Sengwa power station

From Global Energy Monitor
This article is part of the CoalSwarm coverage of Zimbabwe
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Sengwa power station, also known as Gokwe North power station or the RioZim Project, is a proposed 2,800-megawatt (MW) coal-fired power station near the Sengwa coal field in Gokwe North, Zimbabwe.

Location

The map below shows Gokwe, the approximate location where the plant would be built near the Sengwa coalfield.

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Background

In 1989, the Zimbabwe government granted a coal mining license to Sengwa Colliery, a company owned by Rio Zimbabwe Limited (RioZim) and Rio Tinto. The Sengwa coalfield has an estimated 538 million tonnes of coal reserves.[1]

In 1997, the Gokwe North Power Station project was proposed for the Sengwa coalfield, but the project was not implemented due to economic conditions.[2]

The project was later awarded by the Zimbabwe Electricity Supply Authority (ZESA) to RioZim, which said it was planning a larger 2,000 MW power station than the original concept of 1,400 MW. ZESA granted an independent producer license to RioZim in 2010 to establish the power plant.[2]

In 2013, Riozim said it was seeking funding to start the project, but was facing financial constraints stemming from a US$91 million debt.[3]

In January 2014, the Zimbabwe government said RioZim risked losing its independent power producer's license and the Sengwa coal concessions if it failed to make progress on its Gokwe North power project in the next six months. The project was estimated to cost US$4 billion.[4]

In February 2014, it was reported that Indian state-owned Bharat Heavy Electricals Limited and Shandong of China were among companies that had expressed interest in partnering with RioZim to set up a 250 MW plant at its coal fields in Gokwe. The strategy envisaged the construction of a number of smaller power plants over the next 10 years.[1]

In May 2015, RioZim said it was considering a US$2.1 billion investment in a 1,400 MW plant using its deposit at Sengwa to supply its own needs and to sell to Eskom in South Africa and Namibia Power Corporation in Namibia. Eskom said it would purchase the power but would not invest in the project. In addition, Zimbabwe would have to upgrade its transmission network to export the power.[5]

In July 2015, Eskom expressed interest in bankrolling the Sengwa project at up to 2,400 MW.[6]

In June 2016, RioZim said it was still considering its proposed 2,400 MW Sengwa thermal power project near Gokwe even though the company had yet to secure an off-take agreement. Nigeria’s Dangote Group and an unnamed Chinese firm were reportedly interested in the venture.[7]

In August 2016, RioZim was reportedly granted a license for a 1,200 MW coal plant in Sengwa.[8]

In September 2016, Riozim was allegedly working to raise the US$2.1 billion needed for the plant. RioZim's Non-Executive Director, Caleb Dengu, said that potential financiers from Dubai or South Africa would be interested if Eskom committed to an off-take agreement, but not if ZESA committed, since "ZESA is not bankable." Riozim had reportedly selected the State Nuclear Electric Power Planning Design and Research Institute located in Beijing to design the generators for the project, which was described as 2,800 MW in size. An Eskom spokesperson said that the company knew of the project but hadn't had any direct engagement.[9]

In November 2017, it was reported that RioZim had picked two "serious potential investors" for the project - one from China and one from South Korea - out of 12 that had submitted their bids. The two potential investors would send their teams to Zimbabwe in February 2018 for pre-feasibility studies and accessing of appropriate funding models for the Sengwa project. RioZim was seeking about US$1.5 billion for the composite project, which had constituent parts that would entail the development of a coal mine, thermal power plant, water pipeline to the power station, and transmission line to the main grid.[10]

In May 2018, it was reported that RioZim was evaluating proposals from six companies to participate in its US$1.2 billion project, which was now described as 700 MW. The company was reportedly in talks with mainly Chinese groups, including National Energy Investment Group. It expected to conclude negotiations later that year, after the July 2018 elections.[11]

In May 2019, RioZim announced that construction on the project was expected to start in the next twelve months.[12]

In October 2019, RioZim said it would sign an engineering procurement and construction contract (EPC) with Power China for construction for 700 MW Phase One of the Sengwa plant. RioZim was also pushing for Special Economic Zone (SEZ) status for the Sengwa project. However, the company was still seeking financing.[13] The EPC contract with Power China was reportedly signed in March 2020, with a contract value of US$1.126 billion.[14]

In April 2020, it was reported that RioZim would build the plant with China Gezhouba Group Corp., a subsidiary of Power China. It was reported that the plant would ultimately be constructed in four phases of 700 MW each, totaling 2,800 MW.[15] In May 2020, it was confirmed that Sinosure was on board to provide risk insurance.[16]

In September 2020, RioZim signed a framework agreement for Phase Two of the Sengwa plant to expand plant capacity from 700 MW from 2,800 MW.[17]

Financing

Following the announcement that RioZim would build the plant with China Gezhouba Group Corp, the Industrial and Commercial Bank of China (ICBC) signed a formal expression of interest in funding the project and was negotiating with Sinosure (also known as the China Export and Credit Insurance Corp) to cover country risk insurance costs.[15] In May 2020, it was confirmed that Sinosure was on board to provide risk insurance for the project.[18]

In May 2021, RioZim reported that the efforts to secure financing to commence Phase One of the project were "significantly hampered by the uncertainties presented by the COVID-19 pandemic." In addition, the Company is focused on "advancing the financing arrangements in order to make positive progress on the power station."[19]

In June 2021, ICBC notified Go Clean ICBC, a campaign coalition of 32 environmental groups, that it wouldn't be moving forward with financing for the project. While ICBC's withdrawal from the project financing had still to be formally announced, it was reported that RioEnergy is seeking alternative financiers.[20] However, in September 2021, "highly placed" sources within RioZim claimed that the company had not received any communication regarding ICBC pulling out of the project, and that the deal was still on track. Instead, these sources claimed that the Sengwa power station had been delayed by Zimbabwe's outstanding sovereign debt arrears to China, which if cleared, would see ICBC financing cleared for the Sengwa project.[21] Later, in October 2021, sources stated that RioZim was still struggling to secure financing for the Sengwa power station. RioZim announced that financiers and lenders have taken a "conservative approach" from earlier pledges to bankroll the project.[22]

Without definitive confirmation from ICBC, it remained unclear whether financing would continue. But given China's September 2021 commitment to stop all overseas coal financing, the ICBC loan for the Sengwa power station seemed unlikely to be finalized.

However, in October 2021, RioZim said in its half-year trading update that “the project remains alive despite the challenges.” RioZim said it would continue to look for alternative financing while it also builds out new solar power stations in Zimbabwe.[23][24]

In March 2022, RioZim was still looking for alternative backers. "We are still in the market to fund the project and we will work with all possible funders, including the Chinese," parent RioZim told Reuters. The company said another option under consideration was to transform the project to a gas-powered plant, but that idea was "subject to the outcome of feasibility studies" and no time frame for those had been set. RioZim also told Reuters that ICBC and Minsheng Bank "came in to play a supporting role" but that it could not comment on the current status of their involvement because it did not have a direct relationship with the companies.[25]

Opposition

The proposed plant has been coming under increasing fire from a network of local, regional, and global civil society organizations. In May 2020, opponents called on RioZim and the government to abandon the project citing climate change concerns and the plant's expected detrimental impacts on local communities. The Sengwa community consists mostly of peasants who rely on rain-fed agriculture and, according to campaigners, the proposed project would also result in river-water pollution, environmental degradation and internal displacements of hundreds of families. A survey carried out by the groups Information for Development Trust (IDT) and the Centre for Alternative Development (CAD) revealed that, in addition to the adverse effects of the coal plant, Gokwe may suffer more floods while household incomes are already acutely low and poverty high. The survey also revealed that the Sengwa and Gokwe communities were not aware of the impending RioZim project or the negative effects it would have on them.[26]

Project Details

  • Sponsor: Rio Energy Ltd.
  • Parent company: RioZim
  • Location: Gokwe North, Midlands province, Zimbabwe
  • Coordinates: -18.22, 28.93 (approximate)
  • Status: Permitted (Units 1-2), Announced (Units 3-8)
  • Capacity: 2,800 MW (Units 1-8: 350 MW)
  • Type:
  • Projected in service:
  • Coal Type: Lignite
  • Coal Source: Sengwa coalfield
  • Source of financing:

Articles and resources

References

  1. 1.0 1.1 "Foreigners eye RioZim's Sengwa," The Herald, February 17, 2014
  2. 2.0 2.1 "Riozim Limited," Lynton Edwards, accessed February 2014.
  3. "RioZim in Sengwa due diligence," Daily News, May 14, 2013.
  4. "Zimbabwe: RioZim Risks Losing Power Producer Licence," The Herald, January 31, 2014.
  5. "RioZim to build 1,400MW coal-fired power plant," Business Day, May 9, 2015
  6. "Eskom, has expressed interest in bankrolling implementation of the long awaited 2,400MW Sengwa Power Project," cfuzim, July 2, 2015
  7. "Investors keen on $2bln Sengwa project," The Zimbabwean, June 24, 2016
  8. "OM to commission Zim power plant," The Southern Times, August 19, 2016
  9. Godfrey Marawanyika, "RioZim Chooses Chinese Group to Design $2.1 Billion Power Plant," Bloomberg Markets, September 24, 2016
  10. "RioZim shortlist two for $1,5bn power station," Business Reporter, November 17, 2017
  11. "RioZim Evaluating Bids for Investors in Zimbabwe Power Plant," Bloomberg, May 16, 2018
  12. "RioZim’s Sengwa Thermal Power Station To Start Soon," ZimEye, May 1, 2019
  13. "RioZim closer to 2 400MW power deal," The Zimbabwe Mail, October 3, 2019
  14. 中国电建:79.13亿元签订津巴布韦燃煤电站项目EPC合同, Leju, March 16, 2020
  15. 15.0 15.1 "China to Help Build $3 Billion Coal Plant in Zimbabwe," Bloomberg, April 28, 2020
  16. "China to Finance and Build a Massive New Coal Power Plant in Zimbabwe," The China Africa Project, May 27, 2020
  17. "RioZim inks deal for Sengwa Phase Two," The Herald, September 28, 2020
  18. Eric Olander, "China to Finance and Build a Massive New Coal Power Plant in Zimbabwe," The China Africa Project, May 27, 2020
  19. Kudzanai Gerede, "Zimbabwe: 'Rio Zim Energy Projects On Course'," All Africa, May 26, 2021
  20. Ray Ndlovu and Antony Sguazzin,"Biggest China Bank Abandons $3 Billion Zimbabwe Coal Plan," Bloomberg, June 30, 2021
  21. Zimbabwe: "'Riozim Sengwa Deal Still On Track,'" All Africa, September 6, 2021
  22. "Zimbabwe: Sengwa Coal Power Project Hangs in the Balance," All Africa, October 6, 2021
  23. "Even After China Bailed on Its Sengwa Coal Plant in Zimbabwe, RioZim Seems Unusually Confident It’ll Find Other Backers," China Africa Project, October 7, 2021
  24. "Zimbabwe: Sengwa Coal Power Project Hangs in the Balance," All Africa, October 6, 2021
  25. "In Zimbabwe, coal power project seeks other backing after China's U-turn," Reuters, March 30, 2022
  26. "US$3bn Sengwa coal project causes uproar," The Standard, May 17, 2020

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