The remaining construction works at the 2.3 billion dollars Kafue Gorge power project are being financed by Zesco and alternative funds after EXIM Bank of China froze funding to the Kafue Gorge Lower project, Energy Minister Peter Kapala has announced.
Mr. Kapala says Zesco is generating internal revenue to ensure that works at the 750 mega watts Kafue Gorge Lower project are completed early and all the turbines come online.
He said whereas government is not looking at asking Exim Bank to unfreeze funding to the project, negotiations with China to restructure and reschedule the Kafue Gorge Lower project debt are on course and there is goodwill from China who know that the new dawn government means business.
Below is the full statement
KAFUE GORGE LOWER TO BE COMPLETED IN NOVEMBER THROUGH ZESCO FINANCING
The remaining construction works at the $2.3 billion Kafue Gorge power project are being financed by ZESCO and alternative funds after EXIM Bank of China froze funding to the Kafue Gorge Lower project because the PF government defaulted on payments based on the loan agreement. ZESCO is generating internal revenue to ensure that works at the 750 mega watts Kafue Gorge Lower project are completed early and all the turbines come online.
Whereas we are not looking at asking Exim Bank to unfreeze funding to the project, negotiations with China to restructure and reschedule the Kafue Gorge Lower project debt are on course. There is goodwill from China. China knows that the New Dawn Government means business and that we shall abide by the contracts and agreements we have with them.
The Kafue Gorge Lower Power plant was designed to have 5 turbines, each producing 150MW. At least two of the five turbines have been fully installed. In fact, in April 2022, ZESCO indicated that two machines at Kafue Gorge were operational and were producing 300 megawatts while a third one was undergoing a reliability test. They also revealed that the fourth turbine was also earmarked for commissioning soon as final works were ongoing.
We anticipate that the project, which has seen the employment of over 4000 Zambians, who worked alongside more than Chinese workers, will be completed this November. Once completed and at full production, Kafue Gorge Lower will ensure that Zambia becomes a net exporter of electricity. Zambia will be able to sell electricity to our neighbours at good tariffs, which will be able to pay outstanding debt.
This bodes well with new developments that have seen electricity being the highest non-Agro export for Zambia for March 2022, with exports of K300 million (about $18 million) in March 2022 alone. This was before ZESCO and Namibia’s Nampower, in April 2022, signed a power supply agreement for the export of an additional 80 MW in addition to 100 MW that was already being exported after the first agreement was signed in 2020.
The demand for Zambian power is not just from Namibia. The Zimbabwe Electricity Supply Authority (ZESA) was recently quoted in that country’s media as saying that it was in negotiations with ZESCO over the latter exporting 100 MW to Zimbabwe. The negotiations were premised on Zimbabwe making pre-payments for the 100 MW which will come from Kafue Gorge Lower. The condition precedent is that ZESA has to pay monthly deposits of USD 6.3 million to enjoy the facility.
While copper remains the highest export earner, there are limited resultant dollars being remitted back into the country due to the nature of mine ownerships and copper trading. However, export earnings from electricity can have a better impact on the economy, including the strengthening of the Kwacha. This is because ZESCO is wholly owned by the people of Zambia and the company’s foreign earnings will flow back into the country.
Let me end by saying that exporting of power will not lead to load-shedding as suggested by some people. Kafue Gorge Lower will ensure excess power even though we are likely to see Kariba North Bank Power Station operating at about 3m below the level of last year at this time due to poor rainfall patterns this year.
Hon. Eng. Peter Chibwe Kapala
Minister of Energy
01. 06. 2022