Major boost for Intratrek power projects

Source: Major boost for Intratrek power projects – DailyNews Live

BUSINESS WRITER      23 February 2017

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.