Zesa Holdings is planning to raise $500 million through issuing a three-year bond to finance rehabilitation of its existing power plants, sources familiar with the plan said.
The projects include rehabilitation of ageing Hwange Power Station and small thermal plants—Munyati and Bulawayo. The upgrades are part of efforts by the State-owned power utility to boost electricity generation to mitigate power cuts.
Zimbabwe is facing severe power shortages, which has seen businesses and households enduring long periods of blackouts. The prevailing power situation is largely resulting from low production at Kariba hydroelectric plant due to low water levels in Kariba Dam and recurring breakdowns at Hwange.
Hwange and Kariba have capacity to produce 750 megawatts and 1050 MW respectively.
Lack of foreign currency is also inhibiting the country to import power from the region.
“The money is meant to support ongoing rehabilitation projects,” said one source who requested not to be named because he is not authorised to talk to the media.
A local financial institution has been engaged to raise the funds on behalf of Zesa, another source said. Zesa has previously issued bonds to finance the expansion of Kariba plant and the procurement of prepaid meters through the IDBZ.
The IDBZ will be paying off bondholders at the end of next month and this will create capacity for Zesa to borrow more. However, given the prevailing hyperinflation environment, appetite for long term instruments will remain subdued.
Market analysts say investors believe inflation will continue trending upwards, despite Government seeing monthly inflation dropping to 10 percent by end of the year. Zimbabwe’s monthly inflation for October rose to a four-month high of 38,75 percent from 17,7 percent the previous month, driven by increase in food and alcoholic beverages prices, according to Zimbabwe National Statistics Agency. The publication of annual inflation data is suspended until February next year, but independent economic analysts estimate the figure reached 440 percent last month. Government has been failing to raise targeted amounts through 365-day Treasury bills, underlining the huge disconnect between inflation realities experienced by investors and expectations of policy makers. Investors are rather preferring short term.
“No one would want to go long term unless the bond is indexed to inflation,” said James Bower, an analyst with an economic and finance research firm.
At this point, no one knows whether inflation has reached the apex or will continue on an upward trend.