Itezhi Tezhi Power Corporation – ITPC, an Independent Power Producer – IPP is on the verge of suffering serious financial losses after the power-generating corporation agreed to write off about half a billion United States dollars’ receivables from ZESCO after a protracted period of dispute, negotiation, and final arbitration.
Itezhi Tezhi Power Corporation – ITPC is a 120MW hydropower project located in the Kafue river basin in Southern, Zambia and currently supplying power to ZESCO.
ITPC’s debt with ZESCO had been allowed to accumulate to over $780 million from 2016 to 2022 due to the reluctance and dispute by the state-owned power utility Company – ZESCO to settle the bill.
According to the statement issued by ZESCO Managing Director Victor Mapani, ITPC has since agreed to write off the receivables of close to half a billion US dollars ($453 million dollars) a situation which has raised suspicion that Tata Power Company (the co-shareholder) may have deliberately and corruptly tried to over bill the public utility ZESCO as there has been no justification as to how this huge debt was allowed to continue to grow over a period of about 7 years.
This means that the amount of debt owed by ZESCO to ITPC has been slashed down from $784 million to now only $179 million after the writing off of the whooping $453 million as well as an additional payment of about $152 million by ZESCO to ITPC in the last two years.
Speaking in an exclusive interview with the Zambian Business Times – ZBT, ITPC Chief Executive Officer – CEO Moses Mbuta, however, highlighted that the reduction in the amount in question is a result of the revised tariff which was backdated to the time when they started supplying power to ZESCO.
He confirmed that there has indeed been a reduction in the debt owed by ZESCO admitting that there were some mathematical and business financial modeling errors that could have resulted in the miscalculation of tariffs and subsequently the total debt accrued by ZESCO.
“Yes there is that reduction and it can be attributed to two things, the first is that the tariffs were renegotiated between ZESCO and ITPC as the independent power producer, so the tariff was reduced and that reduction was back-dated to the commencement of operation date – COD which was in 2016.”
“So that entails that just by that reduction in tariff, [overall] debt was reduced and ZESCO has been servicing and has made some payments to that debt so that also caused the reduction.”
“That difference [of $453m] is because the reduction in tariff was back-dated from the time that we started selling power to ZESCO so that difference between the earlier tariff and the revised tariff is what gives you approximately that amount. The other term is to write it off but in our case, we say re-stating the account so we went back in time to 2016 and started re-invoicing using the revised tariff so that was automatic by virtual of that.” Remarked Mbuta.
When put to him that there are allegations that Tata Power and ITPC may have attempted to defraud ZESCO and Zambians since it’s a public utility? Mbuta could not confirm if ITPC was using tricks to overcharge the power utility Company – ZESCO a situation which could have led to the loss of over $453 million in debt from ZESCO which ITPC has now let go.
ITPC is 50% owned by Tata Africa and 50% by ZESCO. The company has a 25-year concession and off-take agreement with ZESCO. More details to follow…
