Major boost for Intratrek power projects

HARARE - President Robert Mugabe’s government has given prescribed asset status (PAS) on two major energy deals, thus paving the way for the financing and construction of the key power projects with a combined 130 megawatts (MW) output of electricity.

This also comes amid rumblings about the status and progress of one of the projects – the 100MW Gwanda solar project – to benefit from this new financing arrangement, and policy announcement.

“Following requests by the Zimbabwe Power Company (ZPC) for PAS on the 30 MW Gairezi hydro and Gwanda projects, we are told that Finance minister Patrick Chinamasa wrote to the Insurance, and Pensions Commission (Ipec) on February 20 to rally support for the implementation of this initiative and key projects,” sources said yesterday.

“This bold pronouncement is not only an attempt to accelerate ZimAsset – since power is a key enabler – but the reasoning behind it was also to plug the country’s current power deficit, liquidity constraints that can affect financing requirements of these key national projects and, of course, incentivising ZPC to consolidate its portfolio by refurbishing existing and building new plants,” they said.

With the Gwanda and Gairezi projects requiring about $173 million, and $110 million, the Harare administration has resorted to PAS funding as a way of developing infrastructural projects and where benefits to participating institutional investors, include tax breaks.

Wicknell Chivayo's Intratrek Zimbabwe was awarded the tenders after a competitive tendering process about two years ago now and prescription of assets is a move by governments – the world over – for insurance and pension funds, for example, to hold a minimum of 10 percent of their assets in such long-term national projects, and instruments requiring huge sums of money or investments.

While the deep-pocketed and Shanghai-listed Chint Electric Company is the engineering, procurement and construction partner for the Matabeleland South solar project, Bharat Heavy Equipment of India will help construct the Gairezi project.

According to people familiar with the developments, a minimum 15 percent local funding component for both projects will be met through solar and hydro bonds with tenures of up to 10 years and while the majority 85 percent will be sourced offshore – through vendor financing from export credit agencies, in line with such mega projects.

In the case of Gairezi, Afreximbank will lead the financing arrangements for this key Manicaland greenfield project, while China Eximbank will help on the solar side.

It is envisaged that the bonds will also help “stimulate demand from the target market, including liquid asset status, government guarantees and the whole PAS” market, among other things.

With the Gwanda project expected be complete within 18 months from financial closure, Gairezi will also be completed within three years – and output from the two projects will be sold via a prescribed power purchasing agreement to local consumers or takers.

As the ZPC’s five power stations are only producing 850 MW, the envisaged projects are expected to increase installed capacity from the current 1 960 to 4 260 MW by 2020 and electrification rate to 85 percent.

Zimbabwe’s power sector suffers from such serious supply side constraints that there is a disproportionate gap between rural and urban household supply, and experts say the former only accounts for 16 percent, while cities take nearly 79 percent of suppy.

Therefore, the upcoming projects are expected to significantly enhance electricity supply and generation in their respective areas.

Post a comment

Readers are kindly requested to refrain from using abusive, vulgar, racist, tribalistic, sexist, discriminatory and hurtful language when posting their comments on the Daily News website.
Those who transgress this civilised etiquette will be barred from contributing to our online discussions.
- Editor

Your email address will not be shared.