Page 6 - AfrElec Week 12 2023

AfrElec POLICY AfrElec

Zimbabwe’s high power tariffs unfairly

impacting exporters, says CZI

ZIMBABAWE THE Confederation of Zimbabwe Industries “Currently, con-
(CZI) has bemoaned what it calls steep power sumers must find sup-
tariffs set by the utility ZESA Holdings, state- plementary foreign
owned newspaper The Herald reports.. currency to settle bills
Zesa is charging exporters $12.21c/kWh in foreign currency,” the
compared to the Southern African Power Pool CZI said. “The current
(SAPP) average of $11.7c/kWh, according to the level of retained forex is
report, which quotes CZI as saying “the new tar- acting as indirect taxes
iff priced out Zimbabwe’s value-added exports”. on businesses due to the
Zimbabwe recently introduced US dollar-de- misalignment between
nominated tariffs. The CZI argues that billing the formal and the
should be matched to the proportion of foreign widely quoted market
currency sales, given that businesses have differ- exchange rates used to source supplies.”
ent mixes of local and foreign currency earnings. Zesa says the tariff was raised to fund meas-
The country uses a multi-currency regime ures to improve services, saying, “We have had
due to the weak local currency, which cannot decades of grid non-maintenance owing to the
trade outside Zimbabwe, and most sectors use sub-economic tariff that we have for the past dec-
the greenback for transactions. ade,” The Herald reports.
Foreign currency earners, especially those Zimbabwe is battling to supply enough power
in the mining sector, are now required to pay in the country due to low water levels at Kariba
$10.63c/kWh, while off-peak tariffs sometimes Dam, which is the largest source of electricity in
go as high as $13.4c/kWh. the country, generating 1,050 MW.™

S&P puts Eskom on CreditWatch positive

SOUTH AFRICA SOUTH African government’s commitment to strengthen Eskom’s liquidity over time.”
take on $14bn of power utility, Eskom’s $23bn Eskom’s obligations have been rising in
debt has encouraged international ratings recent years due to operational constraints.
agency, S&P Global, to give the company posi- It is also owed about $3bn mainly by govern-
tive ratings. ment departments and municipalities. The
Engineering News, a local publication, utility runs a predominantly coal-based fleet
reported on March 15 that S&P placed its ratings whose efficiency is declining due to old age. As
on Eskom on CreditWatch with positive impli- a result, it is rationing electricity for up to 12
cations, including its ‘CCC+’ issuer credit rating hours daily.
and ‘zaB’ South Africa national scale long-term The government’s proposed debt relief agree-
rating. ment will reduce refinancing risks and improve
The government, in February 2023, Eskom’s near-term liquidity profile, according
announced the plan to offer the debt relief, to S&P.
a development that the agency expects will A recent award of an 18.5% tariff increase
address Eskom’s near-term debt obligations once for fiscal 2024 and 12.5% for fiscal 2025 by the
implemented and give the utility room to focus National Energy Regulator of South Africa, S&P
on operational improvements and electricity notes, will also improve revenue visibility and be
sector reform targets. more cost-reflective.
“Moreover,” Engineering News wrote cit- The agency expects a law approving the debt
ing S&P, “it expects the agreement to improve relief to be enacted not later than June 2023.
Eskom’s liquidity and capital structure and put However, with load curtailment expected to
the company on a path to financial sustaina- last for at least the next 24 months, S&P thinks,
bility, notwithstanding severe operating chal- lower electricity volumes supplied, high use of
lenges that remain. The CreditWatch placement expensive diesel-powered open cycle gas tur-
reflects that S&P could raise the rating by one or bines and large working capital outflows owing
more notches based on its expectations that the to non-payment by municipalities will remain
debt relief agreement, when implemented, will key risks to cash flows.™

P6 www. NEWSBASE .com Week 12 22•March•2023