Zesco in $480 million loss

ZESCO Limited is expected to lose about US$480 million annually through buying electricity from independent power producers (IPPs).
This is much higher than the price at which the power utility sells electricity to consumers.
Company director of finance Rodgers Chisambi said Zesco, being the off-taker of power from the IPPs, buys electricity at an average rate of US$11 and later sells it at US$0.0 6 cents, resulting in a tariff differential deficit that will impact negatively on the company’s cash flow.
“At the current selling average tariff of 6.02 cents per kilowatt hour (kWh) compared to the IPP average cost of buying of US$11.03 per kWh, [there will be] a loss of US$479.5 million per year,” Mr Chisambi said.
He said this recently when senior officials from Zesco led by acting managing director Victor Mundende appeared before the parliamentary committee on economic affairs, energy and labour.
Zesco Limited is expected to buy 1,880 megawatts of power at an annual cost of US$884 million from Kariba North Bank Extension, Itezhi-tezhi Hydro Power Corporation, Kafue Gorge Lower, Ndola Energy, and Maamba Collieries Limited, among others.
Mr Chisambi also said IPPs demand for security payment of close to US$200 million to secure their monthly billing receivables from Zesco Limited.
“These amounts have to be maintained throughout the life of the agreement and this will result in a serious strain on Zesco’s cash flow. Zesco’s financial statements have for a long time been positive, but this development will result in the company making losses,” he said.
Earlier, Mr Mundende explained that IPPs are depending on Zesco to buy their electricity due to lack of cost-reflective tariffs in the country.
“Several projects are under construction [and] given the current market structure and uneconomic tariffs, these projects are looking to Zesco to underpin their development as the sole off-taker.
However, the tariffs arising from the projects are all significantly above Zesco’s current average selling price,” he said.

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