Sakunda’s foray into power generation

Sakunda’s foray into power generation

Sakunda won the tender to acquire the 200 megawatts emergency diesel power station at Dema substation.

DIVERSIFIED energy group, Sakunda Holdings, was in December awarded a multi-million dollar tender to supply 200 megawatts (MW) of emergency electricity to the national grid to alleviate a crippling power crisis that has disrupted the country’s economy.
The situation has been compounded by the fact that Kariba Power Station’s generation capacity has now been significantly eroded by dwindling water levels in Kariba Dam, which has resulted in a sharp cut in output in electricity at the plant. Breakdowns at Hwange Thermal Power Station have also aggravated the situation.
There are possibilities that the Kariba power plant may be forced to shut down should water levels fail to improve owing to a regional drought expected this season due to an El Nino weather factor.
Sakunda won the tender to acquire the 200MW emergency diesel power station at Dema substation.
The tender is likely to initiate the company’s ambitious 10-year mega electricity project that would cumulatively cost about US$2 billion and expected to result in the country generating enough power for domestic use and export by 2018.
Sakunda is one of the largest petroleum companies in Zimbabwe. The group generated more than US$500 million in revenue in 2014.
But how will this project be executed? Where else has it been implemented? Will the price of diesel not affect the cost of electricity, for which power utility, ZESA, through its generation and distribution units, is already seeking for an upward tariff review?
Neighbouring South Africa, also trying to deal with power supply shortfalls in its economy, last year implemented this “emergency solution” when power outages in the country worsened.
The South African government said expansion of the country’s power generating capacity was a necessary condition for economic growth and housing development hence the need for the emergency diesel power plant.
Documents seen by the Financial Gazette reveal that the Sakunda project will be a multi-dimensional approach with varied power generation sources leveraging the company’s strength as a fuel supplier and mobilisation of funding.
Sakunda says its 10-year goal is to develop projects with generation capacity of up to 870 MW at a tariff of US$0,10/kWh.
“Our overall power cost is lower than any other offered. Zimbabwe will enjoy significant savings on this solution using our option,” said Sakunda in the document.
“Our solution will allow Zimbabwe access to the best equipment. The generators were all (made in) 2015 and new, thereby offering the best operational efficiency. We are able to generate 300MW within three months,” said Sakunda.
The company indicated that it would “absorb price fluctuations which provide Zimbabwe with a stable price, based on requirement”.
Sakunda said it would invest in developing hydropower and coal bed methane (CBM)-fired power plants, which would allow more control over power generation and price. This is because the country does not control availability or pricing of diesel.
The company would invest at least US$200 million for exploration and developing a 10MW pilot plant and should that be successful, invest a further US$700 million for a 400MW modular CBM fired power station.
“Sakunda proposes to fix the diesel cost for up to 24 months up-front to avoid prices increases,” it said in the document.
Zimbabwe has experienced power supply shortfalls resulting in daily load shedding across the country. The supply shortfalls have serious repercussions on the recovery of the productive sectors of the economy such as manufacturing, agriculture, mining and tourism, which government wants to drive the country’s economic recovery.
Presently, most households and industries in Zimbabwe are subjected to between three to six hours of load shedding daily because of lack of investment in power generation since independence in 1980.
Only about 30 percent of the country has access to grid electricity. No new power generation plants have been built in the country since Kariba in the early 1960s and Hwange thermal power station which was completed in 1986.
Regionally, most countries also have power deficits, making it difficult to import power.
The Dema project was classified by government as “urgent” and needed to “be expedited to avert critical power shortage”. The project is one of several being implemented by government to deal with the country’s power crisis.
The country has resorted to imports from friendly southern African nations, who of late have also been experiencing electricity shortages.
Based on Sakunda’s immediate and long term power solutions to the country presented to the Ministry of Energy and Power Development, the Dema project would constitute phase one of its intended multi-billion dollar project.
In the first three months of implementing the project, Sakunda undertook to provide 200 MW through diesel. In the subsequent phases, the company would use its own heavy fuel oil, CBM and hydro power to generate electricity by 2018. The cost of power would go down from the implementation of price of 15,67 cents per kilowatt to 10,45 by 2018. The average price in the southern Africa region is 14 cents per kilowatt.
Among Sakunda’s partners in implementing the project are ARUP, the world’s best infrastructure consulting company in 2014/15; Energyst, manufacturer of CAT temporary power units; Aggreko, world’s temporary power generation company; and Trafigura. It has also partnered as financiers Stanbic Bank, CBZ Bank and Ecobank. Grant Thornton would come in as project accountants and Mhishi Legal Practice as legal advisors.
According to Wikipedia, a diesel generator is a combination of a diesel engine with an electric generator (often an alternator) to generate electrical energy. A diesel compression-ignition engine often is designed to run on fuel oil, but some types are adapted for other liquid fuels or natural gas.
Diesel generating sets are used in places without connection to a power grid, or as emergency power-supply if the grid fails, as well as for more complex applications such as peak-lopping, grid support and export to the power grid.
Sizing of diesel generators is critical to avoid low-load or a shortage of power and is complicated by modern electronics, specifically non-linear loads.
Zimbabwe’s old thermal power stations were built in the late 1940s. Harare, Bulawayo and Munyati, despite their refurbishment in the mid-1990s, are too expensive to run and are almost obsolete.
It is expensive for ZESA to buy coal and bring it all the way from Hwange to Harare to run the generator in the capital city.

Follow us on Twitter on @FingazLive and on Facebook – The Financial Gazette

  • Megawatt

    “Sakunda says its 10-year goal is to develop projects with generation capacity of up to 870 MW at a tariff of US$0,10/kWh.”
    How are they going to fix the price of diesel? In mature power markets generators are only used as emergency back up because of prohibitive fuel costs which get worse with time and I am still trying to figure out how they are going to keep their tariff at such low levels.

Connect With Us

Fingaz Polls

Should all Commuter Omnibuss be moved to designated areas?