The project will cost $355 million and the government will provide the balance of $35,5 million.
Finance Minister Patrick Chinamasa signed the agreement this morning with the Vice President of China Exim Bank, Zhu Hongjie.
Chinamasa said the Preferential Loan Agreement meant that China would provide 90 percent of the funding while the government, through the Zimbabwe Power Company’s contribution, would pay the remaining 10 percent.
“The project thrust is to increase by two generating units at Kariba Power Station of 150 Megawatts each,” he said.
The finance minister admitted that power shortages had “hamstrung efforts to revive our underperforming economy”.
The country’s energy generating capacity currently stands at 1,200 MW against a demand of 1,700 MW.
“This reflects suppressed demand considering that industry in this country is operating at below full capacity otherwise the amount of energy required is about 2,200 MW,” Chinamasa said.
The loan from China Exim Bank will attract an interest rate of two percent per anum with a five year grace period and a total repayment period of 20 years.
The same Chinese bank provided a $150 million loan for the rehabilitation and development of the Victoria Fall International Airport.
Chinamasa said the government would honour its obligations to China Exim Bank.
“We will honour and protect the Power Purchase Agreement to be entered into by the Zimbabwe Electricity Transmission and Distribution Company and the Kariba Hydro Power Company,” he said.
The signing of the agreement was witnessed by the Minster of Energy and Power Development, Dzikamai Mavhaire and Han Bing, the Chinese Economic and Commercial Counselor.
The Zimbabwe Power Company and Sino Hydro signed the Engineering, Procurement and Construction contract for the project in December 2012.
The commencement of the project was subject to the government clearing its $27 million debt with China Exim Bank which the then Finance Minister, Tendai Biti indicated was going to be done.
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