MINING AND INFRASTRUCTURE INDABA 2015ZPC PRESENTATION

Presented by: N.F. Gwariro (MD)

OUTLINE

I. Introduction to ZPC

II. Kariba Project Update

III. Hwange Project Update

IV. Other ZPC Projects Update

V. Funding Implications

VI. Conclusion

ZIMBABWE POWER COMPANY

Subsidiary of ZESA Holdings

Mandated to construct, own, operate and maintain power generation stations

Sales electricity to domestic and regional customers through PPAs with ZETDC and regional utilities

Incorporated in 1996 and became operational in 1999

750MW

920MW

120MW

100MW

90MW

CURRENT OPERATIONS

Current Generation 1200 MW Country’s Demand 2200 MW

NEW POWER GENERATION PROJECTSBatoka

1200MWKariba

300MW

Hwange600MW

Gairezi30MW

Mutare120MW

Lupane CBM300MW

Munyati100MW

Insukamini100MW

Gwanda100MW

Kariba Project Update

BACKGROUND

Engineering, Procurement and Construction (EPC) of 2 x 150MW of hydro-electric power plant units at Kariba Power Station.

The project EPC cost with the contractor, Sinohydro, is USD 369 million.

Financial closure for the project was achieved in October 2014 and the project officially commenced on 10 November 2014.

The 40 month construction project is expected to be completed by 10 March 2018.

PROJECT STATUS

On-Site Works Civil Infrastructure – Powerhouse, etc. – 31 % overall completion Off-Shore Works Electro-Mechanical – 21 % overall completion Hydro-Mechanical – 2 % overall completion Electrical Equipment (evacuation) – 10% (Procurement Stage)

Aggregated Project Progress - 33%

Hwange Project Update

BACKGROUND

EPC of 2 x 300MW of coal fired power plant units at Hwange Power Station.

The Project includes the establishment of transmission infrastructure to evacuate the power.

Project Financing is being sourced from China Exim Bank, DFIs, local and regional banks such as Stanbic Bank.

FIDIC Silver Book was adopted: where the contractor does the full design (engineering), procurement, construction and commissioning of the project.

ZPC takes over the plant after commissioning.

PROJECT STATUS USD 1.174 billion EPC Contract

signed with Sinohydro on 10 October 2014.

Total funding requirement is estimated at USD 1.518 billion.

Generation license and EIA certificate have already been secured.

ZPC and Sinohydro have jointly pooled together USD 3 million for initial works.

Sinohydro to complete initial works in December 2015.

ZPC is currently working towards financial closure.

Official commencement of project to come soon after financial close.

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OTHER ZPC PROJECTS UPDATE

Project Capacity Estimated Dates

Project Status

START ENDBatoka Hydro 1,200MW TBA TBA Feasibility studies are in progress.

Gairezi Hydro Power

30MW 2015 2018 Adjudication was completed. The report is with the SPB.

Solar Projects 300MW 2015 2017 The tenders were awarded to three contractors.

Mutare Peaking Plant

120MW 2016 2018 Contract negotiations with the awarded contractor are in progress.

Coal Bed Methane

300MW TBA TBA Funds are required to carry out feasibility studies, additional exploration, reticulation and water treatment.

Harare Repowering

60MW 2016 2017 EPC contract was awarded and working towards financial close.

Bulawayo Repowering

90MW 2016 2018 USD 87 million line of credit offered by the Indian government and reviewing the RFP for tendering on Indian market.

Munyati Repowering

100MW 2017 2018 Adjudication report has been submitted to SPB and awaiting award.

FUNDING IMPLICATIONS A total of about USD 6.5 billion is required to fully fund all of ZPC’s

projects. Of this amount, the total of EPC costs is USD 4 billion. The balance of the funding requirements will cater for finance costs,

development costs (generation licences, EIAs, CPI movements, consultants etc…) and running costs.

Funding Challenges Funding these projects has proved challenging when ZPC presents

ZETDC as the off-taker. Most financial institutions feel that ZETDC is not a credible off-taker.

Given the legacy loans on the ZPC balance sheet, most institutions prefer a clean entity hence the formation of an SPV for the Kariba project.

For security reasons, revenue from existing power plants is ring fenced to the expansion or refurbishment of that particular power plant, leaving greenfield power plants like solar and CBM to be project financed.

CONCLUSION

Zimbabwe has been plagued with a power deficit since 2007, when electricity demand exceeded its supply. According to ZETDC’s System Development Plan,

the power demand forecast is expected to reach about 3000MW by 2020.

The projects must be funded with long term financing. The loans must be acquired at primarily concessionary rates.

There is need for ZPC to export some power for the purposes of raising funds to increase generation capacity.

In order to increase the amounts of reliable capacity, there is need for investment in the sector, which in turn will make the country more competitive.

The critical success factor is the required funding to implement the projects.

THANK YOU!