Energy Minister Mathew Nkhuwa has disclosed that state owned power utility ZESCO recorded K2.8 billion losses in the 2018 financial year.
In 2016, ZESCO posted a K137 million loss while in 2017, the losses jumped to K270 million.
Mr Nkhuwa said consequently, ZESCO has recorded an unsatisfactory rate of return on assets and has faced challenges to settle debts, owing to its weakened financial position.
The Energy Minister revealed this on Wednesday during a High Level Policy Dialogue Forum with Cooperating Partners in Lusaka.
Mr Nkhuwa observed that the high cost of power purchases from independent power producers and the cost of emergency power imports for 2015 – 2016 has been the major contributor to ZESCO’s liquidity challenges.
“This has also affected our ability to attract the significant amount of funding required for the sector’s diversification and successful completion of the significant number of electricity power projects already in pipeline,” Mr Nkhuwa said.
He said government is committed to creating a platform that will remove barriers and promote effectiveness in processes relating to investment in the sector in order to spur private sector participation in power generation.
“Undeniably, a number of private sector players have expressed interest to invest in electricity projects. However, given the market structure, these developers are looking to ZESCO Limited to underpin their development as the sole off-taker,” he said.
“Regrettably, the tariffs arising from the new power generation projects are significantly above ZESCO’s average selling price, resulting in losses on the utility’s part in the order of millions of United States Dollars per year, despite the fact that domestic tariffs were increased by 75% (from an average of USc 3.3/kWh to USc 6.18/kWh in 2017) and Mining tariffs increased to an average of USc9.3/kWh.”
Mr Nkhuwa said the increment factor is such that the overall increment in revenue collections was greatly affected by the depreciation of the Zambian Kwacha against the US Dollar.
“An increment in tariff from 3.3c/kWh to 6.18c/kWh meant that the revenue collections increased by a factor of 1.9. However, with the Kwacha depreciating against the dollar from trading at 9.68 in 2017 to 11.88c/kWh. The increase reduced to a factor of 1.5c/kWh in 2018 and then 1.3 in 2019 when the Kwacha further depreciated to 13.91.”
He charged that the reality is that ZESCO’s current average tariffs are still far-fetched below the cost of production from new Independent Power Producers (IPP) whose average tariffs are approximately US 11 cents per kilowatt hour.