Kafue Gorge Lower hydropower project, Zambia

19th August 2011 By: Lindiwe Molekoa

Name and Location
Kafue Gorge Lower hydropower project, Zambia.

Project Description
The project comprises the construction of a 750 MW hydroelectric power generation plant on the Kafue river, 7 km downstream from the existing 900 MW Kafue Gorge Upper hydroelectric power station.

The plant will be located about 65 km upstream of the confluence of the Kafue and Zambezi rivers, and will use the remaining 200 m available head. It will feature a 120-m-high dam, an underground powerhouse and a tailrace channel that will discharge back into the river.

About 70% of the power generated at the project will be used locally, and the remaining 30% will be exported.

The project cost is estimated at $1.94-billion, including financial costs.

About 70% of the financing for the project will be in the form of loans from the two contractors, Sinohydro and the China-Africa Development Fund (CADFund) and the remainder will be provided by the Zambian Electricity Supply Corporation (Zesco).

Construction started in July 2011 and the project is expected to be completed by 2017.

The Zambia Ministry of Energy and Water Development (MEWD), represented by Zesco.

In 2010, the Zambia government signed an agreement with two Chinese firms, whose names have not been disclosed, to build the power plant. The Ministry sought private partners to finance, build and operate the power plant and has since appointed Zesco and the two undisclosed Chinese firms to execute the project.

Key Contracts and Suppliers
International Finance Corporation (IFC), a member of the World Bank (lead adviser) and CADFund, Sinohydro and Zesco (cofinance).

Latest Developments
Zambia has raised the estimated cost of the planned 750 MW Kafue Gorge Lower hydroelectric power plant from $1.5-billion to $1.94-billion, after factoring in the cost of borrowing, according to a revised project document.

Sinozam Power Corporation, a joint venture between Zesco and the two Chinese firms, will build and operate the plant before handing it to Zesco after 30 years.

On Budget and on Time?
Construction was expected to start in 2010, in light of financial close being reached by late 2009. However, certain technical risks, including the signing of power purchase agreements and weak credit markets caused a delay in the start of construction work.

Contact Details for Project Information
CADFund, tel +86 108 830 8053 or fax +86 108 830 8940.
IFC, Emmanuel Nyirinkindi, tel +27 11 731 3068, fax +27 11 268 0060 or email ENyirinkindi@ifc.org.
MEWD, tel +260 211 252589.
Zesco, email zesco@zesco.co.zm.