Business / Companies
ZESA to securitise domestic debt
14 Jul 2014 at 16:12hrs | Views
ZESA Holdings says it plans to securitise part of the $322 million it is owed by customers as part of efforts to fund its operations.
Giving oral evidence to the parliamentary portfolio committee on Mines and Energy, Zesa chief executive Josh Chifamba said the company has engaged local banks with the view to raise $150 million to cover the debt.
"We entered into payment plans with individuals who owe us and most of those payment plans are being honored. But due to challenges in the economy, the payment plans are extended over longer periods of time. So what we are trying to do is; against the security of those cash flows we will securitise the debt and raise the money in terms of present value terms.
"So discussions are at an advanced stage to ensure the securitisation of that debtors' book. And we are hopeful that we will be able to raise about $150 million," he said.
He said the installation of prepaid meters would be complete by year end making it easy for the company to track its debtors. The power utility last year wrote off almost $80 million for ordinary consumers while farmers received debt relief of $90 million. After the installation of prepaid meters, Zesa made payment plans with individuals who would have a certain percentage of their monthly electricity consumption deducted to cover their arrear over a long period of time. Chifamba however said the process would take too long for them to collect the whole amount through the payment plans hence the move to securitise the debt.
"The beauty about the domestic debt is that once a prepaid meter is installed the debt ceases to grow. As customers pay their bills, we cream off some amount to liquidate the arrears. When we started the programme we were creaming off 20 percent of the purchases now we have moved it to 25 percent. It doesn't do much though because the arrears will be paid off over very long periods.
"So what we are doing is that we are entering into arrangements with the bank to give us the amount as a loan for 5 years and we use the proceeds from collections to pay off the loans. It's simply converting those payment arrangements which are 5 to 10 years into a lump sum today," he added.
He said although the process would be costly to the company, they would be able to get the money owed to them in one go and use now then pay it over a long period. Chifamba added that the farmers' debt had already ballooned to $70 million while key service providers were also contributing to the huge debt.
"Indeed one of the major drivers of debt is … essential customers like city council that are not paying but we cannot disconnect because they supply water and sanitation services. And other companies like sable chemicals are also not paying," he said. He said the company will be able to move along with other projects once the banks agree to provide funding to clear the debt.
Giving oral evidence to the parliamentary portfolio committee on Mines and Energy, Zesa chief executive Josh Chifamba said the company has engaged local banks with the view to raise $150 million to cover the debt.
"We entered into payment plans with individuals who owe us and most of those payment plans are being honored. But due to challenges in the economy, the payment plans are extended over longer periods of time. So what we are trying to do is; against the security of those cash flows we will securitise the debt and raise the money in terms of present value terms.
"So discussions are at an advanced stage to ensure the securitisation of that debtors' book. And we are hopeful that we will be able to raise about $150 million," he said.
"The beauty about the domestic debt is that once a prepaid meter is installed the debt ceases to grow. As customers pay their bills, we cream off some amount to liquidate the arrears. When we started the programme we were creaming off 20 percent of the purchases now we have moved it to 25 percent. It doesn't do much though because the arrears will be paid off over very long periods.
"So what we are doing is that we are entering into arrangements with the bank to give us the amount as a loan for 5 years and we use the proceeds from collections to pay off the loans. It's simply converting those payment arrangements which are 5 to 10 years into a lump sum today," he added.
He said although the process would be costly to the company, they would be able to get the money owed to them in one go and use now then pay it over a long period. Chifamba added that the farmers' debt had already ballooned to $70 million while key service providers were also contributing to the huge debt.
"Indeed one of the major drivers of debt is … essential customers like city council that are not paying but we cannot disconnect because they supply water and sanitation services. And other companies like sable chemicals are also not paying," he said. He said the company will be able to move along with other projects once the banks agree to provide funding to clear the debt.
Source - BH24
