China and Zimbabwe on Thursday signed an agreement on engineering, procurement and construction for the Kariba South Hydro Power Station expansion project.

Chinese firm Sino Hydro, who won the bidding for the project with investment of 368 million US dollars, signed the agreement with the Zimbabwe Electricity Supply Authority Holdings subsidiary Zimbabwe Power Company.

Out of the five invited bidders for the Kariba South Expansion Project, Sino Hydro was awarded the tender by the State Procurement Board in November 2012. Sino Hydro has gone through contract negotiations with ZPC, and has agreed to take up the role of engineering, procurement and construction of the Kariba 7 nd 8 extensions.

Under an EPC contract, the contractor designs the plant, procures the necessary materials and builds the project either directly or sub-contracting some of the work.

The expansion will add 300 megawatts to Zimbabwe's national grid. The project will be completed in four years and would significantly narrow the gap between demand and supply.

ZPC's managing director Noah Gwariro said actual construction would start next year.

Zimbabwe is currently only able to generate about 1,400MW against demand for power of 2,200MW at peak. Power shortage has spawned rolling power cuts to industrial, commercial and domestic consumers of electricity.

Fears abound that the shortage would worsen as economic activity improves. Industry is running at an average of 44.5 percent production capacity due to a number of factors, chief among them lack of power and funding. Industrial capacity stood at about 57 percent last year.

Most of the country's companies in manufacturing sector cited power supply constraints as the cause for dropping in capacity utilization.

ZPC also said the tender for the expansion of Hwange Thermal Power Station is still open, with the winning bidder expected to be announced next year. The State Procurement Board has narrowed down to two, the bidders vying for the contract to expand the Hwange Thermal Power Station.

The two remaining bidders are also from China, Sino Hydro and China National Machinery Corporation.