GOVERNMENT is pulling all the stops to ensure financial closure for the Hwange Thermal Power Station expansion project is achieved by end of next month, as it emerged that China Eximbank – which is expected to release a US$998 million loan to that end – has brought more conditions for release of the funds.
Source: More strings for US$1bn deal | The Sunday Mail Jul 23, 2017
This is despite a prior announcement that all “conditions precedent” had been met.
Some of the conditions precedent included Parliament’s ratification of the deal; and signing of an on-lending, implementation and power purchase agreements.
Parliament ratified the deal in December 2016 while the on-lending agreement was inked April this year. The implementation and power purchase agreements were signed in May 2017, paving the way for financial closure.Now China Eximbank is said to have raised new conditions which, sources said, had “nothing to do with the deal”.
Informed sources said all parties were working “around the clock” to ensure the new demands were resolved to allow financial closure either “end of August or early September”.
Zimbabwe Power Company officials are understood to have been startled by the new demands made by China Eximbank as they felt all demands precedent had been met.
ZPC is Zesa Holdings’ power generation arm, and one of the Hwange Thermal Power Station expansion project partners, together with Sino Hydro Corporation Limited of China.
The Sunday Mail Business understands that the sticking point blocking the immediate release of the US$998 million loan pertains to Zimbabwe’s debt to China.Zimbabwe owes China around US$40 million.Secretary for Finance and Economic Development Mr Willard Manungo would not comment on the reported new demands but said all conditions precedent had been met.
“Remember, when we work with our Chinese colleagues, they don’t want us to publicise the discussions before an agreement has been struck. But the background to the issue, which you may be familiar with, is that we had conditions precedent – all those we have met … so we are almost at financial closure. That is the stage we are at,” said Mr Manungo.
In his Budget Review and Outlook Statement for 2017 in Parliament last week, Finance and Economic Development Minister Patrick Chinamasa said “as at December 2016, the necessary conditions precedent were fulfilled, including ratification of the loan agreement by Parliament and the conclusion of various suppliers’ agreements”.
In emailed responses to our questions, ZPC spokesperson Ms Fadzai Chisveto would neither confirm nor deny there were issues stalling financial closure, only saying a “great deal of work is going on behind the scenes at ZPC, Sino Hydro and Government of Zimbabwe levels to ensure project kick-off and implementation”.
“The project parties are finalising the conditions precedent of the main funding loan of US$998 million from the China Eximbank.“ZPC has cleared most of its respective conditions precedent. Meanwhile, Sinohydro have initially subscribed for their 36 percent shareholding in the project company, Hwange Electricity Supply Company Private Limited. To date, parties are now preparing to inject their respective bulk equity contributions into the project company,” said Ms Chisveto.
Hwange Thermal Power Station expansion is estimated to cost US$1,5 billion.ZPC and Sino Hydro are now reportedly preparing to receive the bulk of equity contribution into the project company. Ms Chisveto said Sino Hydro and ZPC’s technical teams were on the to finalise project designs and site plans in preparation for ground-breaking at the end of August.
The expansion of Hwange Thermal Power Station will include construction of two new units – 7 and 8 – with combined capacity of 300MW.
Hwange is Zimbabwe’s largest power plant with installed capacity of 920MW. Its first units were commissioned between 1983 and 1986 with Stage 2’s units coming up in 1986/87.