Mining companies to pay more for electricity

31 Jul, 2022 - 00:07 0 Views
Mining companies to pay more for electricity Dr Sydney Gata

The Sunday News

Nqobile Bhebhe, Senior Business Reporter

POWER utility, Zesa Holdings, has advised mining firms to brace for a higher tariff starting tomorrow which would be pegged at US$c10.63 per kilowatt hour up from US$c9.86 per kilowatt hour.

Zesa

Citing unprecedented demand for power by mining firms which are racing to meet the US$12 billion target by 2023, Zesa has said there is a need for the sector to support facilitation of adequate supplies. 

Executive chairman, Dr Sydney Gata, in a correspondence to mining firms said in the past year, Zesa received firm applications for new supply and for current capacity increases from mining and smelting customers alone, aggregating to 2 100 MW of additional load by 2025.

The increase in mining industry demand is inducing other significant industrial loads yet Zesa is charging an average of US$c9.86kWh for exporting customers, he said. 

To that end, Dr Gata said it was important for Zesa to charge cost reflective tariffs. Due to sub-economic tariffs, the power utility can neither service nor buy boilers, transformers and secure oils and chemicals that should all be paid for in US dollars, he noted.

Dr Sydney Gata

“Zesa is no longer able to continue supplying electricity to exporting customers at US$c9.86/kWh, as it is unsustainable. Further to that, Hwange Stage 3 project, which is expected to come in November 2022, will be coming in at US$c10.7/kWh, translating to over US$c12.0/kWh to end customers after adding Zesa overheads and use of system charges. 

“The exporter’s tariff will therefore be US$c10.63/Kwh with effect from 1 August 2022,” said Dr Gata in a letter to the Chamber of Mines of Zimbabwe chief executive officer, Dr Isaac Kwesu.

The US$1,4 billion Hwange Thermal Power Station Unit 7 and 8 expansion project set to ease power cuts in Zimbabwe in line with Vision 2030 is 90 percent complete and on course to meet deadlines.

Projected to inject an additional 600 megawatts to the national grid, the first unit of the project is set for commissioning in November this year with the remainder coming on board in the first quarter of 2023.

Dr Isaac Kwesu

The country’s power generation capacity is subdued at around 1 300MW with demand hovering around 1 750MW, according to official statistics. 

Dr Gata said given that the region is facing a critical power deficit and the country might risk losing out on power negotiated with Zesco of Zambia.

“Zesa has negotiated for power imports with Zesco- Zambia and EDM- Mozambique. However, since January 2022 Zesa has failed to draw power from these contracts because of shortage of funds as Zesa tariffs cannot sustain the import arrangements. 

“The power import contracts, which Zesa had negotiated will not be available beyond end July 2022. Zesco has been spinning the energy it had allocated to Zesa at a huge loss of US$6.3 million per month since January 2022 due to Zesa’s failure to pay for it.”

Dr Gata added that Eskom of South Africa, which has over 18000 MW capacity shortfall “is putting pressure on Zesco, HCB and EDM to take over the same contracts Zesa had secured.

“Zesa now has up to 31 July 2022 (today) to draw the supply or else the contracts will be cancelled and the supply re-allocated to other utilities in the SAPP. Zimbabwe will stand to lose heavily as these contracts are long-term and at a competitive price,” he said.

This past week, Dr Gata said Zesa facilitated the creation of Intensive Energy Users Group (IEUG), which is meant to procure its own power requirements from the region and from local supplies. IEUG is targeting to commence trading on 1 August. This is meant to remove the pressure and risk of securing power from Zesa

Recently, the Government granted Zesa the greenlight to bill exporters in foreign currency with proceeds to be channelled to the procurement of critical assets and components needed to maintain the power generation and repayment of external loans.

Over the years, exporters in various key productive sectors, especially mining, have offered to pay their electricity bills in foreign currency in exchange for ring-fenced power from Zest to avoid crippling disruption to operations.

The power utility has admitted to having challenges in providing adequate power on the back of antiquated equipment and other operational hurdles. With the latest nod, Zest has guaranteed uninterrupted power for sections of the industry that can pay in hard currency, which enables it to mobilise resources to import from the region to reduce the deficit from local generation.

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