Power utility fails to pay Eskom, HCB

HARARE - The Zimbabwe Electricity Transmission and Distribution Company (ZETDC) has said it is failing to service its payment obligations to South Africa’s Eskom and Mozambique’s Hidroeléctrica de Cahora Bassa (HCB) due to a $1 billion debt the firm is owed by consumers.

ZETDC managing director Julian Chinembiri yesterday said the State-owned institution, which is technically insolvent, was failing to execute its duties due to rising debt.

“We are in the process of negotiating with Eskom to continue supplying us with electricity despite the fact that we owe them $8,8 million.

“Eskom and HCB require payment upfront and at the moment we are in default. We are dancing on the fence,” Chinembiri told delegates attending a Zimbabwe Energy Council breakfast meeting in the capital.

The trained engineer said ZETDC, which is suing at least 200 local authorities, State enterprises and private companies to recover over $1 billion in unpaid power bills, was looking at various ways to clean its balance sheet.

“We have over $734 million outstanding power purchases to both external and internal power suppliers, with more than $700 million being owed to the Zimbabwe Power Company ,” he said adding that this may lead to failure to procure power leading to load shedding.

The Zesa subsidiary’s indebtedness implies that the company has no capacity to exploit its balance sheet for further borrowing to support planned electricity generation projects across the country.

It also requires money to rehabilitate its old infrastructure.

But the utility’s creditworthiness has inevitably been hammered by the huge debt, which means it cannot access offshore and even domestic markets for cash.

Chinembiri noted that the recent move by the government to reject an electricity tariff increase compounded ZETDC’s woes.

“The company has since 2009 accumulated loss of $517 million emanating from a low tariff which is not cost reflective,” he said.

This was after the company has for the past four years been pressing government to approve a tariff increase but failed to get regulatory approval due to concerns a tariff hike would undermine efforts to revive the country’s struggling economy while also exposing an impoverished population contending with high unemployment.

Moreover, a number of companies, including major mining ventures, have been calling for a reduction in tariffs to cushion themselves from an inclement international commodities market, where prices have tumbled even as costs remained stubbornly high.

Last year, ZETDC proposed an upwards review of electricity tariff by 49 percent, a move which would have seen electricity consumers paying $0,1469 per kilowatt hour (kWh) from an average $0,0986 per kWh.

However, the Zimbabwe Energy Regulatory Authority said the proposed increment was unnecessary.

Chinembiri said the $0,0986 tariff was insufficient to support power projects currently underway and will result in the company losing a further $189 million this year due to tariff decline.

In 2013, consultants, Norconsult, came up with a cost of $0,14 per kilowatt hour but issues of efficiency at the country’s thermal power stations affected the actual cost of electricity.

Comments (1)

It defies logic, someone trying to justify such a rate spike against this background of a strengthening US dollar. If Julian has failed to run the parastatal isn't it time to do the honourable thing - to resign - and let others steer the ship out of this mess.

Rate payer - 16 September 2016

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