Mwonzora slams Pomona Deal, claims ‘we were hoodwinked’
By Douglas Mwonzora
There has been very little or no explanation of the Pomona Deal to the general public either by government, stakeholders and or opposition political parties, save for misinformation. The MDC continues to be unfairly victimized and used as a convenient scapegoat by some political players and sections of the media which took to attack us without paying due attention to detail.
We would like to put it on record that we as the MDC are pro investment, business, clean cities and development and as such relate with the idea of a sustainable waste to energy concept for our capital city Harare.
The MDC acknowledges that the City of Harare Waste Management problem needs immediate attention. As such we would like to first of all categorically state that the Geogenix BV deal is certainly not a solution unless and until the issues we are raising here today are addressed.
Due diligence on the Geogenix investment was done by a multi stakeholder team and recommendations were made on the financing and pricing structures to be reviewed. It appears, very little or nothing was done to that effect and as such our own investigations discovered a number of anomalies.
It is not enough for us to say that our councillors did not support the deal and so based on sections from the Geogenix BV Financial Model, we will demonstrate why we are not in support of this deal for the following reasons;
#1. Revenue Section
a) According to the Pomona Financial model, revenue is derived from 3 sources namely:
Waste Disposal @ USD 37, 80/ton
Sale of electricity @ USD 25.20/MW
Sales of recycling material @US$158/ton
The Pomona Dumpsite has a vast and extensive resource of waste disposed over many decades which we presume can be used in the waste to energy conversion concept, but have not seen its quantification by the investor. Furthermore, the investor without any plausible and visible infrastructure is already demanding payment for waste disposal from council. This year alone Geogenix will rake in not less than EUR14m from Waste disposal with no infrastructure but gate takings only.
#2. Budget Section: Cashflow/Capital Outlay
The initial capital outlay for the project is indicated in the budget. EUR302 900 001 is split over 5 years as follows:
Year 1 – EURO 68 239 000 Year 2 – EURO 88 881 340 Year 3 – EURO 58 727 714 Year 4 – EURO 40 620 340 Year 5 – EURO 46 431 607
However, in subsequent years commencing Year 7 there is an unusual continued capital expenditure and additional acquisition of assets as follows not stated in the budget:
EUR8m p.a. from Year 7 to Year 14
EUR30m in Year 15 alone
EUR8m p.a. from Year 16 up to Year 24
EUR33m in Year 25 alone
EUR8m p.a. from Year 26 up to Year 30
This additional capital expenditure amounts up to EUR239 000 000 spent on the project outside the presented Investment Budget, thus making the investment value EUR541 900 000 over 30 years. The questions that then arise are:
a) What equipment is it that needs to be bought every other year throughout the course of a project?
b) If the assets being acquired are to enhance the project, then how come the total electricity output generation does not increase proportionately?
Consequently, if the assets acquired are property plant and equipment for the project, then a repairs and maintenance budget needs to be maintained throughout the project duration. This brings us to the next question:
#3. Overheads Analysis Section
a) EUR4,480,000 Maintenance costs are oddly stated for 3 years i.e. from Year 4 up to Year 6 when the project goes up to 30 years. It’s not feasible to have maintenance costs only incurred in 3 years for a project with plant machinery over a 30 year lifespan.
b) Fuel costs
The deal implicitly states that City of Harare will bring waste to the dumpsite at its own cost and trucks, but the Pomona Dumpsite incurs exorbitant fuel costs per annum. For example, in Year 1 alone, the cost of fuel is EUR2.86m or US$3m, translating to US$8300 per day for 365 days, thus working out to 4700L of fuel per day.
#4. Garbage Trucks
Another looming potential prejudice associated with this deal is the EUR27.7m quotation to Government for Compactor and Skip trucks by Geogenix. The Euro 6 Emissions trucks are quoted at EUR405,000 each but our research shows that in Netherlands the most expensive top of the range brand new Euro 6 Emissions trucks costs not more than EUR87,000 each. https://www.truck1.sg/utility-special-vehicles/garbage-trucks/daf-fag-cf-290-a6298305.html
This means the price quoted for each truck is overstated by 365%. This is profiteering and should never be allowed to happen at the expense of our poor people compounded by the current hardships.
#5. Investment Analysis: Net Present Value (NPV)
An NPV of zero or higher forecasts profitability for a project or investment, while projects with a negative NPV forecasts loss. In its own admission as expressed in their Financial Model which has a negative NPV, Geogenix BV knows that this project as currently stated will never be profitable.
Without incorporating the additional capital expenditure which only starts to strangely appear in the Cashflow from year 6 up to 30, the project itself is not viable because its NPV at a discount rate of 10% and EUR302 900 001 capital outlay as stated in their budget is -EUR161 245 891,37
In simple terms what this means is that if Geogenix BV proceeds to invest their EUR302 900 0001 over a 30 year period, they will make a loss of not less than -R161 245 891,37
According to these findings from the Geogenix BV Financial Model, if allowed to continue, the people of Zimbabwe through City of Harare stands to lose in excess of EUR500m, siphoned through illicit cash flows and fictitious expenses.
The MDC leadership recommends that:
i) The deal as currently structured is not reasonably justifiable and supportable and we are calling on government that it be renegotiated or simply open it to tenders.
ii) Geogenix should forthwith not be allowed to collect any money from City of Harare until these anomalies and many others which we haven’t stated here are looked into.
We are a people’s party and carry the sovereign mandate to protect not just the interests of our supporters across the country but the nation at large and more importantly, the generations after us. The MDC will continue to guard the people’s interests, and be the public protector as we fight for a better Zimbabwe.