The Zimbabwe government has awarded a $1.3 billion thermal power generation project to China's Sino Hydro after another Chinese company failed to conclude the contract, a minister said on Wednesday.

Energy minister Dzikamai Mavhaire said the tender for the expansion of the Hwange power station had been awarded initially to China Machinery and Engineering Company (CMEC).

"CMEC however failed to conclude the contract within the stipulated time frame that they had agreed upon with the Zimbabwe Power Company and the government of Zimbabwe,hence,the tender was cancelled in May 2014," he said.

Sino Hydro's bid for the project was the next best, Mavhaire said.

He described the Hwange power station project, which is set to add two generating units of 300 megawatts each, as "one of our major priorities."

Zimbabwe experiences power shortages owing to low electricity production resulting in regular outages in households and industries.

The Zimbabwe Electricity Supply Authority (ZESA) generates 1,300 megawatts against a demand of 2,100 megawatts.