ZIMBABWE Power Company (ZPC) and Sino Hydro yesterday signed the Engineering, Procurement and Construction (EPC) contract paving way for the $400 million expansion of Kariba South Power Station.
Report by Mernat Mafirakurewa Acting Business Editor
However, the commencement of the project is subject to the government clearing its $27 million debt with China Export-Import Bank (China Eximbank).
The government has since approached China Eximbank to finance the new project.
Addressing journalists in Harare after the signing ceremony, Energy and Power Development permanent secretary Partson Mbiriri said the government would shoulder the debt.
He said the Finance ministry had since made a commitment to make the funds available to enable financial closure for the Kariba South expansion.
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“Ideally, of course, those that borrowed should have honoured their obligation, but nonetheless to the extent practicable, government acting as the guarantor of the two loans, is prepared to pay that amount,” Mbiriri said.
“The Minister of Finance (Tendai Biti) has indicated to us that he thinks it will be possible to pay that amount.
“What we can do is to encourage the Minister of Finance to pay so that it does not continue to be an impediment to financial closure of this project.
“Whereas we have signed the contract, this is a prerequisite to financial closure and one of the factors that’s coming to play immediately is Zimbabwe meeting its $27 million loan and thereafter, the China Eximbank considering the request that we have made for a loan towards this project.
“The fact of the matter is, at this point in time we do not have financial closure, but I think we have been in discussion for such a long time that certainly we shall have financial closure.”
Under an EPC contract, the contractor designs the plant, procures the necessary materials and builds the project either directly or by sub-contracting some of the work.
The 300MW expansion project will take about four years to complete and will significantly narrow the gap between supply and demand.
Consequently, in 2012, generation averaged 1 010MW against a target of 1 085MW.
ZPC board chairman Victor Gapare said the project would take almost four years to complete and would benefit the country through skills development and local procurement.
“The EPC contractor was required to source financing for up to 90% of the project from banks on behalf of ZPC,” he said.
“The signing of this EPC contract will enable Sino Hydro to start detailed drawings of the power plant, while ZPC and its financial advisors KPMG finalise financial arrangements.”
Gapare said ZPC power project pipeline had an estimated cost of $5-7 billion.