ZESCO signs deal to construct the Kafue Gorge Power Project

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ZESCO acting managing director Victor Mundende (right) exchanges documents with Sinohydro Corporation Limited vice-president Liu Kai. This was during the signing of a contract for the construction of the Kafue Gorge Lower hydro power plant.
ZESCO acting managing director Victor Mundende (right) exchanges documents with Sinohydro Corporation Limited vice-president Liu Kai. This was during the signing of a contract for the construction of the Kafue Gorge Lower hydro power plant.

ZESCO has contracted Sinohydro Corporation Limited of China to construct the 750 megawatts (MW) Kafue Gorge Lower (KGL) hydro power station in Chikankata District at a cost of US$2 billion.

Zesco acting managing director Victor Mundende said the four-year project was aimed at increasing hydro-generated electricity as the country’s demand had been growing and currently stands at 1 948 MW per annum.

Mr Mundende said the project, which also aims to address the growing demand for electricity in the Southern African Power Pool (SAPP), would be financed by the Government and foreign financial institutions, among them, the Exim Bank of China.

The Government, which would contribute 15 per cent equity financing of the total project cost, has since released $186 million to Zesco as part of the initial investment contribution.

Mr Mundende was speaking at the Zesco head office in Lusaka yesterday at the signing ceremony for the engineering, procurement and construction of the KGL project with Sinohydro following the completion of pre-contract discussions recently.

“The development and construction of the KGL hydro electric project needs to be fast-tracked, completed and commissioned to meet the increasing energy demand both in Zambia and SAPP,” Mr Mundende said.

He said once completed, the facility would be connected to the national electricity grid via a 330-kilovolt transmission line approximately 100 kilometres up to the Lusaka West substation via the south multi-facility economic zone.

“In the advent of the power shortages that the nation is currently experiencing, the development of this project is in the critical path,” Mr Mundende said.

Sinohydro Corporation vice-president Liu Kai said that his firm would move on site as soon as all financing procedures were completed.

“We understand the urgency of this project because we are familiar with this market. Let me assure you that the project will be executed in good time,” said Mr Liu, whose firm is responsible for 50 per cent of the world’s functioning hydro power plants.

33 COMMENTS

  1. Mamamama as long its government money its okay. If its any donors please stop now. they will steal. Zescoro is a conduit for siphoning money by these corrupt leaders. please investigate. This is not a which hunt. For any sponsor fund the contractors directly. This is what is happening with medical stores. Sweden has now withheld funds because the Govt steal money and doesn’t buy medical supplies. PLEASE DONORS STOP AND RESTRUCTURE YOUR FUNDING PROCESS. THESE GUYS ARE RUBBING THERE STOMACHS ALREADY

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    • With 2 billion US I would go solar (four-five solar farms) for the whole country, what with changing weather patterns…the only thing constant is that the SUN will only get hotter and rivers drier…but again, am uneducated and don’t understand these things…

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    • @CatPower, government money work like this: $186million dollars released = $6million stayed at state house for meeting allowances. $5million for Zesco directors. $2 million to PF campaign fund.
      at end that Kafue Power station will never complete. What happened to Maamba coal plant, nothing, it is now rusting?

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  2. Mr ‘power Cut’, sometimes it pays to remain quiet than exposing your ignorance of certain issues always. The damage to Zambias reputation as a country is and has been huge and extremely embarrassing no doubt. It is in this vein therefore that instead of you ‘pouring more fuel’ on the already burning issues in the country please, behave like a true zambian and assist the country with good leadership comments and avoid even more problems bordering on disunity. I for one know you’re ba ‘kachema’ supporter who will stop at nothing but criticise everything and all the way. Shame on you…

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    • Shame on you, Mwape Mondwa, you Bemba thief. You have been stealing Zambian resources alone over the last die years while Zambians suffered. Now you want us to connive with you in your plunder by staying quiet. It is time up for the PF thieves. You are not stealing on our behalf but for your own selfish self.

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    • They are plundering , you want the pipo to be silent witnesses? $500 million was said to be used at kariba dam, no one is willing to account for that money. PF are shamlessly enriching them selves while the country indeptness increases.

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  3. Is it at a cost of $2billion or $1.4billion like you published in your earlier story. Common lusaka times… get your ducks in a row.

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  4. @Mwape Mondwa I think that there is definitely something wrong with you ?. I can’t believe that there are still people like yourself still believing only a gullible “patriot” is a true Zambian! Most righting thinking Zambians want to see the back of this power failed group! They have had their chance twice in 4 years to deliver- unfortunately the buck stops here! Lets try ba kachema!

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    • But sorry, we will not allow the bitter and disgruntled Kachemas to be near the corridors of power. Why do you oppose everything even development projects meant to uplift the lives of our people. On one hand you claim that the PF Government is not doing much to develop the country and when they undertake projects which are meant for National development, you start your ranting and jealous, shame! These projects where conceived long ago and since they require huge financial resources, they need to be well planned out for them to be operational.
      I wonder what projects your Under 5 can ever undertake in this country going by your brain washed thinking. It takes money to develop any nation by the way and this is one of them.

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    • No one objects to developmental projects. But we want accountability of our money. As Mike mulongoti asked PF what the $500 million that was earmarked for kariba was used for, no one knows. You are all thieves in PF including their supporters who just dream of stealing GRZ money.

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  5. excellent! Excited to see some progress in electrical generation. Although this project is 4 years away from completion once online it will substantially increase the stability of the Zambian grid and likely allow us to export to surrounding nations helping to keep our tariff rates low. Now – let us hope we can diversify the grid with some solar farms and wind projects as well!

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  6. One would have thought we run away from hydro-electric power and consider developing other sources such as solar ,thermal and wind.I am thinking loudly about the current unpredictable weather patterns.

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    • We call this type of investment as hybrid! Much as your comment has some life in it, remember that Zambia has huge water resources and if situation permits, we have to utilize these to the fullest. Remember that other sources of energy (Nuclear, Solar, Biomass and Wind) may not be very cheap to every ordinary Zambian and hence this mixture. I hope I have pumped some sense in your dead brain.
      If at all you still have doubts, instead of just wasting time blogging, do some research and find out how much electricity costs in other countries worldwide. So my dear be sober, give credit where it is due and lets support national development investments instead of just talking without facts.

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    • @mposamabwe, just yesterday ZESCO was signing a power purchase agreement with EMCO who will be generating 600 MW from coal fired power plants in Sinazongwe so we are moving towards an energy mix that can guarantee supply in times of drought. What we need now is more investment in solar and mini-hydros in the Northern and NW parts of the country where we have good rainfal and perenial rivers but with few gorges for big power plants.

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  7. I thought one of the bidders for this project said they could do it for $2bn. Why has the cost suddenly doubled?

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  8. I thought one of the bidders for this project said they could do it for $1bn. Why has the cost suddenly doubled?

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    • That is how PF work, they pocket the difference. Just like how zambians are being charged some of the most expensive prices for roads, the difference ends up in the PF pockets.

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  9. Okay it’s the Itezhi People who have been awarded the Construction project
    It’s a Good Project though in ranking amongst the Energies , but the PI and PV should be aligned to the capital management structure to ensure there efficiency in the SUFFICIENCY in that equity allocations amongst the RELATED PARTIES to avoid and accept the financial effects of those adverse circumstances in the structure giving a stable continuity at a low cost of the BUILT project
    You will need to monitor and account for the equity proportion in the capital structure based on the EQUITY RATIO setting the ceiling appropriately as in that TARGET RATIO since you may not have it correct…

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  10. or achieve it in the initial Investments build of the Project So the Equity may diverge but you need to set the CAP and learn from Itezhi Tezhi
    We have heard of Contingencies in litigations amongst the grieving parties Its only hoped that that does not curtail the project

    Given the funding methods, there will need to see also long-term the year on year change in costs to see how that impacts particularly currency and ”interest rate risk”’ capping it below 10% and see the effect on projected EQUITY ratios avoiding that equity erosion Giving attention to change in economic variables and aligning the counter parties accordingly

    Mapping of borrowing costs…

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  11. Mapping of borrowing costs to refinance the project will also be an issue in long and short term borrowings
    The exposure of those costs in’’ debt ‘’ on the Equity considering the floating nature of already borrowed bonds to refinance that equity component mapping those sensitive appropriately for such an uncertain project in costs and time massive like Kafue lower taking into account also the sensitivities on water or drought conditions in that basin in those load forecasts for exports in the SAPP given when waters are LOW or HIGH with best risk protection in export revenues projected quantified arising from those drought sensitivities that can impact negatively and impair…

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  12. The Technologies can also help to ensure effectiveness in cost and speed delivery without much scrambling and variations in cost that can impact negatively on the equity proportion delivery the project within time frame Its not like the Ethiopian Hydro Power Constructions in character its achievable

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  13. Why is it that Chinese get all these projects, are there no other countries who tender for these projects. It seems like the Chinese are the know it all. Just wondering.

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    • @Pay Back the Money, not really to support PF but if you read you will find that there is CHINA Exim Bank is at the centre of the funding transactions so what do you expect…?? “He who pays the piper calls the tune” and China is also doing what the West does well..”we lend you money but 80% of if must be used on supplies and contracts from our country…”..

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  14. Sinohydro were chased from Botswana for corruption and shoddy work. The Power Plant Sinohydro constructed in Botswana at a huge cost to Botswana Govt has failed to run as planned. Botswana Govt went to an extent of lodging an official complaint to the Chinese Govt. Considering the colossal money (Us$2.0Billion), did anyone from ZESCO/Govt check any previous Electrical Power Plants constructed by Sinohydro and how they are performing? Why are we allowing shoddy work at a high cost to the Tax payer in our country?

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    • They are the same company that did the upgrades to kariba at more than $500 million. Due to continued load shedding citizens questioned the quality of the upgrades and equipment installed , a reputable company would have come out and defended the work they did, but not them, they did not even attempt to defend the work. This is very suspicious especially when PF is involved. Looks like the country was ripped off by the custodians of our funds together with the Chinese. Sorry Zambia looks like there is no one looking after our finances at the moment.

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  15. $2 Billion for a 750 MW generation plant is too excessive. Re-evaluate the costing of this project. In terms of site location I concede that this is ideal. Kafue Lower has a lot of potential because of gradient and gorges and rock formation. Lets also consider decisively dealing with Kafue weed. But the pricing and costing of the project needs sieving. US $2 Billion is just too extreme.

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    • We need international auditor’s for every contract that involves the PF. Over charging the country and pocketing the difference is the PF preferred method of stealing in tandem with the Chinese. Then after we pay you ask them to account for the monies spent, you find there is no who knows how the money was spent.

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  16. It will be important also on best case to consider the various cost effective methods of achieving the project mile stones different than the given structure and see how much in servings and Cost of Capital that ups the equity stake can be
    Power in the region is in deficit and that is an opportunity for Zesco which recently advanced tariff scenarios There are observations on the tariff scenario
    You can analyse over the options of the projects say 10 yrs. and see the effective workable project deliveries
    Syno should issue a communique on its track record signifying acceptance as best practise

    Another is to see the capital invested against revenues cost of capital…

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  17. Why is it that PF and their supporters don’t like the words “accountability” and ” audits”. Just mention those words when a topic about contracts is signed and you will see the thumbs down given by PF supporters. Pipo we know one of the pillares of your party was ” donchi kubeba” but we now dealing with the future of our country. We need to see where every ngwee is spent, stealing by way of over inflated prices is the new vice in PF.

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  18. A review and restructure of the equity component will not be a bad idea Notice also that the TOO big to fair in the Counter Party do not necessary hold Making sure you agree and cement will be helpful all those terms You will need to see and learn from the difficulties that SINOSTEEL similar to Sino hydro has been experiencing on its contracts similarly guaranteered amid the global economic slowdown covering a 10 yr. period with its debt-equity ratio averaging 90 % Its more likely to default if not on its banks loans and bonds which the largest share is Gov in the 35 Trillion yuan 70% which are held to maturity and see the implication towards the…

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  19. to drive to internationalize the country’s bond market and financial markets with appropriate ratings.

    In a nut shell the Financial appraisal of SINO Hydro is critical to avoid assets of Zesco being strained in those times of drawdowns The days of blank Cheques seems to be over for most SINO companies
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