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EEC SETTLES E212M LOAN

06/01/2021 00:53:00 BY ASHMOND NZIMA

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MBABANE - EEC is celebrating the settlement of a E212 million Mozambique Transmission Company (MOTRACO) equity loan with the European Investment Bank (EIB).

EEC is the Eswatini Electricity Company. In the 2019/20 annual report, one of the significant milestones in the reporting period, according to now former Chairman S’thofeni Ginindza, was the settlement of the loan.

On the July 15, 1999, EEC had signed a loan agreement with the EIB to partly finance (75 per cent) the acquisition of a 33 per cent stake in the equity of MOTRACO; a joint venture between Electricidade de Moçambique (EDM), EEC and Eskom of South Africa.

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The loan amount advanced to EEC by EIB was €8.2 million (E149.50 million in yesterday’s exchange rate) repayable in the form of a bullet payment on maturity.

“We managed to accumulate more than what we were to pay to liquidate the debt, and thus we retained a E150 million surplus, which we re-invested in the business.

We are realising the fruits of this investment as our share of MOTRACO profits increased from E49 million in 2019 to E59 million, while the net income was E40 million against E6 million in 2019,” reported Ginindza.

During the year under review, the MOTRACO Joint Venture company is said to have declared a seventh dividend.

The company’s net share of the dividends was US$ 2.4 million (E36 264 720), (2018: US$ 2.4 million (E31 768 320)), after deducting 20 per cent withholding tax according to the Mozambican tax code.

According to the report, the company performed well during the financial year ended March 31, 2020, despite not being granted a tariff increase and a stagnant economy. Profit for the year stood at E438 million compared to E650 million in 2019.

“EEC is in a strong financial position, with assets valued at E4.5 billion as a result of a number of capital projects implemented as part of our network improvements and quest for increased internal generation,” reads the report. EEC, according to the report, was able to close the financial year with a positive cash balance of E241 million. This was, however, a huge decline from the prior year closing cash position of E808 million.

Decline

“This decline in the cash holding has been some of the effects of the tariff freeze, coupled with the implementation of the company’s planned major projects.

The company remains profitable and also shows a higher asset base because of the capital infrastructure that is completed every year whereby new customers are connected to the network,” reported EEC.

Meanwhile, EEC recorded a decline in capital projects spending during the period under review.

Spending on capital projects during the year amounted to E241 million (2019: E267 million). Most of the capital projects were to improve the distribution network.

At E142 million (2019: E182 million) of total capital project expenditure was funded by customers and grants.

One particular project of note is the 10MW Solar Photo Voltaic (PV) Power Plant ,whose construction commenced in June 2019.

This will be the first PV plant to be owned and operated by EEC and the first utility scale solar PV in the country.

“The commercial operation of the project was negatively impacted by delays due to the COVID-19 pandemic lockdown in March 2020,” highlighted the report.

In the year under review, sales revenue generated, on the other hand, amounted to E2.4 billion compared to E2.3 billion in 2018/2019. Large customers are said to have contributed 54 per cent to the total revenue generated compared to 58 in the previous year. Small commercial and domestic customers contributed 27 and four per cent, respectively.

“The average contribution per major customer grew by 40 per cent showing that they were the significant drivers of the units/revenue growth notwithstanding that they were less than 1 000 , 17 000 small commercial, and 216 000 domestic.

“The average revenue for domestic continued to decline because of increased rural connection,” shared the company. When it comes to generation, the constant changes in weather patterns have an effect on our hydro generation on a yearly-basis. In this reporting period the overall performance of internal generation, according to EEC, decreased due to less favourable rain conditions.

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Internal generation stood at 227 Gigawatt hours (GWh) representing 17 per cent of total units sent out, a decrease from the previous year’s figure (266 GWh) of 14.7 per cent. In essence, EEC had to import more, which increased their costs of power purchase, which were 1 043.8 GWh (2019: 941.7 GWh). The total cost of these power purchases was E1.195 billion (2019: E977 million) including wheeling charges.

The system maximum demand increased from 237.58 Megawatts (MW) to 245.117MW. This represents an increase of three per cent compared to the previous year. The major contributing factor for the increase in demand is still driven by the growth of domestic customers and agricultural activities.