THE Zambezi River Authority (ZRA) is struggling to settle its US$144 million loan to finance the Kariba Dam Rehabilitation Project due to failure by Zesa Holdings and Zambia Electricity Supply Corporation (Zesco) to pay for the water required for power generation.
The ZRA signed a 30-year loan agreement with the Zambian government in August 2015 and according to the schedule of the agreement, the authority is required to make repayments bi-annually.
However, due to liquidity challenges facing ZRA over the years, the authority has defaulted on its US$14 791 000.
According to the ZRA 2020 annual report and financial statement, the amount in default was made up of current year repayments of US$5 871 000, which is the principal of US$3 800 000 and interest of US$2 071 000, for 2019 and principal arrears for 2018.
“This is in contravention of Section 3.04(ii) of Article III of the subsidiary loan agreement, which states that repayments should not be delayed by more than 30 days from the due date and failure of which government of Zambian has the right to cancel the loan agreement in accordance with Section 5.03 of Article V of the subsidiary loan agreement,” ZRA said.
“The authority has engaged both Zambia and Zimbabwean governments highlighting the challenges in settlement of the said obligation due to delayed payments from the utilities and the failure to easily access the United States dollars fund held in Zimbabwe.
“Subsequent to year-end, the authority and GRZ (Government of the Republic of Zambia) have agreed to restructure the subsidiary loan agreement to allow for terms that will be manageable by the authority,” it added.
Sources in the energy sector recently revealed that the ZRA has failed to repay installments due to challenges in collecting invoice amounts from the two utilities.
“Engagement is continual. The only logical step will be to shut off the water supply to the utilities until they pay up, which, of course, ZRA cannot do as an agency,” one of the sources said.
The ZRA is a bi-lateral organisation mandated to operate and maintain the Kariba Dam complex and its reservoir. It is expected to develop additional water storage infrastructure down the Zambezi River along the common border between Zimbabwe and Zambia.
“The authority’s revenue is from water sales and failure by utilities to pay constrains operations,” the source said, adding that the situation has been worsened by the utilities’ perennial financial challenges.
It was also revealed that Zesa usually pays its debts using the inflation-buttered Zimdollar while Zesco is reportedly technically insolvent.
Demand for power in Zimbabwe is expected to rise to 2 370MW by year-end, 2 711MW next year, 3 407MW in 2024, and 3 943MW in 2025.
Demand is also reportedly rising, despite the current output of approximately 1 307MW with Zesa indicating that power generation has been averaging between 500MW and 1 307MW per day.
To meet the power deficit, Zesa reportedly needs US$17 million monthly to import between 400MW and 500MW of power, which it is not getting from the central bank’s forex auction.
Challenges in generating sufficient power from the country’s two biggest hydro and thermal plants have forced the power utility to implement daily load-shedding schedules while intensifying debt recovery efforts. The Zambezi River Course has the potential of producing at least 14 000MW of electricity but ZRA’s mandate is over the section common to Zimbabwe and Zambia.
Responding to inquiries by the Independent, ZRA chief executive Munyaradzi Munodawafa said the section spans from the Kazungula border intersection up to Luangwa in Zambia and Kanyemba in Zimbabwe with a potential of generating close to 7 000MW of hydro-electric power.
Munodawafa said power generation along the section shared by Zimbabwe and Zambia includes the existing Kariba Dam generating 2 130MW at Kariba North and South banks by Zesco and the Zimbabwe Power Company.
“There is also the planned Batoka Gorge Hydro-Electric Scheme (BGHES), which has the potential to generate 2 400MW to be shared equally between Zambia and Zimbabwe,” he said.
“The planned Devils Gorge Hydro Power Scheme to be shared equally between the two countries has the potential to generate 1 240MW. Another project in the pipeline includes the planned Mupata Gorge Hydro Power Scheme with a potential to generate 1 000MW to be shared equally between Zambia and Zimbabwe,” Munodawafa said.
The installed generation capacity in Zambia is 2 350MW made up of a range of hydro and diesel generation facilities.
Zambia’s demand is forecast to grow from 1 911MW in 2015 to 5 508MW in 2035, representing a compound annual growth rate of 5,4%. ZRA, in the Batoka Gorge Hydro-Electric Scheme Project Overview Document, said the introduction of new generation projects, such as the BGHES, will be critical to meeting this projected demand in both countries.
The average bulk exchange tariff at the Southern Africa Power Pool in 2014 was 8,25 US$c/kWh but there have been recent increases in Zambia and Zimbabwe.