HomeLocal NewsUS$1,3bn debt cripples power supply

US$1,3bn debt cripples power supply

WHILE Zimbabwe continues squandering money on the costly, corrupt and unsustainable US$250 million Dema Power Plant, the country is facing severe power cuts due to the Zimbabwe Energy Distribution and Transmission Company’s (ZETDC) failure to service debts totalling US$1,3 billion.

By Elias Mambo

ZETDC owes creditors US$987 million, and a further US$330 million in loans. The debt includes more than US$734 million to power suppliers, who are threatening to stop supplying the company.

The company is owed US$1,075 billion by consumers, mostly parastatals, local authorities and private companies.

Zesa’s financial woes come when government is dishing out energy deals to dodgy companies without technical capacity or financial resources to see through the power projects. Zimbabwe Independent has established that the country’s energy deals were inflated by more than US$500 million, raising suspicion that Zesa managers and senior government officials could have corruptly benefitted from the price escalations.

The dirty deals include the murky US$250 million Dema Power Plant project which Zimbabwe Electricity Supply Authority engineers say is a waste of resources as funds could have been channelled to the expansion or refurbishment of cheaper power plants.

The Dema deal was awarded to Sakunda Holdings, owned by Zanu PF benefactor Kuda Tagwirei.

Sakunda partnered President Robert Mugabe’s in-law Derrick Chikore in the murky deal, despite the company not participating in the tender process. A senior military commander is also involved in the project, behind the scenes.

According to APR Energy Holdings, a company which initially won the tender but was sidelined in favour of Sakunda Holdings, Zesa could have saved approximately US$200 million over three years had it explored other alternatives such as the use of liquid petroleum gas instead of diesel-powered generators at the controversial 200MW Dema Diesel Power Plant.

Last week, ZETDC managing director Julian Chinembiri revealed that the power company is insolvent and will require a bailout after accumulating liabilities exceeding its current assets.

ZETDC is however being forced to buy electricity from the Dema plant atUS15,04c/kWh which is far more expensive compared to other sources of electricity, including imports.

“We are technically insolvent as a company,” Chinembiri told a workshop on energy on Wednesday last week.

“We thought we will turnaround the company, especially when we were going to be awarded the tariff (increase). The company will require financial bailout in the near future, but (not sure) from where because the fiscus does not have money.”

Through the Southern African Power Pool, Zimbabwe imports power from Mozambique’s Hidroeléctrica de Cahora Bassa (HCB), South Africa’s Eskom and Lunsemfwa of Zambia.

Electricity generated at Kariba costs 4,11c per kilowatt hour (c/kWh), while that from Hwange Thermal Station costs 6,97c/kWh. ZETDC imports electricity from the Zambia Electricity Supply Corporation at a cost of 5,18c/kWh, Mozambique’s HCB at 5,66 c/kWh, South Africa’s Eskom at 13,32 c/kWh) and Lunsemfwa of Zambia 8,00c/kWh, making the Dema deal very expensive.

ZETDC owes Eskom US$8,8 million although the parties have a prepayment arrangement. As a result, Eskom is supplying ZETDC with 50 megawatts instead of the agreed 100 megawatts.

Zimbabwe currently generates just over 1 000 megawatts from its ageing plants, about half of peak demand, and makes up for the deficit through imports.

A combination of increased imports and collapsed industrial demand due to factory closures has, since December 2015, given the country some reprieve from rolling power cuts that used to last as long as 18 hours per day. The power cuts are, however, set to resume given ZETDC’s failure to settle its debts.

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