GOVERNMENT and the European Investment Bank (EIB) have signed a Euro 50 million (more than K300 billion) finance contract for the Itezhi-Tezhi hydro-power generation and transmission project.

The project would boost power output to mitigate load shedding and create about 700 local job opportunities for Zambians.

The agreement was signed by Finance Minister Alexander Chikwanda and EIB head of division for southern region, Diederick Zambon in Lusaka yesterday.

The Itezhi-Tezhi project would involve two components with the first being development construction, operation and maintenance of a 120 Mega Watts base-load hydro power plant at US$239million.

Work on the first component had already commenced.

The second component was the construction of transmission lines from the power station and associated sub stations at an estimated cost of US$137.5millon.

Mr Chikwanda described the agreement as a landmark towards goals aimed at boosting Zambia's power output.

The minister said the country had recorded unprecedented economic viability resulting in an annual growth rate of six per cent, which required to be sustained.

Mr Chikwanda said despite the positive economic growth, it was not sufficient to make an impact on poverty reduction.

"As the Patriotic Front Government, we are trying to move into top-gear and put our act together and we are positive to push the development momentum," he said.

He said the energy sector was a key sector to contribute to sustaining the already recorded economic growth.

Resources were being provided through syndicated financing by Government and cooperating partners who included the Exim Bank of India, the French Government operating through the Agene Francaise De Development and the African Development Bank.

"I would also like to mention here that the Itezhi-Tezhi power plant ranks the second least cost generation options for Zambia after the Kariba North Bank extension mainly because the power plant will be built on the already existing Itezhi-Tezhi dam," he said.

The minister said Zambia had an estimated hydro potential of about 6,000 MW but had only so far exploited 1,200 MW.

In addition, Mr Chikwanda said the Batoka Hydro-power was another project jointly spearheaded by Zambia and Zimbabwe that would further boost power production.

Mr Zambon hailed Government's reliability to execute the Itezhi-Tezhi project to benefit the population and help drive the economy forward.

"The project will contribute to the power pool of the southern region and is a landmark of strong ties with Africa and Zambia in particular," Mr Zambon said.