The $1.4 billion Hwange Power Project signed last year between Zimbabwe government and China Export-Import Bank is now set for takeoff after Parliament on Thursday approved a $1 billion loan facility from the Asian financial institution.
Finance and Economic Development Minister Patrick Chinamasa published the loan facility on Friday in the Government Gazette to concretise the project.
The project is one of the several mega deals signed between Zimbabwe and China as the Asian state demonstrated commitment to do business with Harare.
Minister Chinamasa published the loan agreement in a Government Gazette made available on Friday detailing its features some of which included 20 years repayment period with a grace period of seven years at an interest rate of two percent per annum.
The loan has also a commitment fee of 0.25 percent per annum on the undrawn amount and management fee of the same percentage.
“It is hereby notified, in terms of Section 300 (3) of the Constitution of Zimbabwe, that Zimbabwe, represented by the Minister of Finance and Economic Development, concluded a loan agreement with the Export – Import Bank of China dated 30th June 2016 on the following terms — (a) the loan amount is $997,723,244,20
(d) the loan would be utilised for the purpose of the construction of Hwange 7 and 8 Thermal Power Station Expansion and ancillary structures,” reads the notice.
In his presentation before Parliament, Minister Chinamasa said the project was consistent with Zim-Asset, a situation that showed that Government attached importance to development of key infrastructure such as energy.
He said the 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,” said Minister Chinamasa.
He said 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 US$1.48 billion of which, US$1.147 billion is the contract price. Of the contract price, 85 percent amounting to US$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 US$176 million representing 15 percent of the contract price as equity into the project,” said Minister Chinamasa.
“In addition, ZPC is required to raise US$307 million to cover the project development costs. Several efforts have been initiated to ensure that ZPC secures these resources. Insurance cover for Sino-sure is also critical for the successful implementation of the project.”
Expansion of the two power generation units, would provide an additional 600 megawatts of power to the national grid, said Minister Chinamasa, in addition to 920 megawatts, giving a cumulative figure of 1 520 megawatts.
Minister Chinamasa said it was critical that Government approved viable tariffs to ensure competitiveness both to producer and consumer.
Harare East MP Cde Terence Mukupe raised concern that the project, big as it is might deplete limestone, the consequence of which might lead to a price hike on cement.