STATE power utility company — Zesa Holdings (Zesa) — is struggling to attract funding owing to unsustainably high gearing levels and antiquated equipment that have made operations inefficient, the company’s 2015 annual report shows.
By Taurai Mangudhla
Zesa’s long-term loans stood at US$1,076 billion as at December 31 2015, up from US$942 million the previous year, making the company unattractive to potential lenders, chairman Herbert Murerwa said in the report.
Total foreign loans owed by Zesa to institutions such as the Commonwealth Development Corporation, Lloyds Bank plc, Barclays plc, Afreximbank, ZTE, Huawei, India Exim Bank, China Exim Bank, Standard Bank and the European Investment Bank amounted to US$583,6 million while interest accrued on all loans stood at US$253,7 million, bringing the total foreign and local loans to a figure of US$1,1 billion.
Seven local banks, the Reserve Bank of Zimbabwe (RBZ) and the World Bank were as of December 2015 collectively owed about US$180 million by Zesa. Zimbabwe has 14 registered commercial banks including state-owned savings bank POSB.
The central bank is owed US$100,4 million relating to electricity import invoices for the period 2006-2008 that were paid by the RBZ on behalf of Zesa, while BancABC is owed US$5,2 million, part of which is not secured and NMB Bank is owed US$5 million which is overdue and yet to be renegotiated.
FBC Bank, Stanbic Bank Zimbabwe, ZB Bank and the World Bank are owed US$3,5 million, US$13,3 million, US$4,6 million and US$7,7 million respectively. The loans from FBC, ZB and Stanbic are unsecured.
Non-banking entities that are owed millions by Zesa are the government of Zimbabwe (US$50,8 million) and Chinese energy firm Afrochine (US$7 million). This brings the total local loan to US$238,8 million as at December 31 last year, up from US$228,1 million in 2014.
As a result of obsolete equipment, the company’s power generating costs went up by about US$8 million in the year under review while depreciation on plant and equipment worsened by more than US$100 million.
Zesa said the cost of generating electricity went up from US$185,2 million in 2014 to US$193,2 million while depreciation of plant and equipment stood at US$282,8 million from US$ 174,8 million in 2014.
Zesa said the adverse operating environment resulted in, among other things, a lack of meaningful investment in the transmission and distribution infrastructure.
“Aged equipment resulting in frequent breakdowns and a high number of faults, all of which contributed to loss of revenue,” Murerwa said. Spares and materials are unavailable resulting in low stock levels, he added.
Zesa said the company continued to witness an increase in electricity debtors from US$984,8 million as at 31 December 2014 to US$1,087 billion as at December 31 2015, resulting in reduced funding for recapitalisation and operations.
The power producer earlier in the year pushed for a tariff hike with a view to financing new generating projects as well as funding electricity imports, but the proposal was shot down by the Zimbabwe Energy Regulatory Authority (Zera).
In terms of production statistics, Zesa has reported a reduced local generation at Kariba due to the drought resulting in low water levels at Lake Kariba.
“Coupled with constrained imports, this resulted in a 48,1% increase in the supply gap from 1 252,22GWh in 2014 to 1 854,75 GWh in 2015,” Murerwa said.
Energy sales fell from 8 280 GWh in 2014 to 7,474 GWh in 2015 while new connections also decreased from 22 369 in 2014 to 15 443 in 2015, partly due to a shortage of prepayment meters for new installations and replacements.
“The new connections decreased by 31% from 22 369 recorded in 2014 to 15 443 recorded in 2015. This was 69% below the annual target of 50 000 and this was mainly due to challenges encountered in the procurement of meters and other connection material,” the company said.
Zesa CE Josh Chifamba said total energy sent out from local generation plants decreased from 9 811,86 GWh in 2014 to 9 269,2 GWh in 2015, representing a 5,5% decrease, owing to low water levels at Kariba Dam and the antiquated equipment at other generation stations.
“Total imports declined from 978,63 GWh in 2014 to 636,49 GWh in 2015. This represented a 35% reduction in total energy imported during the year under review,” Chifamba said.
“Exports amounted to 960,15 GWh while overall net supply declined by 7% from 9 706,299 GWh in 2014 to 9 004,71 GWh in 2015. Load shedding persisted during the year and recorded an increase of 48,1% at 1 854,75 GWh compared to the 2014 figure of 1 252,22 GWh.”
In terms of expenses, staff costs for the year stood at US$266,8 million down from US$$283,8 million.
Zesa’s 13-member board was paid US$205 055,40 in board fees and allowances for 2015 including fuel and electricity allowances.