7 December 2012

Zimbabwe: Govt to Unbundle Zesa

GOVERNMENT is this month expected to unbundle ZESA Holdings into three separate entities, The Financial Gazette's Companies & Markets can report.

The move is meant to clean up a huge debt on the power utility's balance sheet and create a level playing field for independent power producers to help meet electricity demand.

Energy and Power Development Minister Elton Mangoma (pictured) confirmed the unbundling on Monday, saying the new structure would see the creation of National Grid Services Company (NGSC) responsible for the transmission of power, marketing and systems operations.

NGSC will inherit all of ZESA 'legacy' debts and will be 100 per cent government owned.

He said the other two companies would be the Zimbabwe Power Company (ZPC), already a subsidiary of ZESA responsible for electricity generation, and the Zimbabwe Distribution Company taking charge of the distribution of electricity.

"The new structure will see the creation of a new company NGSC, ZPC and Zimbabwe Distribution Company. These companies will be on a flat level. There will be no more ZESA Holdings.

"ZESA has what we call a huge 'legacy' debt. Each of the separate units has got some debt. In total, ZESA has a debt of over US$400 million. These debts were incurred long before ZESA was first unbundled in 2002.

"If we are going into projects with these debts, potential investors will look at the balance sheet and say this company is not good. So we want to have a safe way of dealing with that debt.

"By end of this December, we will be able to show a ZPC balance sheet which is clean. If it is clean we can now do business, which is our intention," said Mangoma.

The Minister also said it was important to set up a mechanism which would create a level playing field for independent power producers.

"We are now going to have independent power producers in the market so it's important that we create a level playing field.

Mangoma added that the country's electricity law would be amended next year to enable the transfer of 'legacy' debt.

"The transfer of the legacy debt requires the current law to be amended so that if we are going to have any challenge from any creditor, it will be covered in the law. But the change of the shareholding does not require the law," said Mangoma.

Mangoma said workers at the power utility should not panic as their future was secure.

"There is a lot of uncertainty and anxiety at the moment," said Mangoma. "They (workers) are unsure whether they have a job or their posts will disappear in the new structure. There is always this fear of losing jobs when a restructuring exercise of this magnitude is taking place. This exercise does not however necessarily mean that the changes we are bringing are going to see people losing their jobs.

"The formation of NGSC requires a lot of personnel so a lot are going there. More importantly ZPC is going to do a lot of projects. Already there is the expansion of Kariba and Hwange Power stations, Gairezi, solar plant and we are pursuing the Lupane gas project. All this increased activities require more people.

"But, truly there is going to be some changes for those who were sitting at ZESA Holdings and thinking they were above everyone else. They have to come to the party and be equal to others.

Minister Mangoma however, could not be drawn into discussing the fate of group chief executive officer, Josh Chifamba.

"We have already spoken to him and he fully knows and understands what is going to happen to him. I cannot reveal that now," said Mangoma.

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