Chinese bank loan could open up Africa

TANZANIA: A deal to fund a wind farm in Tanzania through an unconditional loan from the state-owned Export-Import Bank of China could set a precedent for financing wind projects in sub-Saharan Africa.

The loan will pay for the construction of a 50MW wind farm in central Tanzania's Singida region and forms the initial phase of a long-term plan by the east African country to generate 600MW from the site in partnership with private developers.

The only stipulation is that Tanzania ensures that a Chinese company is unconditionally awarded a contract either to build, own and operate or build, own, operate and transfer the project.

The case could influence other lenders who have maintained stringent conditions for lending, such as sovereign guarantees. This has led to delays in developing several proposed wind projects across the continent.

By offering such loans for infrastructure projects in Africa, China has managed to rally several African countries behind its quest for lucrative contracts in key sectors including energy as the nation seeks to ensure a flow of business for state-owned infrastructure development firms.

The Singida project is being implemented by China Dalian International Economic & Technical Cooperation Group (CDIG) at an estimated cost of $97 million. The government of Tanzania owns a 51% stake in the project through the National Development Corporation and the remainder is held by the East African Power Pool, which is formed by ten East African countries to pool energy resources between their utilities. Details as to when the funds will be released and the term of the loan have not been announced.

"The EXIM Beijing president has agreed to finance the wind power generation in Singida pending completion of the final procedures between the government, the national development corporation and the Chinese ambassador to Tanzania," deputy minister for industry, trade and marketing Lazaro Nyalandu said in April after the two countries signed an economic cooperation agreement.

CDIG CEO Wang Hongjie said: "Our company is willing and has the motive to cooperate with Tanzania in implementing the project."

Minister Nyalandu hinted that China could also be interested in closing a financial gap to enable closure of another 50MW wind project on the outskirts of Tanzania's Makambako township. The project is being developed by a three-firm consortium that includes Norway's Norks Vind Energi (50%), Tanzania's Sino Tan Renewable Energy (36%) and China's MCC 20-Hainan International (14%). It is due to be completed in July 2013.

This will be a major achievement for electricity-starved Tanzania as it is expected to reduce the country's electricity deficit by 10%. Total power generation is less than 450MW, though its power consumption is estimated at 800MW so it has to import from neighbouring countries. This results in a perennial regime of power rationing in Tanzania. The International Monetary Fund warned in April that Tanzania risks losing up to 10% of its economic gains if the current power shortages persist.

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