17 December 2013, Harare – Zimbabwean power utility, ZESA Holdings, the custodian of government equity in the power sector, is technically insolvent and has a negative working capital, creating uncertainty in its ability to continue as a going concern.The situation could have worsened this year after government ordered the parastatal to write-off millions of dollars in electricity bills owed by consumers.
In its latest financial statement published last week for the year to December 2012, the company attributes its woes to outstanding legacy debts estimated to be in excess of US$600 million, which were not being serviced and are now treated as current liabilities.
Analysts fear that unless ZESA receives funding from government, the debt, which is part of the unresolved national debt, would weigh down the company.
ZESA’s current liabilities, which totalled US$944,9 million, far outstripped its current assets by US$479 million, implying that the company may not be able to meet its current liabilities as they fall due.
In the prior comparative period in 2011, the company recorded a negative working capital of US$505 million.
The financial statement showed that the company recorded a net operating loss of US$132,2 million in contrast to a profit of US$24 million in the previous year.
The electricity debtors book ballooned to US$785,1 million from US$650,9 million in the prior year.
However, there was a significant improvement in electricity sales, which increased to US$799,4 million from US$698,6 during the prior comparative period in 2011.
Board chairman, Simbarashe Mangwengwende, described the financial position as precarious.
“The financial position of the group continues to be weak largely due to the legacy debt,” said Mangwengwende in a commentary on the financial position.
“The group is technically insolvent because all outstanding legacy debt, which is not being serviced, is now treated as current liabilities.”
“Although we have an unqualified audit opinion on our accounts because of the letters of comfort from the shareholder, there is an emphasis of matter by the external auditors regarding the going concern status of the group due to the fact that the current assets for ZESA Holdings, ZPC, ZETDC and ZESA Enterprises are less than the companies’ current liabilities,” Mangwengwende said.
– Finacial Gazette