The Zimbabwean government has approved a $1 billion loan facility from the Asian financial institution, Exim Bank of China, enabling work to begin on the Hwange Power Project.
Minister of finance and economic development, Patrick Chinamasa, confirmed the development last week, local media the Herald reported.
It is reported that the project is one of the several mega deals signed between Zimbabwe and China, which demonstrates the Asian country’s commitment to do business with Harare.
Media reported that the approved loan is expected to be paid back over a 20-year period with a grace period of seven years at an interest rate of 2% per annum.
The loan has also a commitment fee of 0,25% per annum on the undrawn amount and management fee of the same percentage.
Hwange Power Project form part of Zim-Asset
According to the media, in his presentation before Parliament, Chinamasa said the project was consistent with Zim-Asset, a situation that showed that government attached importance to the development of key infrastructure in the country, including energy.
The minister said the Hwange Power project was being implemented by Sino-Hydro Corporation Limited of China as the contractor.
“The special purpose vehicle that has been created for the purposes of overseeing the project development will be the Hwange Electricity Supply Company (HESCo). It shall be a joint venture company between Zimbabwe Power Company (ZPC) and Sino-Hydro Corporation,” he explained.
The minister further explained that in terms of an On-Lending Agreement, it was HESCo, that would assume responsibility for repayment of the principal loan and interest from the proceeds of electricity sales with the project set to be implemented over a period of three and half years.
“The cost for implementing this project is $1.48 billion of which, $1.147 billion is the contract price. Of the contract price, 85% amounting to $997.7 million has been secured through the Preferential Buyer Credit Loan Agreement concluded with China Exim Bank.
“In turn, China Exim Bank has requested the contractor, Sino-Hydro Corporation, to inject $176 million representing 15% of the contract price as equity into the project,” Chinamasa said.
The minister noted that the expansion of the two power generation units, would provide an additional 600MW of power to the national grid, in addition to 920MW, giving a cumulative figure of 1,520MW.
In conclusion, Chinamasa said it was critical that government approved viable tariffs to ensure competitiveness both to producer and consumer, media reported.