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Zim to meet debt obligation

ZIMBABWE will meet its US$27 million debt obligation to Export-Import Bank of China (Eximbank) in order to get another loan from a Chinese company meant to finance expansion of Kariba South Power Station, a senior government official has said.

REPORT BY KUDZAI CHIMHANGWA

Sino Hydro wants to finance the US$400 million expansion of Kariba but has said it cannot do so unless the debt owed to Eximbank has been cleared.

The expansion would result in additional generating capacity of 300MW.

Speaking at a signing ceremony between the Zimbabwe Power Company [ZPC] and Sino Hydro in Harare last week, Energy and Power Development permanent-secretary Partson Mbirimi said the government had not finalised financial aspects related to the project as a result of the debt.

“As far as I’m aware, government appreciates the significance of this project. Nonetheless, to the extent practicable, government acting as guarantor for the loans is prepared to pay that amount.

“The Finance ministry has indicated that they think it will be possible to pay that amount, although I can’t indicate when,” he said.

“It [loan repayment] is a prerequisite to financial closure.”

The country owes the Eximbank US$27 million for agricultural equipment acquired through the Industrial Development Corporation and Farmers’ World owned by Muzarabani South MP, Edward Raradza.

A report by the Parliamentary Portfolio Committee on Mines and Energy earlier this year showed that Sino Hydro had said that it would not release funding for Kariba South from Eximbank until the debt had been cleared.

ZPC last week signed an Engineering, Procurement and Construction contract [EPC] with Sino Hydro, under which the EPC contractor was required to source financing for up to 90% of the project financing from banks on behalf of ZPC.

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.

Kariba South Power Station extension is being developed as a standalone Special Purpose Vehicle [SPV] which combines the assets of the existing plant and the proposed power station extension and operated by a single operator to maximise the value of the resource.

To avoid the complexities and delays likely to arise from introducing equity from third parties in a project involving existing state assets, the SPV would subsist through a combination of debt and internally generated cash flows, with ZPC being the only shareholder.

Mbirimi said there was major interest presently being shown by the Chinese government to develop additional hydro projects on existing dams dotted around the country as well as other independent power producers in Gwayi and Gokwe North.

Power shortage problems being addressed — Gapare
ZPC Chairman Victor Gapare said the board and management were addressing the power shortage problem from two fronts.

The first involved addressing the gap between actual generation and installed capacity at existing thermal power stations namely Hwange, Bulawayo, Munyati and Harare.

The second front involved the construction of new generation capacity.

Zimbabwe generates an average of 1 200MW, against a demand of 2 200MW.

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