Zesa faces revenue crisis as power challenges escalate

ZESA Holdings, the State-owned power utility is likely to plunge into a cash flow crisis as a result of declining revenue in light of subdued supply, analysts have warned.

With Zimbabwe facing its worst power crisis in five years after ZESA was forced to reduce production at its Kariba hydroelectric plant due to low water levels, some analysts said this could have a serious negative impact on the utility’s revenue inflows.

“At some times, we have power cuts lasting for about 18-20 hours and what it means is there is no consumption (of electricity); so for a household that would, for instance, require say $100 per month; at the current load shedding levels, the units that amount buys could last for more than a month, probably two or so.

“But we have a power utility that has huge fixed costs, which they can’t avoid even when not generating,” Carlos Tadya, a Harare-based economic analyst told Business Weekly.

Already, ZESA is owing coal miners a significant amount for coal delivered to its thermal plant.

“They already have cash flow challenges because they are failing to pay (coal producers), and now revenues are declining, the situation will get worse,” Tadya added.

ZESA has previously said it was failing to generate enough revenue due to low tariffs.

Customers are paying US9,2c kWh, excluding exporters, and can be paid in local currency at the prevailing interbank rate. Exporters, with effect from October 1, 2022, started paying US10,12c per kWh. The World Bank carried out a study on the country’s power tariff regime and recommended a cost cost-reflective of US15c kWh.

Last year, ZESA executive chairman Sydney Gata, warned of severe power cuts, saying the non-cost reflective tariff continued eroding the viability of the power utility.

Minister, Soda, also said Zimbabwe’s power situation would remain “fragile” in the absence of an economic tariff. In October, the Zimbabwe Energy Regulatory Authority (ZERA) chief executive, Eddington Mazambani, said Zimbabwe would gradually move towards a cost reflective tariff over the next three years to avoid “any potential economic shocks.”

Coal Producers Association chairman, Linos Masimura, told Business Weekly in an interview last week the miners had become so incapacitated “to even fail to load the trucks.”

Three companies-Zambezi Gas, Turbo Mine, which is mining in Hwange western areas, and Hwange Colliery Company Ltd, are supplying coal to thermal plants.

Makomo Resources, which had overtaken Hwange Colliery as the country’s largest coal miner, is facing serious viability challenges and is under corporate rescue.

“We haven’t been paid for four or so months and the viability of producers is now severely eroded; they (ZESA) have taken all our working capital,” said Masimura.

He said coal miners were capable of supplying ZESA’s fuel requirements for all plants. “But it is now a matter of them paying and collect,” said Masimura. “They are collecting revenue from their consumers but they are not paying us. Why?”

Another analyst said the “potential revenue loss will be so significant because consumers are now spending on alternative sources of energy, solar, gas or diesel.

“I see a serious cash crisis and the immediately viable options would probably be a State bailout.”

Energy and Power Development Minister Zhemu Soda said ZESA had made a request for a Government bailout from the Treasury to import more power and ramp up production at Hwange and small thermal power plants to narrow the deficit.

“We are still working on the figure but we need to import additional capacity to ramp up generation at Hwange and other small plants while we wait for the review of the hydrological situation at Kariba, which we expect in the next month or so,” he said.

Soda said the country was looking to import an additional 200 MW from the region.

People who spoke to Business Weekly said the consumption of power has severely declined.

“Sometimes we are switched off around 4 am and then power is restored at around 10-11 at night; who uses power at that time? The last time I bought my units was towards the end of November but I have only spent about 10 percent of what I would have under normal before increased hours of blackouts,” Terence Jahwi of Harare said.

Calls seeking comment from Dr Gata were not answered.

Kariba is the country’s largest power plant, with the capacity of producing 1 050 MW, and has been the most reliable. Hwange thermal plant, the country’s second-largest plant has become so unreliable because most of its equipment is obsolete.-ebusinessweek;y