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ZPC power generation in Zimbabwe receives boost through hydro and thermal projects

Steven Gamble
Richard Metcalf

Background

Although 37% of Zimbabweans have access to electricity, which is in excess of the 31% African average, the gap between installed capacity and peak demand in Zimbabwe is approximately 1,200MW. As a result, Zimbabwe is reliant on importing power via regional interconnectors. The Zimbabwe state utility, ZESA Holdings, imports up to 40% of its power requirements from Eskom (South Africa), Cahora-Bassa (Mozambique) and Snel (the Democratic Republic of Congo) through the mechanism of the Southern Africa Power Pool (SAPP). Where this demand gap is not bridged, there is extensive load shedding, especially during peak periods.

To rectify the deficit in installed capacity, Zimbabwe Power Company (ZPC) launched a number of electricity generation expansion and improvement projects over the last few years, including:

  • the rehabilitation of the existing 920MW Hwange coal power station;
  • the 600MW extension of the existing Hwange coal power station;
  • the rehabilitation of the existing 750MW Kariba South hydropower station; and
  • the 300MW expansion of the existing Kariba South hydropower station.

Funding for the rehabilitation and expansion projects

As part of its rehabilitation and expansion initiatives, Zimbabwe Power Company (ZPC) recently negotiated a US$120 million facility with the Standard Bank of South Africa and The Eastern and Southern African Trade and Development Bank (PTA Bank) to provide finance to ZPC for, among other things, the expansion of the Kariba South hydro power station. This facility supports the original 20-year $319 million loan negotiated by ZPC with China Exim Bank to finance the expansion of Kariba South in October 2013 and completes the funding required to increase the installed capacity of Kariba South by the addition of a further 300MW, resulting in an aggregate 1,050MW installed capacity. The new hydropower plant is to be wholly owned and operated by ZPC’s subsidiary, Kariba Hydro Power Company (Private) Limited (KHPC) and completion is scheduled for 2018.

Funds available under the US$120 million facility will also be used to assist with the rehabilitation of the existing hydro power plant at Kariba South as well as the existing coal fired power plant at Hwange. Hwange has an installed capacity rated at 920MW, but ageing equipment means only 600MW of this capacity is currently in use. The rehabilitation of these plants will add significantly to Zimbabwe’s power resources.

The US$120 million facility is backed by a 15-year power purchase agreement between ZPC and offtaker Namibia Power Corporation (NamPower) for 80MW of the capacity at Kariba South.

In addition to these projects, ZPC is finalising the equity and debt arrangements required for the $1 billion extension of Hwange which will add 600MW of thermal power to the national grid. The new 600MW thermal power plant is to be majority owned and operated by ZPC’s subsidiary, Hwange Electricity Supply Company (Private) Limited (HESCO) as PPP joint venture with Sinohydro of China.

These domestic initiatives, coupled with the Southern Africa Power Pool (SAPP) initiative to develop new cross-border transmission capacity between Zimbabwe and South Africa, will lead to significant improvements in access to electricity within Zimbabwe.

Norton Rose Fulbright Group and its alliance partner Gill, Godlonton & Gerrans of Zimbabwe provided legal advice to ZPC on each of the projects referred to above.

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