Debt hurdle poser for power imports

17 May, 2019 - 00:05 0 Views
Debt hurdle poser for power imports

eBusiness Weekly

Golden Sibanda
Zimbabwe’s plans to import power from the region to cover its acute internal power supply deficit occasioned by reduced generation at Kariba, faces debt hurdles following revelations the State utility owes regional suppliers a staggering US$80 million from unpaid earlier imports.

Further indications are also that Zesa is “broke”, with consumers doing little to settle bills with a long standing debt of over $1 billion, a situation likely to complicate the security of power supply in the country. This leaves little latitude for resources to procure forex.

Zesa is reportedly importing about 150 megawatts from the region (50MW Cahora Bassa and 100MW Eskom) and needs an upward of 300MW in imported power, an amount equivalent to what Zesa is shedding due to reduced output at Kariba; which has left a huge supply deficit.

Zimbabwe also faces the twin challenge that Hwange, which has installed capacity of 920MW can at best manage to do 700MW due to its advanced age, but even the constrained generation level is also not reliable.

The State power utility may also struggle to pay for the power even if the imports (surplus) may be readily available in the Southern African Power Pool (SAPP) electricity market, due to limited financial resources.

“We do not have the US dollars needed (to clear the debt) or the RTGS dollar to buy even if the Reserve Bank were to avail the forex because customers are also not paying for power or accumulated debts,” Zesa spokesman Fullard Gwasira told Business Weekly.

Gwasira said Zesa’s plight was made worse when the central bank floated the domestic currency and ditched the 1 to 1 parity policy between the US dollar and local forms of money that include bond notes/coins and electronic dollars like Real Time Gross Settlement (RTGS).

While Zesa has not increased its power tariff rate of 9,86 cents per kilowatt hour since 2012, a floated exchange rate which started on the interbank market at 2,5 to the green back, has crept up to 3,4 to the US dollar, meaning more RTGS dollars are needed to purchase requisite foreign currency.

If anything, the ruling floating interbank rate of $3,40 to the green back means Zesa’s tariff, quoted in US dollars until the monetary policy of February 2019, has effectively been reduced to 2,85 US cents per kWh.

“Zesa cannot function (properly) under the current circumstances even if the RBZ had the money, we don’t have the local funds to buy it.

“While the interbank started at 1 USD to $2,5, which exchange rate has risen to $3,4, the Zesa main tariff did not change, so we took a double knock (shift from 1 to 1 parity and tariff that has not changed since 2012).”

The country’s top industrial lobby group, Confederation of Zimbabwe Industries (CZI), said this week that the crippling power cuts now rocking the country might worsen the plight of firms already battling to stay afloat.

CZI president said this week average industrial capacity, which stood at 48 percent last year, would drop significantly this year as disruptions from power shortages, foreign currency crisis and rising production costs take their toll on operations.

Declining Lake Kariba water level

Zimbabwe is facing the renewed challenge of crippling internal power supply deficit after the Zambezi River Authority (ZRA) further cut Zesa’s water allocation for power generation at Kariba, the country’s largest plant.

Low river flows from the Lake Kariba catchment area prompted the ZRA to reduce the water allocations to Zesa for power generation from the initial ration of 19 billion cubic meters to 17 billion cubic meters.

The station consumed 6,72 billion cubic meters in the first quarter leaving the station with only 10,38bm3 for generation for the rest of the year which corresponds to an average monthly capacity of 358MW.

This cutback will also affect Zambia state power utility, Zesco, which shares equally the Lake Kariba water with Zimbabwe’s Zesa and draws the bulk of its electricity from its Kariba North hydro-power station.

The recent cut of the water allocation by the river authority is the second within months. ZRA regulates usage of water from the Zambezi River on behalf of riparian neighbouring states, Zambia and Zimbabwe.

The Lake Kariba did not receive adequate inflows of water to build sufficient stocks through its main feeder, Zambezi River, whose catchment area stretches up to Angola but received insignificant rains this past season due to drought, prompting the ZRA to cut the allocations.

Lake Kariba capacity
The Lake Kariba is designed to operate between levels 475,50 metres and 488,50 metres (with 0,70 metres freeboard) for hydropower generation on the northern (Zambia) and southern (Zimbabwe) banks of the dam wall.

The lake level continued receding due to poor inflows, dropping by 6cm during the week under review, before closing at 480,19 metres (33 percent usable storage) on May 7 2019.  Last year on the same date, the Lake Kariba water level was 485,19 metres.

This comes at a time when Hwange Power Station (HPS), which can no longer operate optimally despite extensive measures undertaken to improve its reliability and production capacity, which at best averages 700 megawatts.

As such, the immediate intervention at Zesa’s disposal, at a time Zimbabwe is still in the process of extending thermal generation capacity at HPS to add 600MW is to import the power from the region.

Zesa is currently only able to generate about 995MW (527MW Kariba, 450MW Hwange and Bulawayo 18MW) against demand at peak periods of 1 700MW, leaving deficit requiring imports to close it.

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