Kariba South Hydro Power expansion to start this week

Expansion work at Kariba South Hydro Power is expected to start this week, amid indications that Government and officials from China Export and Import Bank will today sign a US$320 million funding agreement for the project.

A delegation led by China Exim Bank vice president, Mr Zhu Hongjie was expected to arrive in the country yesterday to seal the deal.

The project will cost about US$355 million, with Government supplementing 10 percent which is about US$35 million. All things being equal, the development puts in motion Government's commitment to reducing the widening gap between electricity demand and supply in the country at least by 2017.

The loan will be used for such services as engineering, procurement of equipment and actual construction to be done by the winning bidder – a Chinese firm called Sino-Hydro. The firm has an option of sub-constructing building of the two units that will add 300 megawatts to the national grid.

"Yes, China Exim Bank number two (Mr Zhu) is coming to sign loan agreement for Kariba South expansion," confirmed Finance Minister Patrick Chinamasa yesterday.

Zimbabwe Power Company - a subsidiary of Zesa Holdings, last year signed the agreement for the project with Sino-Hydro, an engineering, procurement and construction company.

But a debt of over US$25 million owed to Sino-Hydro by the Industrial Development Corporation and Farmers World Holdings stalled conclusion of the funding agreement as the two firms were supposed to clear the debt first before new funding.

"That debt was settled. That is the reason why there is progress now in terms of funding for Kariba South expansion," said a source.

"Treasury applied for a loan agreement with the China Exim Bank in June this year and the application was approved last month. It is the first time that a loan application has been approved by that bank this quick.

"It usually takes a year to approve loan applications, especially for projects on this part of the world. The reason could be that the bank has worked with Sino-Hydro for a long time because as the contractor they were also pushing for the approval of the loan."

ZPC managing director Mr Noah Gwariro told The Herald at the weekend that signing of the funding agreement would pave way for actual work to begin.

"By signing the agreement, it means we would have achieved financial closure for basic funding for the project. What will be left is for us to raise the balance of about US$35 million. Work should start in the first quarter of next year with the contractor mobilising on site and doing a detailed design for the project. We expect the first unit to be ready by 2018," he said.

But an official from Sino-Hydro who requested anonymity said work would immediately start soon after signing of the funding agreement.

"We will start work immediately. We have been waiting for the funding agreement to be signed," said the official.

"We will start mobilising resources to the site to start the project even before disbursement of the money. We have already concluded basic design, geological investigations and topographic survey. So, what is left for us is to do the actual job."

On completion, the project is expected to ease the country's perennial electricity crisis that has affected all sectors of the economy, including agriculture and industry. The country's daily peak demand is about 2500MW against 1300MW generation capacity.

ZPC is also working toward increasing generation capacity at Hwange Thermal Power Station where 900MW will be added to the national grid upon completion.

Another Chinese firm, China Machinery and Energy Corporation, won the bid for the expansion of Hwange Units 6 and 7.

The capacity expansion project is estimated to cost US$1 billion.