The Zimbabwe Stock Exchange listed firm wants to build a 2 800 megawatt (MW) power plant in Sengwa, Gokwe North, and has provisionally agreed a construction contract with Power China.
But progress on the long-standing project is facing delays due to persistent demands by Chinese funders for a sovereign guarantee that ensures the loan is repaid fully in foreign currency.
Some progress had been achieved on technical aspects of the project, until the advent of coronavirus, including full design and feasibility study, as well as mapping for evacuation lines.
Officials from China are due to visit Zimbabwe to perform due diligence on the project but the trip has remained in the balance owing to travel restrictions in light of the Covid-19 pandemic.
While the total cost of the project stands at about US$3 billion, actual construction will take place in four phases, each with capacity for 700MW to give a total of 2800 on full completion.
Highly placed sources told The Herald Business and Finance that the company continues “to beg” the Government to provide the guarantee although this is largely a private sector initiative.
“There is the issue that if the power is sold in Zimbabwe dollars, can the Reserve Bank or Government give assurance that funds will be made available to service the loan,” a source said.
“They have to see what they can do because they are not being asked to guarantee business failure or anything, but if the Chinese invest in this country, Government must guarantee the forex to repay the loan.”
Sources said the Government must find a way to assist the company given the current power deficit, as well as the many ambitious targets that require adequate to be realised.
Alternative insurance could be obtained through third parties like African Trade Insurance (ATI) but company insiders say taking such a route would be prohibitively expensive.
RioZim company secretary Mr Wilson Gwatiringa declined to comment and referred all questions to Rio Energy, a unit of RioZim, whose general manager Mr Simba Mhuriro could not be reached for comment.
Demand for power at peak periods in Zimbabwe stands around 1 800MW-2 000MW, assuming all usable plant capacity is available, but internal generation averages about 1 450MW.
The Government is also working on a number of power development initiatives, including the ongoing 600MW expansion of the Hwange Power Station, an old plant built in the 1980s.
It has also issued nearly 50 licences to independent power producers, including the Sengwa project, as part of consented efforts to curtail crippling shortages, but few have been actualised.
The Sengwa power project has been on the cards since the early 1990’s but little progress has been achieved due to challenges the project developers have faced in obtaining funding.
RioZim is targeting the local market with power from Sengwa, given the prevailing deficit despite a depressed economy, as well as exporting into the region, which also faces shortages. Herald