Become blue chip- ZETDC challenged
The Zimbabwe Electricity Transmission and Distribution Company has been challenged to position itself to be a blue chip company .
Speaking during the ZETDC Annual General Meeting (AGM) held in July 2016, the Ministry of Energy and Power Development (MOEPD) Permanent Secretary, Mr Patson Mbiriri said of the 10 or so State Enterprises under his Ministry, a handful have started moving from loss making to profit making and declaring dividends.
The Permanent Secretary said, “There is need for ZETDC to move from its current position to become a blue chip company.”
Mr Mbiriri said he was delighted that ZETDC is going to implement a vehicle tracking system, which will reduce major losses through accidents, a challenge experienced by many companies and ministries in general, whose national cost is huge. He urged ZETDC to acquire more operational vehicles as the vehicle base remains thin and therefore impacts on poor reaction time to faults, resulting in poor service delivery.
“As a ministry, we are concerned about the reaction time to faults, although there is some noted improvement on how ZETDC relates to customers. There is need for the customer to be treated with respect,” he said.
Mr Mbiriri urged ZETDC to double up efforts on new connections as the figure 0f 15000+ customers connected in 2015 is too low and disheartening.
“Prepaid meters have been a positive story and the target for 600 000+ connections and the introduction of Smart Meters still remain for end of 2016,” he added.
The Perm Sec challenged ZETDC to the respond to the difficult environment in which the company is operating under and not use it as an excuse. The organisation was challenged to identify opportunities in this environment and continue doing the positive things that the Energy Sector has been doing.
Speaking at the same occasion, the ZESA Holdings Board Chairman, Dr Herbert Murerwa said, the Government is aiming to improve the economy through the development of key State owned Enterprises such as ZETDC in order to achieve the ZIMASSET Economic Bleu Print.
“ZESA Holdings appreciates the role played by ZETDC in Customer Satisfaction, despite serious concerns on system and financial losses. There is need for ZETDC to look at ways to improve these,” said the Chairman.
According to Dr Murerwa, ZESA Holdings will continue to support ZETDC as its business is capital intensive.
Addressing the same gathering, ZETDC Managing Director, Engineer Julian Chinembiri said ZETDC is implementing projects so as to manage losses. These include various Demand Side Management initiatives, installation of statistical meters, vehicle tracking and formation of Revenue Assurance Division among other initiatives.
A number of Network Reinforcement projects both at Transmission and Distribution levels are being developed using resources from DBSA, AFDB and own meagre resources.
“To expand and deepen sales, the client base is projected to expand to 691 494 through the connection of 49 349 new clients in 2016.The installed base for prepaid meters is expected to increase by 180 000 as the second phase of installation will be completed by end of 2016,” he said. This will significantly improve cash-flows and collection of outstanding amounts.
ZETDC also appreciates the efforts by the Government of Zimbabwe in engaging multi-lateral creditors to address the country’s outstanding arrears and exploring the feasibility of debt rescheduling. Successful debt rescheduling would improve the company’s working capital.
MANANGING DIRECTOR’S BRIEF: ZETDC ANNUAL GENERAL MEETING 2016
v Reliable Power Supplies
Load shedding was eliminated from December 2015 as a result of implementation of Power Purchase Agreements with Eskom and HCB.
v Management of Losses
The following projects are being implemented to manage losses:-
- Various DSM initiatives
- Installation of statistical metering
- Vehicle tracking metering
- Formation of Revenue Assurance Division. With the assistance of Ernst & Young (EY) as consultants, we have developed a ZETDC Revenue Strategy.
v A number of Network Reinforcement projects both at Transmission and Distribution levels are being developed. This is being done using resources from DBSA, AfDB and own meagre resources.
v To expand and deepen sales, the client base is projected to expand to 691 494 through the connection of 49 349 new clients in 2016.
v The installed base for prepaid meters is expected to increase by 180 000 as the second phase of installation will be completed by end of 2016. This will significantly improve cash-flows and collection of outstanding amounts.
v The billing system (ICS) and the prepayment system (3E) now have an interface that provides a single view of the client reporting.
v A project to upgrade the Design and Construction System (DCS) to the Network Development and Maintenance (NDM) system and the Incident Management System (IMS) to the Outage Management System (OMS) that commenced in late 2015 will be concluded in the third quarter of 2016.
v To improve efficiency, ZETDC has successfully transformed our depots from Cost Centres to Profit Centres.
These initiatives are meant to improve client service.
ZETDC saw a sharp decline in electricity sales due to low water levels at Kariba Power Station due to El Nino effect. Third quarter sales were most affected.
v Purchase of Electricity
- The gross profit margin went down significantly due to an increase in the average purchase price of power from suppliers.
- Traditionally Kariba Power Station has been the most significant supplier at the lowest tariff (more than 50% cheaper than the second cheapest supplier). To ensure that electricity shortages do not stand in the way of economic turnaround, ZETDC engaged various regional utilities to augment internal suppliers.
v Electricity Debtors
- Management successfully lobbied the Shareholder for an improvement in the debt recovery through the prepayment system.
- Recovery of debt improved from $3 million in 2014 to $4 million in 2015.
v Debt Restructuring
The company has been relying on short-term borrowings to cover both working capital and capital expenditure. ZETDC accessed $150 million from Afreximbank which enabled the company to move short term commitments into medium term. At the end of 2015, Afreximbank expressed willingness to advance a further $300 million for repayments of ZPC debt and other capital projects.
v Cost Control
ZETDC embarked on aggressive cost-cutting initiatives which saw a decline in expenditure. Concerted efforts were made by all stakeholders. These measures will be carried into 2016 and further increased as the liquidity crisis persists
v Capital Expenditure
The company spent $52 million to recapitalize the business in 2015 against a budget of $418 million. The company could not adequately undertake budgeted capital projects due to cash-flow constraints.
v Legacy Debt
ZETDC appreciates the efforts by the Government of Zimbabwe in engaging multi-lateral creditors to address the country’s outstanding arrears and exploring the feasibility of debt rescheduling. Successful debt rescheduling would improve the company’s working capital.
The Company Operated in a stable environment in 2015 though we had a carry-over of some issues that need finalization in the first half of 2016. Directorate and Management entered 2016 with aggression to make ZETDC achieve set targets that will enhance business performance and employee motivation.
From 1 January 2016, Directorate embarked on strategic human resources issues that should be completed by year end:
v Culture Change Initiative
This process started after realization of the gap between strategy formulated and implementation. Stage one of the process was completed by end of quarter one wherein an analysis of current work culture was done. Report back sessions were completed and we are now planning for second stage for Culture Change Strategy formulation and implementation.
v Restructuring Initiative
The current Organizational Structures were crafted in 2006 yet technology and business processes have not remained static. To that end we are currently working on structures that are in tandem with the current business strategy. The process is planned to be completed by end of quarter three. This should see a staff establishment reduction by plus or minus 10 % to enable financial resources to be channeled towards projects that assist in business sustenance.
v Performance Management
ZETDC embraced in full the utilization of the Integrated Results Based Management in 2015. It our quest to achieve the targets set in the ZIMASSET Blue Print, we commit ourselves to close the gaps identified during the first year of implementation. Of interest to note is the clear understanding by employees of the performance management system in the realization of National Targets in the Infrastructure and Utilities Cluster by 2018.
v Staff Training and Development
-Gaps were identified amongst Engineers and Technicians against the requirements from the Engineering Council of Zimbabwe. ZETDC has committed itself to sponsor affected employees for staff retention and meeting statutory requirements.
In conclusion, I would like to thank our parent Ministry, the Board and ZESA Holdings for the continued support throughout the year.
I also thank my colleagues in ZETDC Directorate, Executive Management and ZETDC Staff for their resilience and hard work in 2015.