Zesa owes US$350m for Kariba South renovations

Zimbabwe's power utility, Zesa Holdings (Zesa), is grappling with a staggering US$350 million debt for renovations at the Kariba South Power Station, as its foreign currency obligations continue to hinder its operations. The company is facing a critical financial situation compounded by an ongoing electricity supply crisis, with the nation struggling to meet its energy demands.

Currently, the Kariba South Power Station, with a total capacity of 1,050 megawatts (MW), is only able to produce 250MW. This drastic reduction is due to depleted water levels at Kariba Dam, a consequence of climate change, which has diminished the lake's ability to sustain power generation.

Zesa's broader financial woes are tied to its US$2 billion debt, which it has struggled to service due to a subsidized electricity tariff system that has resulted in significant financial losses. In recent years, the average price per kilowatt-hour (kWh) of electricity in the region has been US$0.1254, but Zesa has been charging only US$0.10 per kWh locally, further compounding the utility's financial strain. Although the price increased to US$0.12 per kWh in November 2023, it remains below the regional average.

The Parliamentary Portfolio Committee on Energy and Power Development recently revealed that Zesa's financial burdens are exacerbated by significant foreign currency obligations. These debts include loans for the renovation of key power plants like Kariba South and the procurement of spare parts. According to the committee, Zesa has resorted to exporting electricity to generate foreign currency to meet these obligations.

"The debt burden, particularly in foreign currency, is overwhelming, and repayments need to be done in hard currency," said the committee. "Zesa has been unable to service its loans due to a combination of factors, including the subsidized tariffs and low generation capacity."

Zesa's difficulties extend beyond Kariba South. The Hwange Thermal Power Plant, with a potential capacity of 1,520MW, is currently producing just 760MW, reflecting the nation's struggle to meet its growing energy needs. The country's demand for electricity ranges between 1,500MW to 2,350MW, but the current supply from all power plants, including independent power producers (IPPs), totals just 1,079MW.

In a bid to mitigate the crisis, Zesa's subsidiary, the Zimbabwe Power Company (ZPC), has been importing electricity from neighboring countries like Namibia to alleviate the effects of load shedding. However, the situation remains dire, with the national grid still unable to meet the country's energy needs.

The committee has called on the Ministry of Finance and Economic Development (Treasury) to provide timely disbursements to help Zesa service its debt. "Treasury must act swiftly to disburse funds for loan repayments and to support power projects," the committee urged. "This is essential not only for improving the power supply but also for enhancing the country's creditworthiness and access to affordable energy financing."

With Zimbabwe's energy crisis showing no sign of abating, the committee warned that without significant investments in power generation infrastructure and strategic solutions to increase capacity, the nation will continue to suffer from prolonged power shortages.

As the government grapples with this challenge, the future of the country's energy sector remains uncertain, raising questions about the sustainability of both Zesa and Zimbabwe's economic recovery.