ZESCO Limited is seeking for options from non-traditional sources of funding to raise US$2 billion for its five-year financing plan.
Meanwhile, the power utility is restructuring its balance sheet to support the level of debt, once the firm decides to issue a bond or float shares on the capital market.
Company senior manager for financing and analysis Wezi Gondwe said Zesco is aggressively pursuing a project financing plan which is expected to run for the next 4-5 years.
“Over the next four to five years at least until 2017, we are pursuing a programme that entails a total capital outlay of almost US$2 billion.
“This is a very robust funding plan and so what we are doing is shifting away from our more traditional way of funding approach where the firm depends a lot on bilateral arrangements,” he said.
Mr Gondwe said in an interview in Lusaka on Tuesday night.
Zesco has an expenditure of about US$1 billion on generation projects which does not include huge projects such as Kafue Gorge Lower hydro project which is going to be funded on special purpose vehicle.
Mr Gondwe said certain small and medium-sized hydro projects are going to be financed on the balance sheet of Zesco.
The firm has a further US$500 million into transmission projects and another US$500 million into distribution and supply projects making it a large portfolio of projects that will absorb the US$2 billion once it is raised.
He said the firm is developing a long- term financing plan which could involve at some point sourcing funding from the capital markets while at the same time looking at funding projects within special purpose vehicles away from the balance sheet.
“Our plan will comprise a mix of sources from various traditional sources, the DFIs [Development Finance Institutions], from vendors, debt and equity capital market,” he said.
Mr Gondwe was, however, quick to point out that issuing a bond is not an immediate alternative although it will be considered down the road.
Commenting on the firm’s balance sheet, Mr Wezi said it has certain structural inefficiencies that need to be rectified, mainly in light of the aggressive capital outlay that the company has embarked on.
“To raise that amount of money [US$2 billion], we need a balance sheet that can support that level of debt and cash flow as well. That is where the issue of tariffs comes in. It is not a balance sheet that services debt, it is cash that services debt,” he said.
Mr Gondwe said the firm is currently changing the financing approach by restructuring the balance sheet with a thought of capital market.
“We have many ways in which we are managing to raise resources and when we are ready to go to the market we will take that step having done all the internal preparatory work and gone through the whole process with stakeholders and shareholders,” he said.
Zambia Daily Mail