The Civil Engineering Contractor January 2019 | Page 15

and related institutions by providing grant resources for
preparing high-quality and viable regional and/or continental
infrastructure projects with a view to requesting financing
from public and private sources; developing a consensus
and partnership for project implementation; and promoting
infrastructure projects and programmes aimed at enhancing
regional integration and trade.
The project will ease power shortages in Zimbabwe and
Zambia, with a huge potential to supply other regional
countries. The development comes as Zimbabwe has set in
motion a number of other electricity generation projects
that will see the country produce surplus power in the
next five years. Zimbabwe’s President Mnangagwa recently
launched the USD1.5-billion Hwange Power Station Unit 7
and 8 construction project, which will add 600MW to the
national grid.
That project comes after the successful completion of
the Kariba South expansion venture that has an output of
300MW. Zimbabwe has also secured an investor for a coal-
bed methane gas project in Matabeleland North.
The country is currently producing about 1 200MW of
electricity against a demand of 1 400MW during peak period.
Under the Batoka project, Zimbabwe and Zambia will share
the electricity equally when generation commences.
Going to market
Kabwe adds that ZRA is cognisant of the need to involve
investors from an early stage and to this end have been
around the world conducting market soundings in France,
China, South Africa, and more, and hosted an international
investor conference. “We have sounded them out as to how
they would like the project to be structured and based on this
feedback, came up with a commercial structure. This was all
designed so that when we go to market, investors will find
the appetite for it,” says Kabwe. The structure is flexible,
allowing investors to put capital to either the north bank
(Zambia), the south bank (Zimbabwe), or the entire project.
The funding is to be split between the capital for the dam
(which is the major cost) and the power infrastructure.
“Regarding the dam finance, the government will come in
with debt and grants without affecting its debt standing or
credit rating. Our governments have told us they are not
interested in providing sovereign guarantees, because this
project on its own is bankable. The power infrastructure
will largely be funded by private investors. We’re talking
to foreign investors, as well as local investors, such as
pension funds.”
“The procurement rules and objectives will be fair and
transparent, based on open competition in terms of tendering,
and must offer value for money. It is a complex structure
involving the two countries and three utilities, ZRA, ZESA,
and ZESCO. We have a strong coordination mechanism in
place, which ensures that all decisions made talk to all those
players to manage interface risks,” says Kabwe.
“When it comes to financing, we are looking for lowest-
cost finance. The project has to have limited recourse to
government debt and to minimise currency risks. Cost is
www.civilsonline.co.za
INFRA AFRICA
Aerial view of the Victoria Falls near which the Batoka Gorge
HEP project will be located.
USD3.6-billion, of which USD2.1-billion is the cost of
the construction of the dam, and USD732-million for the
construction of each of the power plants (north and south
banks). The tariff will be 3.2c (US)/kWh. These numbers
have been challenged by potential investors, as it is a very
competitive rate, but we have run the numbers by them
and proven it. There has been strong involvement with
Nepad. In fact, this project is a case study for Nepad,
because of its job creation and other economic spin-offs.
The African Development Bank has been appointed as the
lead arranger and is currently studying how to crowd in
other development finance institutions. Very soon [this was
said in October 2018], we will be on the market to mobilise
resources,” says Kabwe.
Strong regional interest
On empowerment within the region, Kabwe says: “In the
capital-raising process, we are going to be involving local
financiers. We are about to run expressions of interest and
we are going to be asking participants to put money on the
table. Thereafter, we will be looking at EPC contractors and
will shortlist a number and divide the project into lots for
which there will be visibility.
“South Africa is a big player in terms of this project and
South African companies were heavily involved in the
preparation stage. Going into the construction phase, this
is an international project and all companies are free to bid,
as tenders will be internationally visible and awards will be
based on quality and price. We have a strong appreciation
of the capabilities of South African companies, as we do
for regional companies,” says Kabwe. As to involvement of
small businesses, Kabwe notes the project would be subject
to the laws of each country, and in the case of Zambia, at
least policies support the involvement of SMEs, “though as
a complex water project, there can be no compromising on
quality”. nn
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