Maputo — Mozambique's publicly owned electricity company, EDM, owes its main supplier, Hidrolectrica de Cahora Bassa (HCB), which operates the Cahora Bassa dam on the Zambezi, about eight billion meticais (114.3 billion US dollars, at current exchange rates).
"The period for repaying the debt to HCB will be established between EDM and HCB, and the due consultations are going on right now", said EDM in a statement emailed to the independent newsheet "Carta de Mocambique".
EDM says it ran up the debt because it sells electricity at below cost. The average price charged by EDM to its clients is lower than the real cost of supplying power, which affects EDM's capacity to honour its commitments to its suppliers.
EDM's debt of eight billion meticais to HCB covers the period up to the end of 2019, and is included in HCB's financial statements for the year. However, EDM says the figure is gross of debit notes issued by EDM for 2.6 billion meticais, concerning tariff corrections that EDM is claiming. "The definitive balance of the debt will be subject to final reconciliation", said EDM.
In addition to selling its power at below the cost of producing it, EDM says it has also been faced with a range of extraordinary costs and losses, arising from external factors beyond its control, notably the two cyclones (Idai and Kenneth) which struck Mozambique in March and April 2019.
More recently, the Covid-19 pandemic has had a serious impact on EDM's revenue, particularly a 50 per cent reduction in the amount of power exported by EDM to other countries in the region.
On the domestic market, EDM's monthly invoicing has fallen by 25 per cent, because of the discounts granted by the government to some categories of EDM clients, the closures or reduced production in some factories, and the increased debts to the company by clients who find they cannot pay their electricity bills.
A further factor affecting EDM's ability to pay its suppliers has been the depreciation of the metical. The suppliers, including HCB, invoice EDM in US dollars or South African rands, but EDM pays in meticais. EDM's plan and budget for 2020 assumed an average exchange rate of 62.5 meticais to the dollar, but the exchange rate has now slipped to 70 meticais to the dollar.
Nonetheless, EDM says it is reprogramming successfully its debts to HCB and other suppliers and so the overall level of debt has been declining.