Minister of finance and economic development, Patrick Chinamasa, confirmed the development last week.
It is stated that the project is one of the numerous mega deals signed between Zimbabwe and China which demonstrates the Asian nation’s dedication to do business with Harare.
The press reported that the permitted loan is estimated to be paid back over a 20-year phase with a grace interlude 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
In his presentation before Parliament, Chinamasa said the project was consistent with Zim-Asset, a position that showed that government attached significance to the development of chief infrastructure in the nation, as well as energy.
The minister said the power project was being executed by Sino-Hydro Corporation Limited of China as the contractor.
“This special purpose vehicle that has been formed for the purposes of supervising the project development will be the Hwange Electricity Supply Company (HESCo). It shall be a partnership company between Zimbabwe Power Company (ZPC) and Sino-Hydro Corporation,” he clarifies.
The minister further clarified that in terms of an On-Lending Agreement, it is HESCo, that will take responsibility for settlement of the principal loan and interest from the profits of electricity sales with the project set to be realized over a phase of three and half years.
“The outlay for executing this project is US $1.48 billion of which, US $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 fulfilled with China Exim Bank.
“In turn, China Exim Bank has asked the contractor, Sino-Hydro Corporation, to infuse $176 million representing 15% of the contract price as equity into the project,” Chinamasa said.
The minister stated that the expansion of the two power generation units, would supply an extra 600MW of power to the national grid, in adding up to 920MW, giving a collective figure of 1,520MW.
In conclusion, Chinamasa said it was vital that government permitted viable tariffs to guarantee competitiveness both to the producer and the consumer.