Inside Itezhi Tezhi Power Corporation's Financial Saga

 

In recent news, the Itezhi Tezhi Power Corporation (ITPC), an Independent Power Producer (IPP) based in Zambia, finds itself grappling with significant financial implications following a decision to write off a substantial portion of its debt owed by ZESCO, the state-owned power utility company. This move, amounting to approximately half a billion US dollars, has raised eyebrows and sparked discussions regarding the circumstances leading to such a decision.

The ITPC, a 120MW hydropower project situated in the Kafue river basin, plays a vital role in supplying power to ZESCO. However, a prolonged period of dispute and negotiation resulted in the accumulation of a staggering $780 million debt owed by ZESCO to ITPC between 2016 and 2023. This contentious issue finally reached a resolution with ITPC agreeing to write off $453 million of the receivables owed by ZESCO.

Victor Mapani, the Managing Director of ZESCO, confirmed this development, shedding light on the reduction of the debt from $784 million to $179 million after the substantial write-off and additional payments made by ZESCO totaling around $152 million over the past two years. However, questions linger regarding the circumstances leading to such a substantial debt accumulation and subsequent write-off.

Moses Mbuta, the CEO of ITPC, addressed concerns surrounding the reduction in debt, attributing it to a revised tariff structure that was renegotiated between ITPC and ZESCO. This revised tariff, backdated to the commencement of operations in 2016, significantly contributed to the reduction in debt owed. Mbuta acknowledged the possibility of mathematical and financial modeling errors that could have led to the miscalculation of tariffs and subsequent debt accrual by ZESCO.

When confronted with allegations of potential misconduct, particularly regarding overbilling, Mbuta refrained from confirming any intentional wrongdoing by ITPC or its co-shareholder, Tata Power Company. The company operates under a 25-year concession and off-take agreement with ZESCO, with Tata Africa and ZESCO each holding a 50% ownership stake in ITPC.

The situation surrounding ITPC's financial dealings underscores the complexities inherent in the energy sector, particularly in emerging markets like Zambia. While the resolution of the debt dispute provides some clarity, it also prompts a deeper examination of transparency, accountability, and regulatory oversight within the power generation and distribution landscape.

Moving forward, stakeholders, including regulatory bodies, investors, and the public, must remain vigilant in ensuring fair and equitable practices to uphold the integrity of the energy sector and safeguard the interests of all involved parties. As ITPC navigates these financial challenges, transparency and accountability must remain paramount to foster trust and sustainably drive the energy transition in Zambia.