Zesa seeks to settle loans in ZiG

POWER utility, Zesa Holdings, is prioritising cost-containment measures to drive revenue and pay off its loans.

With successful expansion projects at Kariba Hydro Power Station and Hwange’s units 7 and 8, Zesa is servicing two loans of US$319 million and about US$1 billion provided by China Exim Bank.

To improve operational costs, Zesa has developed a programme to save money through cost-containment measures and pay off operational requirements with the Zimbabwe Gold (ZiG) currency.

To convince suppliers, Zesa is exploring half-payment in ZiG or a portion of payment in ZiG and the rest in US dollars.

Zesa is also pursuing debt recovery measures and is collecting ZiG400 million and US$55 million monthly, but requires more to meet its US dollar obligations, including importing power from the region.

To resolve the challenges, Zesa is engaging with China Exim Bank and Sinohydro Corporation to negotiate the imposed penalties due to delays created by monetary policy changes and restore its Escrow accounts.

ZPC Units 7 and 8 Cooling Towers

Zesa group financial controller, Mr Elias Chikwenhere, told the Parliamentary Portfolio Committee on Energy recently that the company had adopted a strategy to cut costs to keep the power utility operational.

“We have come up with a programme to ensure that at least we try by all means to save money through cost containment measures and at the same time try to the extent possible that some of our operational requirements are paid in ZiG,” he said.

“There is a programme that we have now to ensure that at least while the bill for Hwange 7 and 8 is US$36 million, we sincerely believe that some of the things can be paid locally.

“We have identified certain things we can pay for locally in ZiG. It’s a programme that we started about two months ago and we are trying to engage some of the suppliers.

“While the contract says you are paid in USD, we want to convince them to accept perhaps payment half in ZiG or a portion payment that will be the way to go because there is no way we can sustain a bill of US$36 million, it’s not possible,” said Mr Chikwenhere.

“Every month, we are required to pump out US$18 million each for units 7 and 8, which is US$36 million and this is 100 percent in USD.”

He said it was for this reason that Zesa was aggressively pursuing debt recovery measures from customers, especially exporters, to ensure that the operations of Hwange Power Station, including Units 7 and 8 are prioritised.

The company’s revenue remains subdued compared to critical obligations such as financing operations that include offsetting loans, spare parts purchases as well as the import bill.

“We’ve established a trend after the tariff adjustments in November-December. Every month, we collect close to US$51 million, which we use to finance our requirements. Out of that US$51 million, Hwange Power Station Units 7 and 8, require $36 million and yet we are also required to import power from the region for about $25 million monthly,” said Mr Chikwenhera.

“If you add the two figures they will go beyond the total that we are getting as Zesa. Over and above that, we need US$5 million to import spares.”

He said the power utility was collecting about ZiG400 million and US$55 million and hoped to ride on the firming local currency to push for certain services to be paid in ZiG.

“I have seen a positive development that the ZiG is strengthening and there is acceptance by the market, and I believe as Zesa we can ride on that development to contribute to the acceptance of the local currency to popularise ZiG. We will continue to push our customers to assist us to meet our obligation.”

The company has set its sights on the new mining firms setting up shop, with power demand envisaged to grow as operations expand.

“We now have to identify specific customers that will pay directly into those Escrow accounts (funds held in trust) and I can confirm that some of the customers that we have identified include the new mines Bikita, Kao Investments, Gwanda and Kamativi,” said Mr Chikwenhera.

“The bills will increase gradually and this will assist us in resolving some of the challenges we are having in terms of payment.”-chronicle