Nam-Zim power loan 'written off'

NamPower's annual report shows that its profits dropped by 18 per cent and stood at N$119,3 million at June 30 2007 compared to N$146,3 million the previous year, 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 states.

"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)," it adds.

According to standard definition, a loan is impaired when "it is probable that the creditor will be unable to collect all the amounts due according to the contractual terms of the loan agreement".

NamPower originally signed a total loan of US$40 million (about N$280 million) and added another US$10 million at the end of 2007 to fix up Hwange.

In return, Namibia would receive 150 megawatts of electricity for a minimum of five years starting January this year as part of a power purchasing agreement with Zetco's holding company, Zimbabwe Electricity Supply Authority (Zesa).

On page 71 of the annual report, NamPower said the N$280 million loan to Zetco carried an interest rate of 6,25 per cent.

"The NamPower management and board are very confident on the realisation of the (power purchasing) agreement.

However, due to the prevailing economic conditions in Zimbabwe it had been decided to impair the loan."

It is not stated in the just-released report, but it appears as if the cash repayment of the loan will not take place, but that the 'repayment' might be done in the form of electricity instead.

Source : http://www.namibian.com.na