ZIMBABWE has failed to raise the requisite US$350 million deposit to secure a US$1,2 billion loan facility from the Export-Import Bank of China for the refurbishment of Hwange 7 and 8 thermal power stations, the Zimbabwe Independent has learnt.
The development has prompted the Asian financial institution to direct the Zimbabwe Power Company (ZPC) to form a joint venture with Chinese firm Sinohydro Corporation through a special purpose vehicle called the Hwange Electricity Supply Company (HESC), as a precondition for the release of the funds.
ZPC sources this week said while the development was good as it would guarantee the release of funds, the company will however not have its way as Sinohydro will be involved in the day-to-day running of the stations long after completion of the refurbishment.
“Sinohydro through its involvement with HESC will be involved in running the stations for a long time until a certain amount of the loan is repaid,” ZPC said.
“This speaks into issues of sovereignty and complete ownership of the project because the loan repayment is up to 20 years.”
Last year, Finance minister Patrick Chinamasa said it will take 20 years for Zimbabwe to repay the loan.
Chinamasa published the loan agreement in the Government Gazette detailing its terms, including the 20-year repayment stipulation with a grace period of seven years at an interest rate of 2% per annum.
The loan has also a commitment fee of 0,25% per annum on the undrawn amount and management fee of the same percentage.
“It is hereby notified, in terms of Section 300 (3) of the Constitution of Zimbabwe, that Zimbabwe, represented by the Minister of Finance and Economic Development, concluded a loan agreement with the Export-Import Bank of China dated 30th June 2016 on the following terms — (a) the loan amount is $997 723 244,20, (b) the loan would be utilised for the purpose of the construction of Hwange 7 and 8 Thermal Power Station Expansion and ancillary structures,” reads the notice.
In January last year, China offered Zesa a US$1,2 billion loan for the refurbishment of the Hwange Thermal Power Station. The Chinese loan requires that government raise a substantial guarantee, of at least 15% plus other charges, before accessing the facility, hence efforts to raise the US$350 million.
Chinese leader President Xi Jinping signed for the release of US$1,2 billion for Hwange, with a repayment interest rate of 2% annually when he visited Zimbabwe in December 2015.
The power utility is in a serious financial crisis as it is owed close to US$1 billion. It is also struggling due to mismanagement and corruption.
ZPC has been trying to secure the 15% deposit to no avail due to its financial challenges. Vice-President Phelekezela Mphoko tried to facilitate a costly US$350 million loan deal between the Zimbabwe Electricity Supply Authority and Botswana’s Capital Management Africa where his son is a shareholder, but was stopped in his tracks after President Robert Mugabe rejected the deal.