By OLIVER SAMBOKO
ZESCO made a loss of over US$1 billion from the Power Purchase Agreements it entered into with Independent Power Producers (IPPs), the 2020 Auditor General’s report on parastatals has revealed.
The report revealed that during the period under review, Zesco Limited procured power from IPPs at higher rates which it sold to customers cheaply.
The report revealed that Zesco bought 6, 749, 524, 592.28 kWh of electricity from 11 domestic PPA customers at costs amounting to US$1, 781, 302, 250.84 which were sold for US$402, 324, 247.61 resulting in a loss of US$1, 378, 978, 003.22.
Zesco’s profit before tax decreased by K4, 971, 054, 000 from K19, 595, 000 in 2015 to a loss of K4, 990, 649, 000 in 2019.
The report indicated that although the company recorded profits after tax of K1, 308, 639, 000; K345, 567, 000 and K1, 560, 679, 000 in 2016, 2017and 2018 respectively, these profits were due to tax credits awarded to the company.
According to Zesco Corporate Strategy of 2018 to 2025, the recommended net profit margin was pegged at 10 percent but the analysis of the financial statements for the period under review, revealed that the net profit margin was below the recommended target as it ranged from one percent in 2015 to negative 43 percent in 2019.
The AG report said the recording of net profit margin below the target during the period under review was attributed to high administrative and other expenses.
The audit also revealed that 50 percent of the power that was supplied by Zesco Limited was procured through Power Purchase Agreements with the IPPs.
During the period under review, the audit revealed that Zesco Limited entered into five different categories of PPAs for Domestic Bulk/Power Supply Agreements.
Zesco also during the same period under review, entered into 10 Domestic Bulk/Power Supply Agreements whose tariffs were to be escalated annually using United States Producer Price Index.
The IPPs accounts for over 20 percent of power generation to the national grid.
