Zimbabwe signed a $1.5-billion deal with China's Sinohydro Corp on Friday to expand a coal-fired power plant in the most ambitious move yet to tackle the country's crippling electricity shortages.

The deal, which still needs full financial cover, would see Sinohydro Corp add 600 MW of electricity at the ageing Hwange plant in western Zimbabwe as well as a transmission line.

The southern African country produces 1 100 MW of power against peak demand of 2 200 MW, which means industry and households have to endure regular power cuts.

"The additional electricity will narrow the demand-supply gap in a huge way," Dzikamai Mavhaire, the minister of energy and power development, said at the signing ceremony.

Under the agreement, the state-owned Zimbabwe Power Company (ZPC) will seek a $1.17-billion loan from China's Export and Import Bank in negotiations that are expected to take a year.

The remainder of the money would come from electricity revenues generated by ZPC and other financial institutions, ZPC officials said.

The project is due to take 42 months to complete.

Sinohydro last month started constructing two generation units at the Kariba hydro power station to add 300 MW.

The Hwange Thermal Power Station has a design capacity of 920 MW, but produces less than half that due to ageing equipment and years of inadequate funding to maintain the plant.

ZPC is owed more than $900-million by debtors and over the last three years has been introducing pre-paid meters, where customers pay in advance for their power.

Josh Chifamba, the chief executive of ZPC's holding company ZESA Holdings, said that to generate more revenues, the pre-paid meters would be introduced to industry and farmers, who are some of the biggest consumers of electricity.

The government of President Robert Mugabe, for long a pariah in the West, has increasingly turned to China for investment to help an economy desperate for new infrastructure like roads, power, and water.