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 CEC January 2019 | 13