Zesa secures $150m in debt-for-cash swap deal
Debt factoring is a form of commercial finance which allows a business to sell its debtors (accounts receivable) to a third party in return for an immediate cash advance.
“The transaction is on the back of cash flow streams guaranteed by revenues from customers on prepaid (meters) and Zesa will use the money to pay its creditors including suppliers to re-establish good commercial relationships,” said one source.
The suppliers are mostly regional power producers from which Zesa imports power to boost local supplies.
Zimbabwe’s power plants produce an average 1 200 megawatts, about half of its peak demand, and is minimising power shortages through imports from the region.
The facility is priced at 8 percent per annum over five years. Zesa is expected to start draw- downs “anytime soon”, another source said, adding that “this will also enable the company to enjoy the present value of the cash”.
No comment could be obtained from Zesa chief executive Engineer Josh Chifamba yesterday as he was said to be out of the country. But in an interview last week, he hinted that the power utility had, on the back of prepaid income, successfully raised “substantial money” from a regional financial institution against its debtors’ book.
Eng Chifamba also said Zesa was moving towards putting all customers on the prepaid metering system to improve revenue inflows. About 42 percent of Zesa’s income comes from customers on prepaid meters and plans are underway to grow it to 70 percent in first half of 2016, he added.
Recently, Zesa reached an agreement with ferrochrome producers to go on prepaid meters.
Zesa has also gone on prepaid arrangement for power imports from Mozambique where it is purchasing about 50 megawatts. As such, economic analysts say it was time Zesa grow its prepaid revenue considering that it is also paying for imports in advance.
“Despite increased revenues inflows from domestic customers, it is critical that all customers, domestic and commercial, are put on prepaid meters.
“This will help guarantee imports while at the same time ensuring the company generates enough revenue for its capital projects as well as putting the company in a stronger position to attract debt capital from local, regional and international markets,” said one analyst.