By Patience Rusare
CONTRARY to reports in the so-called independent media that Asian investors are shunning the country, Zimbabwe has received a US$319,5 million loan from China Exim Bank for the expansion of the Kariba Hydropower Station, an upgrade that should help ease electricity shortages in the country.
Speaking at the loan agreement signing ceremony in Harare on Monday, the Minister of Finance and Economic Development, Cde Patrick Chinamasa, said the project will reduce the widening gap between electricity demand and supply in the country at least by 2017.
“This should go a long way in reducing power outages that characterise our power generation,” he said.
“For us, the energy deficit has hamstrung the growth of our economy.”
Under the loan agreement, the bank will provide US$319,5 million which is 90 percent of total project cost while Government funds the remaining 10 percent which is US$35, 5million.
The loan, from China Exim Bank, will attract an annual interest of two percent, grace period of five years and has a repayment period of 20 years.
Cde Chinamasa said a power purchase agreement has been agreed between the transmission and Distribution Company and a new company called the Kariba Hydro power company has been created as a special vehicle purpose company, which will be owned by Zimbabwe.
“After signing this loan agreement, the burden now shifts to the Energy Minister (Cde Dzikamai Mavhaire) to successfully implement and do everything in his power to expedite implementation of the project,” he said.
China Exim Bank vice president, Zhu Hongjie said China and Zimbabwe have created a clear path for smooth cooperation.
“We feel the same in prioritising energy, Sino hydro is a very competitive company and I would like to implore them to complete the project in time so that it benefits Zimbabweans,” he said.
Zhu said China experienced similar challenges in the 1980s, but it finally addressed the problem.
Zimbabwe produces about 1 200 megawatts of electricity against a peak demand of 2 200 megawatts, resulting in long outages that have hit industrial and agricultural production.
The project will take four years to complete and is for two power units of 150 megawatts each.
“The two units will produce a combined 300 megawatts which will be a major step towards meeting national demand,” said Cde Chinamasa.
Kariba produces 750 megawatts at its peak.
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.
The power generation company 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 company, China Machinery and Energy Corporation, won the bid for the expansion of Hwange Units six and seven.
The capacity expansion project is estimated to cost US$1 billion.
The nationwide power cuts in Zimbabwe are already having severe negative implications on the already squeezed industry and there are fears the situation could threaten the survival of struggling firms.
Shortage of power has exacerbated the plight of industry, which is still recovering from the effects of a decade of economic downturn, precipitated by Western-imposed sanctions.
Residents countrywide have not been spared as they endure excessive power cuts forcing households and industries to invest in expensive alternatives such as generators and inverters.
Imports, mainly from Mozambique, range up to 300MW, depending on source peak periods.
Zimbabwe experienced 17 percent deficit on its requirements in the eight months to August 2013.
The country faces critical shortages as most of its generation stations’ equipment is now very old and susceptible to frequent breakdowns depriving consumers of consistent supplies.