Personal tools

Zambia, Muchinga Hydro Power

Working with local entrepreneurs to deliver 200MW of sustainable hydro power; underpinning economic development in Zambia and beyond

Muchinga Power is a 200MW sustainable hydro power project jointly developed by Lunsemfwa Hydro Power Company (LHPC) - a Zambian power generation company - and InfraCo Africa Ltd. It will significantly increase the country's capacity to generate electricity; serving the people of Zambia and neighbouring countries through a renewable energy power plant.

BACKGROUND

As Zambia's economic growth, particularly in its mining sectors, continues to accelerate, the country is experiencing increasing power shortages. Zambia has considerable hydro power generation potential, estimated at 6,000 MW, however, to date only about 1,800 MW has been developed. An estimated 80% of Zambia's population has no access to electricity.

The Muchinga Project has benefited from being able to take advantage of an exceptional site. Located in Zambia's Central Province in the Lunsemfwa Gorge, the project will exploit the hydro power potential of the combined flows of the Lunsemfwa and Mkushi rivers. Muchinga will use an existing dam on the Lunsemfwa River at Mita Hills and will construct a new narrow dam in the Mkushi gorge as well as developing a new power plant, some 25km downstream.

THE DEAL

LHPC had already acquired the existing site during the Government privatisation programme and approached InfraCo Africa, through their principal developer, eleQtra, with a proposal to jointly develop its downstream expansion. InfraCo Africa assisted the local shareholders of LHPC (a small group of indigenous entrepreneurs) to develop a project that had been on the drawing board for over a decade by providing a vision and conceptual approach that had been lacking within the project sponsor group.

The project attracted the interest of SN Power of Norway who became a majority shareholder of LHPC in 2011. InfraCo Africa exited the project in 2012 when it was sold to the LHPC and the owners have continued with the project development; construction is scheduled to commence in 2015.  The project requires a total investment of US$600 million, and will require an equity investment of US$200 million from local and foreign sources, with the balance of the project financing to be provided by DFI’s and international banks.

PIDG POSITION

InfraCo Africa signed a Joint Development Agreement (JDA) with the original project sponsors, LHPC, in March 2010. Following this, LHPC and InfraCo Africa commissioned technical feasibility studies, selected the design concept for the plant, conducted environmental and social impact assessments, and entered into discussions with off-takers. InfraCo Africa helped LHPC transform the project by developing a new technical approach that effectively doubled the output of the project using the same flows of water. This change enabled the local sponsors to attract new international investors into the project and accelerated the pace of project development.

DEVELOPMENT IMPACT

Private Sector investment

Total commitments

 

US$500m

Fiscal benefits

Estimated contribution to government revenues through taxes – US$15 million per year

The project will potentially be able to export energy to neighbouring countries in the Southern Africa Power Pool, including consumers in Namibia and Botswana

The development dovetails with Zambia’s National Development Plan to expand electricity generation and transmission capacities, and to improve cost effectiveness in fuel supply.

Job Creation

Construction

Operational

 

4,000 people

225 people

Additional Benefits

The project will boost generation capacity in Zambia by 15% and deliver reasonably priced energy into the national grid, impacting approximately 10% of the total population of the country with access to improved power supply.

The project will provide ‘green power’ in line with PIDG policy of supporting initiatives that combat climate change.

This pioneering initiative is Zambia’s first privately owned hydroelectric power plant with significant indigenous shareholding. It is expected to have a significant demonstration effect in the region