Thursday, February 21, 2013

Zimbabwe starts paying Zambia debt to enable hydropower project

Zimbabwe starts paying Zambia debt to enable hydropower project
Tue Feb 19, 2013 8:24am EST

* Zimbabwe to have paid $40 mln of debt by end-March

* Joint venture to produce 1,600 MW

Feb 19 (Reuters) - Zimbabwe's state utility ZESA said it had started
paying a $70 million debt to Zambia, a necessary step before the two
nations can embark on a joint 1,600 megawatt hydroelectric plant,
which could help relieve a power shortage.

The two southern African countries have started preliminary work on
the Batoka power project, estimated to cost $2.5 billion, and expected
to be built and operated by a private company for a period of years
before transferring ownership to the two states.

Zimbabwe, which currently generates just over 1,000 MW of power or
about half of peak demand, has struggled to get funding for new
projects to expand capacity, largely due to concerns about President
Robert Mugabe's handling of the economy. The resulting power shortage
has paralysed mines and industries.

ZESA Chief Executive Elijah Chifamba told a parliamentary committee
hearing the utility had started making payments to Zambia to clear the
debt incurred when Zimbabwe sold off assets of a disbanded power firm
jointly owned by the two countries to run hydroelectric plants at the
Kariba dam.

Chifamba said Zimbabwe will have paid $40 million to the Zambians by
the end of March.

"Zambians needed to see first that we were committed to settling that
debt and to demonstrate that we are bona fide partners before they
could actually enter into the Batoka project," he said.

"Because we have done so, that has unlocked the project."

Chifamba said ZESA, which is owed $740 million by non-paying
customers, was struggling to raise long-term finance to fund its
projects. The company has, however, cleared $100 million in debt for
importing power owed to Mozambique's Hydro Cahorra Bassa.

The utility signed a $400 million deal with Chinese hydropower
engineering firm Sinohydro in December to expand its Kariba
hydroelectric plant by 300 megawatts.

Zimbabwe is in discussions with Export-Import Bank of China over
funding the expansion.

Zimbabwe has licensed several independent power producers, but
analysts say it is unlikely to attract significant foreign investment
due to Mugabe's drive to force foreign firms, including mines and
banks, to turn over 51 percent ownership stakes to locals under a
black economic empowerment law. (Reporting by Nelson Banya; editing by
Jane Baird)

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