Zambia is a large, landlocked country facing daunting development challenges. Poor infrastructure, notably electricity shortages and a thin and deteriorating road network, is a fundamental impediment to releasing the country’s economic potential, making the economy more diversified and resilient and sharing the gains from growth more broadly.
The project concerns the construction of:
- a new 120MW base load hydropower plant at the site of the existing Itezhi Tezhi dam on Zambia’s Kafue River, and
- a ca. 280 km transmission line from Itezhi Tezhi to Lusaka West via Mumbwa, that will connect the power station to the national grid and thereby to the South African regional network. The transmission line is to be developed, constructed, and operated by Zesco, the state-owned power company, and financed by EIB, AFD and AfDB.
The project, by providing renewable energy for national consumption and export, will help reduce the share of generation of fossil fuels in the Southern African Power Pool (SAPP) and in Zambia. In this way, the project will reduce CO2 emissions by increasing electricity generation from hydropower resources in Zambia for sale into the domestic market and in the region, reducing the SAPP's net power deficit at an economically and financially viable cost.
The project is important for two other projects supported by the EU-AITF, namely the Caprivi Link and the Transmission Line Kafue Livingstone.
The EIB participates in the financing of the hydro power plant via a loan to ZESCO which is used as an equity injection from ZESCO in ITPC, a joint venture between ZESCO, TAHL and others.
The works on the transmission line have started and should be finalised by the end of 2016.
A EUR 17.1 million EU-AITF Interest Rate Subsidy applies to both the EIB and AFD loans financing the Ithezhi Tezhi project. It reduces the interest rate of the loans to a level compatible with the debt sustainability requirements as the country is a Least Developed Country which has undergone debt restructuring under the HIPC initiative. The IRS applies to the transmission line as well as for the equity injection into ITPC for the hydropower plant, and is used simultaneously with EIB’s and AFD’s loan disbursements which started in 2015.