Home » Business » No Takers for U.S $50 Million Electricity Bond

The bond, which was meant to raise money for the Zimbabwe Power Company has failed to excite the liquidity-starved market and is struggling to find buyers.

A US$50 million bond floated by the Infrastructure Development Bank of Zimbabwe (IBDZ) in December last year is struggling to find buyers, affecting two power generation projects meant to improve electricity supplies.

The situation has been aggravated by the fact that an Indian contractor, Jaguar Overseas, is also struggling to secure US$59 million for its commitment in one of the projects.

The Financial Gazette understands that the bond, which was meant to raise the money for the Zimbabwe Power Company (ZPC), has failed to excite the liquidity-starved market and is struggling to find buyers.

The two projects at stake are the Harare Power Station re-powering project and the Kariba Power Station refurbishment project.

Failure by the two firms to secure funding for the projects means that the country is now behind schedule in its electricity development, meant to turnaround the ailing economy under the Zimbabwe Agenda for Socio-Economic Transformation.

The total cost for the Harare Power Station re-powering project is US$70,2 million, of which the IDBZ is required to raise US$11,2 million on behalf of the ZPC while Jaguar, which won the re-powering tender early last year, is expected to raise US$59 million.

ZPC’s US$11,2 million includes insurance and its own contribution to the project.

IDBZ spokesperson, Priscilla Mapuranga, indicated that the US$50 million bond had been split into two, with one bond issue for the US$11,2 million for the Harare Power Station re-powering project and another for the US$38,8 million for the Kariba Power Station.

She said they had raised part of the US$11,2 million required by the ZPC to kick-start the project, but declined to give figures.

“The US$11,2 million issue has received a lot of support from the market and is almost fully subscribed,” said Mapuranga.

She said the IDBZ would invite investors for the US$38,8 million bond once “the US$11,2 million bond is out of the market”.

“The market canvassing undertaken by the bank for the bond has indicated a lot of interest in the issue. It is hoped to close the total bond issue of US$50 million before June 30, 2015,” she said.

“The bond offer is still open for investment and the bank is currently engaging both local and international investors through private placements,” Mapuranga said.

Private placement is the sale of securities to selected investors as a way of raising capital.

Noah Gwariro, the managing director of ZPC, could not be reached for comment.

Sources said the delay by the IBDZ to close the bond issue had delayed the projects, whose implementation is desperately needed to improve electricity supplies in the country.

The re-powering project at the Harare power plant would see the replacement of the current boiler technology with circulated, fluidised bed combustion boilers which are more efficient and cost effective and the refurbishment of the associated turbine generator sets.

On completion, the plant, which was shut down in August last year, is expected to guarantee 60 megawatts (MW) of dependable power supplies.

Apart from Harare Power Station, other small thermals, Bulawayo and Munyati, continue to be constrained by poor coal supplies and aged plant. Re-powering projects for Bulawayo and Munyati are also expected to go under execution once funding has been availed.

On completion, Bulawayo and Munyati power stations are expected to increase output to 90MW and 100MW respectively.

Munyati Power Station is generating on average 25MW compared to its design capacity of 100MW.

Bulawayo Power Station is currently generating about 30MW of electricity.

ZPC is also planning to extend the economic life of Hwange Power Station at estimated cost of about US$600 million.

This will optimise its output to its design capacity of 920MW for at least another 25 years. The station has outlived its useful life thereby becoming increasingly unreliable.

Hwange stage one, which has a design capacity of 4x120MW has exceeded its economic life by five years

Hwange Power Station is currently generating an average of about 392MW.

The country is currently generating inadequate electricity which stands at about 1000MW against peak period demand of about 2 200MW with the shortfall being imported from regional utilities.

However, Zimbabwe has lately not been getting enough imports to augment supplies.

The only imports have been coming from Mozambique’s Hydro Cahora Bassa, which has been supplying 50 Megawatts (MW) on a non-firm contract.

ZPC, with assistance from government, is working on a number of projects to increase electricity generation, with work on the expansion of Kariba South Hydro Power Station to add 300MW to the national grid currently underway.

The country is also pursuing the Hwange Power Station expansion which would see the country’s largest coal-fired power station adding two more units to give a combined generation capacity of 600MW.

Source : Financial Gazette

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