ZESA Holdings subsidiary Zimbabwe Power Company will this morning sign an engineering, procurement and construction agreement with Chinese firm Sino Hydro for the Kariba South Hydro Power Station expansion project.
The State Procurement Board awarded the tender to Sino Hydro last month, who beat five other bidders.
The expansion will add 300 megawatts to the national grid. The project will be completed in four years and would significantly narrow the gap between demand and supply.
Sino Hydro has gone through contract negotiations with ZPC and has agreed to take up the role of engineering, procurement and construction of the Kariba 7 and 8 extensions to boost the station's power output.
ZPC's managing director Mr Noah Gwariro yesterday said actual construction would start next year.
"We have completed negotiations with the winning bidder, Sino Hydro, and the contract will be signed on December 20, 2012," he said. "With the signing of the contract, the project will commence next year upon conclusion of the funding process."
In terms of the agreement, the contractor will design the plant, procure the necessary materials and build the plant directly or sub-contract some of the work.
This forms the beginning of notable progress in addressing the country's crippling power shortages. Kariba South Expansion is expected to cost US$368 million.
Zimbabwe is currently only able to generate about 1 400MW against demand for power of 2 200MW at peak. Power shortage has spawned rolling power cuts to industrial, commercial and domestic consumers of electricity.
Fears abound that the shortage would worsen as economic activity improves. Industry is running at an average of 44,5 percent production capacity due to a number of factors, chief among them lack of power and funding. Industrial capacity stood at about 57 percent last year.
About 9 percent of companies interviewed by the Confederation of Zimbabwe Industries in its latest manufacturing sector survey research cited power supply constraints as the cause for dropping in capacity utilisation.
ZPC said the tender for the expansion of Hwange Thermal Power Station is still open, with the winning bidder expected to be announced next year.
The State Procurement Board has narrowed down to two, the bidders vying for the contract to expand the Hwange Thermal Power Station.
The two remaining bidders are also from China- Sino Hydro and China National Machinery Corporation. Sino Hydro has submitted a US$1,38 billion bid for the expansion of Hwange for an additional 600MW.