (4th July). In addition we lost two units (3 and
5) at Kariba at 10:21 and both were back by 11:52 on Saturday (2nd
July) due to grid surge from Cabora Bassa.
Considerable work remains to be done to the units
and support infrastructure at Hwange, and the station remains fragile
and unpredictable. Planned unit-by-unit outages will resume from
August through to the middle of next year to attend to this ailing
infrastructure - funds permitting.
On a more positive note the momentum gained in recent months is
very encouraging in spite of having to manage the business on a
strict cash flow basis. At Hwange Power Station the relining of
the two large raw-water reservoirs is nearly complete, replacement
of the 3 km ash-disposal pipeline is underway, ash-disposal pumps
are on order, the water treatment works for the boilers is nearing
completion and tenders for overhauling the precipitators have been
that the daily generation status is updated every week day on the
home-page of the ZPC website: www.zpc.co.zw
Our stations are extremely vulnerable to regional
grid swings. We lost Hwange Power Station completely on the 16th
May due to a surge from Cabora Bassa and again on the 23rd May 2011
due to a surge from Kafue. The last being a loss of two units at
Kariba, on the 2nd July, due to a system surge from Cabora Bassa.
I must now draw your attention to the critical issue
of our suppressed tariff and the serious ramifications to ZPC's
operations if an increase is not approved. In the absence of an
increase to the tariff, ZPC has now had to slow down its efforts
to stabilise and optimise power from its existing power stations.
In addition efforts to raise capital for adding generation capacity
(a four to five year process from when funding is secured) will
be thwarted. Load shedding will remain a way of life and overall
economic growth will be stunted until generation capacity is expanded
to fully support households and business needs.
The ZPC tariff (which is the approved price that
is charged by ZPC to our sister company ZETDC) I believe is the
lowest hydro/thermal blend tariff in the region. The thermal element
of this tariff, I am reliably informed, is one of the lowest, unsubsidised,
tariffs in the world.
The tariff was set in February 2009 and 28 months
later we still await approval of a "cost reflective tariff".
Over this two and a half year period ZPC has had to absorb all cost
increases. The main cost-driver increases have been : coal 51%,
diesel 44% (a major cost component of Hwange Power Station) as well
as spares and components imported from non-US$ countries against
a US$ which has weakened against most global currencies. Our efforts
continue to improve efficiencies and productivity as we know there
is still room for improvement, but these efforts can in no way compensate
for over two years of cost increases. In the meantime the only way
to compensate for a sub-economic tariff is to cut back on maintenance
and ongoing refurbishment. This is clearly not sustainable and if
the situation is not addressed urgently, the lights you have from
time to time today will go out tomorrow!
It is my understanding that at a recent stakeholders
meeting there was full support for a tariff increase. I therefore
urge Government to give this matter urgent and positive attention.
I take this opportunity to thank the Ministry of
Finance for their fiscal contribution towards 50% of this year's
refurbishment programme. Sadly in the absence of a tariff increase
ZPC will be unable to fully match the funding that is required to
see this programme implemented to a satisfactory level.
I reiterated that load shedding will remain a way
of life until we expand generation at Hwange and Kariba. New investment
and private sector funding into generation capacity will not be
forthcoming while our tariff remains sub-economic and in the absence
of a long-term tariff formula.
Meanwhile ZPC, with the help of its technical partner
(HATCH), is well advanced in updating feasibility studies for the
expansion programmes at both Hwange and Kariba. We will be calling
for "Expressions of Interest" in the next two weeks
and (tariff and funding permitting) will be in a position to go
to tender in September/October this year,
Following the award of a tender by State Procurement
Board, ZPC has finalised an agreement to secure the services of
KPMG Consortium who will assist and address all aspects of the financial
process for this capital raising programme.
In consultation with the mining industry, the small
thermal stations have been brought back into partial service. Due
to their distance from the coal fields and the age of the technology
the power from these stations is more expensive. The power from
these stations is matched, on a 1:1 ratio, with power from the grid
and sold to major customers at a blend price. Only those companies
who have dedicated lines and who are prepared to comply with stringent
payment conditions are eligible for this scheme. This arrangement
should have no negative impact on the load shedding of ordinary
customers as those companies who have, voluntarily, joined the scheme
were already getting their share of power from the grid - their
top-up power comes from the small thermals at a higher price.
to Kariba Power Station
The team at Kariba in line with their mission statement
committed themselves to high standards and undertook to achieve
ISO rating. This resulted in their being awarded ISO 9001/2008 in
March this year. Well done to Mr. J. Chirikutsi, the General Manager
of Kariba South Power Station and his team at the station!
into the future
ZPC has managed to rebuild its strategic stock to
capacity and now receives coal for immediate consumption purposes
only. I wish to thank our coal suppliers for their support. I hope
that over time, as they increase their markets of other coal products,
they will be able to invest in infrastructure such that the "mine-mouth"
cost of coal is aligned to regional benchmarks.
ZPC have applied for an extension to their grant
for the Western Coal Fields as this grant is a central component
of its expansion programme for units 7 and 8 at Hwange Station.
There are ongoing improvements in environmentally
responsible technology in the thermal arena. Further there has been
a loss of confidence in nuclear powered stations in any seismically
unstable counties. These two factors may imply a long term future
for thermal power. I urge the authorities to be mindful of the global
pressure for coal over the next century. It would be shortsighted
to issue concessions on all the coal fields around Hwange now as
these will get mined concurrently. Much of this coal would be exported,
and while this will be of benefit to our economy in the short term,
I am concerned that this concurrent depletion of our coal reserves
will leave our children, and future generations of Zimbabweans,
with a coal challenge. This can be avoided by formulating the correct
policies around preservation and optimal use of this strategic resource
at this stage.
Alternative power sources
ZPC have identified a suitable location in Zimbabwe
for a bulk solar power station but the capital costs of such an
installation remain prohibitive. Wind power is not an option for
bulk electrical power but localised opportunities exist and these
should be exploited by smaller independent power producers. ZPC,
some years ago, applied for a CBM (Coal Bed Methane) grant but still
await a decision from the authorities.
I take this opportunity to welcome Mr. Joshua Chifamba
to ZESA Holdings as Group Chief Executive Officer. He worked for
ZESA as a post graduate trainee up to Board Member after which time
he then joined Lesotho Power Utility in 2006's as their CEO.
This was followed by a period where he mentored the present incumbent
in Lesotho before returning to Zimbabwe this year. We look forward
to his leadership during this exciting and challenging period that
I take this opportunity to thank Honourable Ministers:
Mangoma, Nyanhongo and Biti for their respective support of the
energy sector. In addition I thank the Permanent Secretary, Mr.
J. Mupamhanga and the Director of Power, Ms. F. Chikonye for their
administrative and technical support.
I thank fellow ZPC non-executive board members:
Mrs. G. Chela, Mr. D. Matete, Mr. V. Gapare and Mr. T. Zengeya for
their diverse and incisive contributions to the business.
Executive directors, management and staff are well
aware of my confidence in their ability, both current and latent,
to improve their individual contributions towards implementing our
agreed strategies. I thank them for their efforts to date and in
anticipation of them reaching their full potential.
I remind you all that power cannot match demand
in the medium term and hence everyone of us needs to take full responsibility
for using it wisely. In addition, like any other fuel, it has a
cost and hence needs to be sold at an economic price. Payment of
your bill on time is crucial for the future of electrical power
With winter on us we will all feel the impact of
an increase in load-shedding. Let us pull together - by switching
off a light you do not need you are lighting up someone else's
Chairman Zimbabwe Power Company
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