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Wednesday, 13 March 2013

Batoka Power Project

Zimbabwe's state utility ZESA says it has started paying a $70 million debt to Zambia, a necessary step before the two nations can embark on a joint 1,600 megawatt hydroelectric plant, which could help relieve a power shortage. The Batoka power project will cost about $2.5 billion.

Zimbabwe, which currently generates just over 1,000 MW of power or about half of peak demand, has struggled to get funding for new projects to expand capacity, largely due to concerns about President Robert Mugabe's handling of the economy. The resulting power shortage has paralysed mines and industries.

ZESA Chief Executive Elijah Chifamba last month announced that Zimbabwe had started making payments to Zambia to clear the debt incurred when Zimbabwe sold off assets of a disbanded power firm jointly owned by the two countries to run hydroelectric plants at the Kariba dam. Zimbabwe will have paid $40 million to Zambia by the end of March. In his words, "Zambians needed to see first that we were committed to settling that debt and to demonstrate that we are bona fide partners before they could actually enter into the Batoka project...Because we have done so, that has unlocked the project."

This will be an important project. The interesting thing is that this project is expected to be under the design, build and operate model. A private player will build and operate it for some years and then transfer ownership some years down the line after it has recouped its investment. [Similar to how the Channel Tunnel linking the UK and France was built]. Presumably in the interim (before handover) the two countries will buy power from the private player. It will be interesting to see how this one is being negotiated.

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