Zimbabwe, China in $400 mln power plant deal

HARARE (Reuters) - Zimbabwe has signed a $400 million agreement with China's Sinohydro to expand its Kariba hydro electricity plant at a time when rolling power cuts are threatening to dim the country's economic recovery prospects.

Noah Gwariro, the managing director of the Zimbabwe Power Company -- the generation arm of state utility ZESA -- said on Monday Sinohydro would add two 150 megawatt units at Kariba.

"China's Eximbank will fund the project to the tune of $400 million. Sinohydro is already working on a similar project on the Zambian side of Kariba," he told Reuters.

Gwariro earlier told parliament Zimbabwe was generating a total of 940 MW -- less than half its national power requirements -- from its Hwange thermal plant and Kariba, against the country's peak demand of 2,500 MW.

Zimbabwe has previously signed hundreds of millions of dollars worth in cooperation agreements with foreign governments to boost its electricity generation capacity, but has not made progress in getting any of the projects off the ground.

In July 2005, Zimbabwe signed a $200 million deal with Iran's Farab Company for the extension of the Kariba South power station, but the deal fell through after Zimbabwe failed to raise the required deposit for the loan.

A raft of deals with China totalling $1.3 billion for the building of new coal mines and three thermal stations, signed in 2006, have also not yielded results.

Gwariro said a shortage of funding meant only two of six units were running at Hwange, which was hit by a complete power failure in February but the station -- whose capacity is to generate 750 MW -- should generate 560 MW by the end of May.

After years of hyperinflation and contraction, Zimbabwe's economy has stabilised under a power-sharing government formed last year by President Robert Mugabe and his rival, Prime Minister Morgan Tsvangirai.