The Sunday Mail
Martin Kadzere
Senior Business Reporter
Zesa Holdings is seeking Treasury support to continue optimum production of electricity at its thermal power stations amid rising expenses largely driven by a spike in coal prices as hydro-power continues to dwindle owing to rapidly dropping water levels at Kariba Dam, sources close to the matter have revealed.
Zesa operates four thermal plants, with Hwange being the largest with a capacity of 900 megawatts, while others are Harare, Munyati and Bulawayo stations.
The parastatal reduced production at Kariba by 60 percent due to low water levels, resulting in massive power rationing that has seen consumers endure several hours of supply cuts.
Business has since raised concern, warning that rolling power cuts would severely erode viability.
Last week, Energy and Power Development Minister Fortune Chasi fired the Zesa board, accusing it of lukewarm response to the prevailing power shortages. Treasury sources confirmed that Zesa had submitted a proposal for support to the Ministry of Finance and Economic Development “which is still under consideration”.
Power consumers, including Government and local authorities, owe Zesa about $1,2 billion.
“As it is, Zesa will definitely require support from the Treasury in the absence of a tariff hike . . . otherwise leaving the situation as it will certainly have dire consequences,” one of the sources within the ministry told The Sunday Mail Business.
The source said coal prices had gone up from about $27 to $88 per tonne. Despite the increase, the tariff has remained at 9,8c per kilowatt hour.
While the Zesa Holdings sought a 30 percent tariff increase, Finance and Economic Development Minister Professor Mthuli Ncube warned against the move, arguing it was inflationary as it would trigger a massive wave of price increases.
“Any ill-advised sharp increase in ZESA tariff rates combined with power outages that we are already facing will be most unwelcome, and will certainly trigger another round of price increases and inflation,” the minister was quoted as saying recently.
Minister Chasi admitted the tariff had become uneconomic “and we are looking at that”, he said in an interview.
“But there are several issues that also need to be looked at such as costs containment so that the tariff is not the ultimate (reason) for inefficiencies.”
Of late, coal miners have been struggling to supply fossil fuel to Zesa due to operational constraints partly arising from subdued price.
Zesa requires about 6 000 tonnes of coal daily to fire its stations but is sometimes getting an average of 1 000 tonnes.
It is currently sitting on a stockpile of 90 000 tonnes against a strategic reserve of 300 000 tonnes.
Coal producers dilemma
The miners said the shortage of key inputs such as explosives, fuel and foreign currency to import spares was affecting production.
This is being compounded by low prices.
Makomo Resources, the country’s largest coal producer said the current US dollar price of $26,50 per tonne was last reviewed in 2011.
However, the company is selling at 88 RTGS dollars per tonne, which is not in tandem with the interbank market rate.
If it was to be priced using the interbank rate, the cost would be around $160 per tonne.
“We have engaged Government seeking to have the price of coal move in line with the prevailing rates on the interbank rate,” Makomo director Ray Mutokonyi said recently.
“Secondly, we also need the US dollar price agreed in 2011 reviewed upwards to take into consideration rising expenses such as diesel, which at the time the prices was set, was going for about US90c per litre but has since risen to US1,37c per litre.”
