Namibian consumer to foot N$270 m bill for Zim loan

A MULTI-MILLION-DOLLAR loan to Zimbabwe’s electricity utility nearly a year ago, which was noted as “impaired” by auditors in NamPower’s recent annual report, was not written off, says NamPower Managing Director Paulinus Shilamba.

Zimbabwe would not repay the loan with money, but with electricity supply from its Hwange power station in western Zimbabwe to Namibia, Shilamba told a media briefing in Windhoek on Friday. “The Zimbabwean Electricity Supply Authority (Zesa) will pay the loan back with electricity, there is no money involved,” Shilamba said.However, NamPower will still pay for that electricity.”The redemption of the loan with energy is the only option that we agreed upon,” Shilamba said.This detail was however not conveyed to the media at the loan signing ceremony at State House in 2007, or in the joint communiqué issued afterwards.He also revealed on Friday that NamPower had concluded a second agreement with Zesa last year, under which NamPower would buy the electricity generated at the Hwange power station “as loan repayment”.The US$40 million loan (about N$270 million), which came from NamPower’s cash reserves of N$2 billion, was granted during a state visit by Zimbabwean President Robert Mugabe to Namibia in February 2007 and sparked a lot of debate and criticism.Mozambique last week stopped its power supply to Zimbabwe because it failed to pay arrears running into millions of US dollars.South Africa also stopped exporting electricity to Zimbabwe recently, but said it was because of a severe power shortage at home (see also page 7).Hwange has four turbines, which will be overhauled with the N$270 million loan.The first one was refurbished at the end of last year and started generating 40 megawatts (MW) of electricity on January 3 this year.Once all four turbines at Hwange on the Zambezi River are overhauled by September 2008, it should generate 330 MW of electricity and Namibia will receive 150 MW of that for five years “at a competitive price”.As the N$3 billion interconnector power line to connect the Caprivi Region to the rest of Namibia’s power grid and also to Zambia and Zimbabwe will only be completed in 2009, the electricity now coming from Hwange must flow through Botswana and South Africa to Namibia until then.NamPower will also therefore pay for the transmission of the electricity coming from Hwange, “at a tariff”, Shilamba said.The long distance the electricity has to travel comes with what experts call a transmission loss, meaning that not all of it will reach the other end.Asked what the transmission loss from Hwange would be, Reiner Jagau, General Manager for power system development at NamPower, said it was “higher than 10 per cent”.On the issue of the loan impairment, which is done when it is probable that the creditor will be unable to collect all the money due according to the contractual terms of the loan agreement, the NamPower MD said this was not the same as writing off a loan.”NamPower’s financial year ended June 30 2007 and by then there was no electricity coming from Hwange in Zimbabwe yet as repayment.Our auditors insisted as a result that the US$40 million loan should be recorded as impaired,” Shilamba said.According to NamPower’s annual report, which was published earlier this month, its profits decreased by 18 per cent and stood at N$119,3 million at June 30 2007 compared to N$146,3 million the year before, despite a 17 per cent increase in electricity sales, which amounted to N$1,1 billion.”Included in the cost is the impairment of the loan that was made to the Zimbabwe Electricity and Transmission Company (Zetco) for the refurbishment of the Hwange coal-fired power station,” the annual report stated.”The impairment was occasioned by the volatile economic and political climate experienced in Zimbabwe.The amount advanced as at (financial) year end was N$27 million (of the total loan),” according to the report.”The Zimbabwean Electricity Supply Authority (Zesa) will pay the loan back with electricity, there is no money involved,” Shilamba said. However, NamPower will still pay for that electricity.”The redemption of the loan with energy is the only option that we agreed upon,” Shilamba said.This detail was however not conveyed to the media at the loan signing ceremony at State House in 2007, or in the joint communiqué issued afterwards.He also revealed on Friday that NamPower had concluded a second agreement with Zesa last year, under which NamPower would buy the electricity generated at the Hwange power station “as loan repayment”.The US$40 million loan (about N$270 million), which came from NamPower’s cash reserves of N$2 billion, was granted during a state visit by Zimbabwean President Robert Mugabe to Namibia in February 2007 and sparked a lot of debate and criticism.Mozambique last week stopped its power supply to Zimbabwe because it failed to pay arrears running into millions of US dollars.South Africa also stopped exporting electricity to Zimbabwe recently, but said it was because of a severe power shortage at home (see also page 7).Hwange has four turbines, which will be overhauled with the N$270 million loan.The first one was refurbished at the end of last year and started generating 40 megawatts (MW) of electricity on January 3 this year.Once all four turbines at Hwange on the Zambezi River are overhauled by September 2008, it should generate 330 MW of electricity and Namibia will receive 150 MW of that for five years “at a competitive price”.As the N$3 billion interconnector power line to connect the Caprivi Region to the rest of Namibia’s power grid and also to Zambia and Zimbabwe will only be completed in 2009, the electricity now coming from Hwange must flow through Botswana and South Africa to Namibia until then.NamPower will also therefore pay for the transmission of the electricity coming from Hwange, “at a tariff”, Shilamba said.The long distance the electricity has to travel comes with what experts call a transmission loss, meaning that not all of it will reach the other end.Asked what the transmission loss from Hwange would be, Reiner Jagau, General Manager for power system development at NamPower, said it was “higher than 10 per cent”.On the issue of the loan impairment, which is done when it is probable that the creditor will be unable to collect all the money due according to the contractual terms of the loan agreement, the NamPower MD said this was not the same as writing off a loan.”NamPower’s financial year ended June 30 2007 and by then there was no electricity coming from Hwange in Zimbabwe yet as repayment.Our auditors insisted as a result that the US$40 million loan should be recorded as impaired,” Shilamba said.According to NamPower’s annual report, which was published earlier this month, its profits decreased by 18 per cent and stood at N$119,3 million at June 30 2007 compared to N$146,3 million the year before, despite a 17 per cent increase in electricity sales, which amounted to N$1,1 billion.”Included in the cost is the impairment of the loan that was made to the Zimbabwe Electricity and Transmission Company (Zetco) for the refurbishment of the Hwange coal-fired power station,” the annual report stated.”The impairment was occasioned by the volatile economic and political climate experienced in Zimbabwe.The amount advanced as at (financial) year end was N$27 million (of the total loan),” according to the report.

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