Chinese lenders lead team to finance Zambian coal power plant

Nava

05/08/2015 10:41

* Chinese lenders to provide $300 mln, Western banks $65 mln 
    * Electricity needed for growing mining, household demand 
    * Project developer to also export power to neighbours 
 
    By Jacob Gronholt-Pedersen and Jessica Jaganathan 
    SINGAPORE, Aug 5 (Reuters) - Chinese banks are leading a 
group of lenders in financing a 300 MW coal-fired power plant in 
Zambia that is needed to meet rising demand from miners and an 
electricity-starved public. 
    Zambia's power demand is expected to double between 2010 and 
2020 to almost 3,000 megawatts (MW), official data shows, with 
most of the electricity going to the mining industry. New plants 
are needed to plug a looming shortfall as current capacity is 
below 2,000 MW. 
    The new power plant is part of an $828 million project that 
includes revamping Zambia's biggest coal mine and aims to tackle 
power shortages that are curbing copper mining operations.  
    The plant - to be commissioned by mid-2016 - is being 
constructed by Chinese companies. The mining and power venture 
is also the first private project in sub-Saharan Africa for 
which the Chinese portion of the financing is to be covered by 
China's state-owned export credit insurance agency Sinosure. 
    "In terms of competitiveness in price and execution, the 
Chinese were way better than the other competitors who bid for 
the project," Ashwin Devineni, managing director of the 
international business unit of Nava Bharat Ventures  NAVB.NS , 
told Reuters in an interview in Singapore.  
    The Indian company holds a 65 percent stake in the project. 
    China has pledged some $30 billion in credit lines to Africa 
over the last two years. It was the biggest foreign investor 
into infrastructure projects in Africa in 2013, with state 
export banks leading investments worth $13.4 billion, data from 
the African Development Bank showed.  
    For the coal mine and power project, Bank of China 
 601988.SS  and the Industrial and Commercial Bank of China 
 601398.SS  will provide $300 million, while western banks 
including Standard Chartered  STAN.L  and Barclays  BARC.L  will 
finance $65 million, Nava Bharat Ventures said.  
    Another $150 million is coming from development banks in 
South Africa, itself a major coal producer that suffers from 
power shortages. 
    Zambia, Africa's No.2 copper producer, relies almost solely 
on hydropower and struggles to supply households - 70 percent of 
which have no access to electricity - as well as miners 
operating in the country, including First Quantum Minerals 
 FM.TO , Vedanta Resources  VED.L , Glencore  GLEN.L  and Vale 
 VALE5.SA . 
    A drought recently forced utilities to cut power to miners 
by as much as 30 percent. 
    "Zambia is now facing the brunt of going all hydro," said 
Devineni. "The economy ... requires good baseload (24 hours) 
power. That is where we come in."     
    At a later stage Nava Bharat Ventures may triple capacity to 
meet demand for electricity from neighbouring countries such as 
Botswana and Namibia. 
 
 (Editing by Henning Gloystein and Tom Hogue) 
 ((jacob.pedersen@thomsonreuters.com; +65 6417 4529; Reuters 
Messaging: jacob.pedersen.thomsonreuters.com@reuters.net)) 
 
Keywords: CHINA ZAMBIA/COAL FINANCING