The Zimbabwe Power Company has secured $116 million from regional financial institutions to go towards its equity contribution for the expansion of Hwange Thermal Power Station.
ZPC’s equity contribution was one of the major conditions that were stalling the financial closure of the $1,1 billion project to be carried out by a Chinese company, Sino hydro. ZPC signed a contract with Sino Hydro to expand Zimbabwe’s largest power plant by additional 600 megawatts as the country seeks to increase power generation and reduce imports.
The power generating subsidiary of Zesa Holdings has a contractual obligation to raise $314 to cover project development costs. The Herald Business understands that the $116 million, enough to kick start the project was secured from Standard Bank South Africa ($40 million) and Afreximbank ($76 million).
The remaining amount will be released according to project requirements. Sino Hydro told The Herald Business that China Eximbank—which is expected to release about $1 billion for the project— would start releasing the funds. The funding will enable ZPC to add to 2x300MW generators, commonly referred to as Hwange 7 and 8 to increase power output from the country’s biggest thermal power plant.
Currently, the power station has installed capacity of 920 MW. ZPC acting managing director Engineer Josh Chirukuutsi, said the firm had cleared all outstanding issues.
“ZPC has fulfilled all the conditions precedent for financial closure and we are now expecting the first draw-down for the loan,” he said.
“It’s all done and we are only left with processes of disbursement but by the end of the month, we should be able to draw down from our bank. The amount is a lot but it is going to be released as per project requirements. That is how it is structured.” Zesa Holdings chief executive Engineer Josh Chifamba, weighed in: “Before disbursements are done, there are conditions that should be met. All those conditions precedent have been met.
‘‘What we are now waiting for is disbursement from where we are getting our money otherwise all the prior outstanding issues have been cleared.
“We are waiting for the bureaucracy of the banks and after that we will be moving to the ground breaking ceremony, which will be done by the highest office in the country.”
ZPC had initially hoped to seal the funding agreement with Sino Hydro in 2016, but missed the timeline due to unfulfilled conditions precedent. The latest development comes at a time Sino Hydro has completed the first unit of the Kariba South power expansion which is now delivering 150 megawatts onto the national grid.
The remaining unit, with capacity to churn out another 150MW, is expected to be running by March. The projects are part of the Government’s economic recovery programme under the Zim-Asset Infrastructure and Utilities Cluster.
Commenting of Hwange project, Sino Hydro chief representative in Zimbabwe Mr Yifeng Wu, said: “On our part we are ready, and China Exim Bank is ready and we hope the first disbursement will be happening soon as per projections and the project officially commences.
“As the contractor, we are doing preparatory works while manufacturers in China have already started the manufacturing of equipment needed for the project. All the agreements and documents are in place.
“With regards to Kariba, we have come on line with one unit and the second unit, in terms of the agreement should be running by March 18. We are doing our best to make sure we meet the target.” Parliament has ratified the Hwange project loan and a power purchase agreement between Sino Hydro and the Zimbabwe Electricity Transmission and Distribution Company is in place.
Zimbabwe Energy Regulatory Authority (ZERA) has approved a tariff of 11c kWh. The projects being carried out will see Zesa cutting on power imports, which are costing the power utility. Zesa imports power from regional utilities including Hydro Cahorra Bassa and Eskom of South Africa to cover local supply gaps due to limited capacity. Zimbabwe requires an average of 1 400 megawatts against an average generation of 1 000MW.