PHILLIMON MHLANGA

THE recent hefty electricity tariff has boosted ZESA
Holdings’ cash flow position which allows it to meet its costs, an executive
has said. Cash flows for ZESA, a vertically integrated power utility engaged in
power generation, distribution and transmission, were under strain in the past
due to increased cost of power generation and losses registered by the company,
among other challenges.

Ralph Katsande, the acting managing director of the Zimbabwe
Electricity Transmission and Distribution Company (ZETDC) told the company’s
internal publication that the tariff increase of 320% from ZWL$0.3861 per
kilowatt hour (kWh) to ZWL$1.6216 per kWh will address concerns related to
input costs and boost cash flow generation.

ZETDC is an electricity distribution unit of ZESA Holdings.
“The [new] tariff gives us a reasonable gross profit margin to operate the
business, from a previously negative value that saw the utility regularly
approach the fiscus for a bail out,” Katsande said, without taking into
consideration the huge burden that the tariff has brought to ZESA customers who
are complaining that their hyperinflation-eroded wages and salaries mean that
they cannot afford ZESA’s new tariff.

The ZETDC owes the group’s generation unit, the Zimbabwe
Power Company (ZPC), close to ZWL$1bn. It is the ZPC biggest debtor. The ZPC
operates five power stations in Kariba, Hwange, Bulawayo, Munyati and Harare.
Hwange is the country’s largest coal-fired power station. The new
cost-reflective tariff, experts say, will enable ZETDC to liquidate its
obligations, and in turn enable the ZPC to meet its obligations.

“This adjustment is expected to increase the average monthly
revenue,” Katsande said. “The improved cash flows mean that ZESA will be in a
better position to fund critical raw materials (coal-ZWL$72m, diesel-ZWL$23m, water-US$1.2m
per month, chemicals, and spares) and adequately maintain the generation
plants, and the transmission and distribution infrastructure, thus guaranteeing
improved supply reliability and availability. Supply availability at peak will
improve from the current 800 megawatts (MW) to 1150MW, implying a reduction in
hours of load shedding to Stage 1.”

According to analysts, though the new high tariff is good
for ZESA’s bottom line, its impact on ordinary Zimbabweans who have been
stretched to the absolute limit by hyperinflation and high prices of goods and
services right across the board, poses a danger to national security. For
example, there are households that now spend ZWL$50 a day on electricity alone.

In a month, those households will be spending ZWL$1,500 on
electricity in a country where wages and salaries have remained stagnant. This,
the analysts say, cannot be a sustainable situation for anybody in the country,
and the sooner the government looked into the electricity matter the better.

Otherwise it could lead to a situation where ZESA gets all
the revenue in the world, but its customers will not be able to buy the
electricity it produces.

Katsande said the increased revenue from the new tariff was
“expected to help address the repair of the Hwange Power Station Unit 6 rotor
earth fault, statutory inspections of Hwange Unit 4 and 5, a major overhaul of
Unit 3, timely payments of water and diesel, the supply and transportation of
coal, procurement of chemicals, spares and oils for the power stations, imports
payment ability, the maintenance of transmission and distribution
infrastructure, the repair and replacement of vandalised and faulty
transformers, and the settlement of group insurance premiums that are now in
arrears”.

Katsande said the key interventions that would arise from
the new tariff and cash-flows “will facilitate thermal power plants production
through the acquisition of spares and maintenance”.

He said ZPC has been struggling to pay for coal and diesel
suppliers, resulting in the Ministry of Finance and Economic Development
providing financial assistance. Improved cash flows also mean that the ZPC will
be able to pay coal and diesel suppliers timeously in preparation for the rainy
season, Katsande said.

“ZPC needs to make bulk orders to increase stock levels for
Hwange from the current 70 000 tonnes to 200 000 tonnes to ensure stocks last
from the current 10 days to 30 days. Small thermal stocks will increase from
the current average of 2 000 tons to 15 000 tonnes per station to ensure stock
last from the current 10 days to 30 days. Diesel too is required at Hwange to
ensure boiler flame stability when changing over mills and start-ups. A minimum
of 1.5m litres of diesel per month is required translating to ZWL$23m at the
current price,” Katsande said.

For generation at Kariba, according to Katsande, US$1.2m per
month is required by the Zambezi River Authority, an outfit owned by the
governments of Zimbabwe and Zambia which administer the Zambezi River and
Kariba complex. Currently, there are arrears amounting to US$7m.

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