Government has committed P1.5 billion as part of equity financing for the $1,6-billion (P11.14 billion) Morupule B Power Station expansion project.
This was revealed by the Chairman of the Botswana Power Corporation (BPC) Ewetse Rakhudu at the signing ceremony of loan agreements between the Industrial and Commercial Bank of China (ICBC), South Africa-based Standard Bank and the BPC.
The consortium of ICBC and Standard Bank, which operates as Stanbic Bank in Botswana, will provide a $825-million loan for the expansion project which will be serviced over a period of 20 years and is backed by a guarantee from the Ministry of Finance.
The consortium will also provide a $140 million bridge loan for the project, covering 85 percent of the debt financing of the project.
Rakhudu said the remaining financing will be raised from institutions like the African Development Bank and local financial institutions.
ICBC president, Jiang Jianqing, who signed on behalf of the bank, said the deal, which is the largest by a Chinese financial institution in Africa, signals the start of bigger ones to come between the continent and the Asian country.
"Africa is a huge market with massive potential," Jianqing said. "Africa needs urgent foreign investment, especially after the impact of the global crisis, so we will look at more projects to invest (in)."
Speaking at the signing ceremony, the Minister of Minerals, Energy and Water Resources, Ponatshego Kedikilwe,
"This country and its economy need power as a matter of urgency," he said.
He, however, said the project will come with costs that someone will have to pay for, signalling tariff increases after the project is completed.
"Batswana must anticipate the good thing that they will get from the project, (but) someone has to pay for it," he said.
The expansion project comes in the wake of South Africa's Eskom reducing its power supply to Botswana to supply growing domestic demand.
The Morupule Power Station expansion project will be carried out by the China National Electric Equipment Corporation, which has been awarded part of the contract to supply and build part of the power station, hence the Chinese partnership.
When completed, the power station will have four 150 MW units. The first unit will be commissioned in 2011 while the first phase of Morupule B project is expected to be completed by 2013.
"The financing of the Morupule B Power Station is just one of 65 projects that the ICBC is currently funding on the African continent and is evidence of China's strong appetite for African investment opportunities," said Jiang.
The ICBC has a 20-percent stake in Standard Bank.