The Challenges Faced by Private Project Developers in Securing Financing for Hydropower Projects in Zambia

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DOI: 10.21522/TIJMG.2015.SE.19.02.Art024

Authors : John Chenjelani Phiri


The study investigated the challenges faced by private project developers in securing financing for hydropower projects in Zambia. It was a cross sectional exploratory study based on the pragmatic research philosophy. The multiple case study research strategy was utilized in the study. Mixed methods were selected as research choice and non-probabilistic was used as the sampling technique. Primary data was collected through semi-structured interviews and secondary data was obtained from library and internet. The population of the study comprised 13 hydropower projects that were being promoted by the Office for Promoting Private Power Investment.

Five of Thirteen (38.5%) hydropower projects were considered for the study having relevant data for the study. Purposive sampling was used to select the projects. Quantitative and qualitative data was collected and analysed.

The study found that the challenges in securing financing for hydropower projects in Zambia were related to the non-fulfillment of the key conditions required for nonrecourse financing of hydropower projects. Those conditions were

1.  Development Mode of the project

2.  Sharing of project unlimited risks

3.  Government guarantees for project credit enhancement

4.  The Level of electricity tariffs

5.  The Power off-taker for the project and

6.  Provision of escrow arrangements by the off-taker.

The study concluded that the efforts made by Government to support private investment in hydropower projects did not directly address the risks associated with project finance mobilisation. It was therefore recommended that Government addresses these requirements from the lenders and developers in line with the principles of project finance to enable the hydropower projects secure financing in Zambia.

Keywords: Project Mode, Unlimited Risks, Government Guarantee, Electricity Tariffs, Off-Taker, Escrow, Project Financing.


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