POWER COLUMN

Dear Stakeholders,

Welcome to the Power Column.  I am pleased to take you through our activities and performance of this year’s second quarter.


Zimbabwe Power Company (ZPC) sent out a total of 1789.80GWh of energy against a target of 1902.76GWh. The production target for the period was missed by 5.94% due to inadequate coal supplies at the Small Thermal Power Stations, water conservation measures at Lake Kariba, as well as numerous boiler tube leaks and outages at Hwange Power Station.


Coal suppliers failed to meet their delivery targets for the quarter due to various challenges being faced by the coal miners, chief amongst them being delayed recapitalization on the key mining equipment & cash flows. This challenge is therefore preventing most of the miners from processing adequate coal required to meet their delivery targets to the stations. The Makomo Small Thermals account was settled and prepayment for fresh supplies was made, resulting in the resumption of supplies from Makomo on the 15th of June 2017.


The Kariba lake level rose from 481.01m at the end of the first quarter to 483.19m at the end of June 2017. This represented a 2.18m rise in lake level over the quarter and the lake is 56.20% full. The lake level at the same time last year was 480.31m thus a 0.60% difference.
The Kariba South Extension project is now at 91% to completion and on course to commissioning in December 2017.


The Hwange 7 and 8 project is progressing well. The project parties (ZPC and Sinohydro Corporation Limited) are finalising the conditions precedent of the main funding loan of US$998m from the Export Import Bank of China (“China Eximbank”). ZPC has cleared most of its conditions precedent.  Meanwhile Sinohydro have initially subscribed for their 36% shareholding in the project company, Hwange Electricity Supply Company Private Limited (“HESCO”). To date, parties are now preparing to inject their respective bulk equity contributions into the project company.  Sinohydro and ZPC Technical teams are on the ground in Hwange to finalise the project designs and project site plans.

 
The Hwange project team also conducted a vendor quality surveillance (VQS) on Sinohydro’s subcontractors in the month of June 2017 and results were satisfactory.
The Deka project is set to resume and tenders are being floated as per the new Exim Bank of India guidelines.  The tender process is targeted to end in September 2017.
Water supply agreements for the Harare and Bulawayo projects were signed on the 26th of April 2017 and the 9th of June 2017 respectively.  Fundraising for Harare repowering is still in progress with senior debt funds being sourced from Afrexim Bank under a ZETDC corporate loan.  Four bidders were prequalified for the Bulawayo repowering project and the tender documents were issued to the four bidders. The tender closing date was extended from 6 June 2017 to August 2017 due to new tax laws introduced in India in July 2017.


The Ministry of Finance awarded the Gwanda Solar project and Gairezi project prescribed asset status and national project status. ZPC was granted approval by the SPB to negotiate all solar projects in view of the downward trends in solar project prices.  Feasibility studies are in progress for the Batoka gorge hydroelectric project and these are expected to be completed in the third quarter. 


ZPC had a successful Annual General Meeting on the 22nd of June 2017.  In this meeting, it was reported that the profit after tax for the year ended 31 December 2016 was $25.3million.  This was attributed to a decrease in the allowance for credit losses of $22.95 million. 


ZPC measures its performance against a full range of indicators, one of them being corporate social responsibility.  During the year under review, we sponsored the National Paralympic games in Matebeleland South.  Through the Kariba South Extension project, ZPC sponsors the ZPC Kariba Football Club, and financed the construction of the Ruia Bridge which has since been a great relief for the Kariba community.  In relation to promoting education, to date, 105 students have benefited from the ZPC scholarship beneficiary program since its inception in 2012.

Looking ahead, ZPC will need to improve on its revenue collections to better manage its cashflow constraints and financial obligations. We will also improve on operational efficiencies in order to cut costs and improve the bottom line.  ZPC has been identified by the Government as one of the ten strategic parastatals earmarked for an emergency reform program. In this regard, ZPC realizes the importance of adequate and reliable power supply to support the economic turnaround envisaged by Government.


In closing, I would like to thank the Ministry of Energy and Power Development, the ZESA Holdings Board, management and staff, the ZPC Board, management and staff, and all our stakeholders for your continued support as we work towards powering Zimbabwe into a brighter future!

 

N.F. Gwariro
MANAGING DIRECTOR