We are ready to reform says Chinamasa as Zimbabwe and Zambia woo investors for $4bln power plant

We are ready to reform says Chinamasa as Zimbabwe and Zambia woo investors for $4bln power plant

By Kuda Chideme, Livingstone, 30 March (The Source) –  Zimbabwe and Zambia say they are prepared to undertake deep reforms to attract investors for the $4 billion Batoka Gorge Hydro power plant which would produce 2,400 megawatts and ease power shortages in the two countries.   

The two countries, which are bordered by the Zambezi River, are on a charm offensive to court financiers for the development of the power plant which will be located 54 Kilometers downstream of the Victoria Falls.

The project was first mooted as far back as 1904 but stalled due to an impasse between the two countries over a $71 million debt accrued by Zimbabwe emanating from shared costs of the construction of Kariba Dam and associated infrastructure during the tenure of the colonial era Central African Power Corporation (CAPCO).

CAPCO was co-owned by Zimbabwe and Zambia during the Federation of Rhodesia and Nyasaland. It was disbanded in 1987 and later succeeded by the Zambezi River Authority.

A feasibility study was undertaken in 1992 and recently updated. In 2015, the World Bank said delays to the project  had cost the two countries more than $45 billion in missed economic opportunities.

Zimbabwe has been experiencing crippling power shortages over the past decade, with demand rising to about 2,200MW against generation of an average of 1,201MW, with the shortfall supplemented with imports mainly from Mozambique and South Africa.

But the southern African country has struggled to attract investment, mainly due to perceived political risk and murky interpretation of its controversial indigenisation policy.

Zimbabwe’s Finance Minister Patrick Chinamasa told an investors conference on Thursday in the resort town of Zambia that the two southern african countries were ready to institute reforms to attract funding.

“I am aware that to attract private capital for our public infrastructure projects, particularly energy projects with high upfront costs, we need to address and overcome a number of perceived risks, including regulatory, financial, legal and other such barriers” he said.

“A project of this magnitude requires much preparation for the market so as to provide clarity for easier investor assessment. This is also benefiting from reform programmes focusing on attracting capital, particularly from private investors into the energy sector that our two countries have been implementing.”

Zambian Finance Minister Felix Mutati also weighed in saying that transparency and consistency would be at the core of the two government’s engagement with investors.  

“We are aware that for such investments to take place, we have a number of structural issues that we will need to address as governments. Key is the commitment to a predictable, consistent and enabling policy environment in the energy sector that will guarantee an attractive return on your investment,” he said.

“To this end the tax regime will have to be stable and predictable to ensure that your long-term models are sustainable as you make these decisions. On our part, I would like to assure you of our commitment to a stable fiscal regime.”

The total project cost  is estimated at $4 billion and the unit cost of electricity generated from it is expected at 3.6 Cents/kwh compared to a regional average tariff of 8.25 us cents/kwh.

A number of institutional investors, including prominent  banks such as Standard Chartered Bank, Stanbic Bank, and Developmental Financial Institutions were present at the conference. Sino Hydro Ltd and Italian contractors Salini Impregil are also in attendance.

Completion of the Batoka gorge power project is expected to go a long way in plugging the the Southern African Development Community (SADC) region’s power deficit currently at 6, 000MW.