THE Auditor General’s on the Accounts of Parastatal Bodies and other Statutory Institutions for the financial year ended 31st December 2019 has revealed that Zesco Limited owed local and cross border power suppliers in amounts totalling $797,902,517.54 as at 31st December 2020.

And the Report revealed that Zesco had wastefully paid $70,059,280.65 to domestic and cross border suppliers due to failure to adhere to Power Purchase Agreements PPAs.

Meanwhile, the report revealed that Zesco Limited’s profit before tax decreased by K4,971,054,000 from a profit of K19,595,000 in 2015 to a loss of K4,990,649,000 in 2019.

The Report stated that the over $797 million owed to domestic and cross border suppliers had been outstanding for periods ranging from 366 days to 1,767 days.

“A review of financial records and creditors ledgers for the period under review revealed that Zesco Limited owed it’s local and cross border power suppliers amounts totalling US$797,902,517.54 as at 31st December 2020, which have been outstanding for periods ranging from 366 days to 1,767 days,” the report read.

The Report revealed that the power utility company had paid over $70 million to domestic and cross border power suppliers due to failure to adhere to the power purchase agreements.

The contracts included Electricidade de Mozambique, Nampower Pty Limited of Namibia, Eskom of South Africa, Itezhi Tezhi Power Corporation, Lunsemfwa Hydro Power Company Limited, Maamba Collieries and Ndola Energy Company.

“Contrary to the agreements, Zesco Limited delayed in making payments during the period under review resulting in accumulated penalty charges of US$70,059,280.65 as at 31st December 2020 on invoices which had been settled. The payment of the US$70,059,280.65 in respect of penalty charges that had been outstanding for periods ranging from 56 to 1,189 days was wasteful as it could have been avoided by adhering to agreements,” the report read.

The Report also stated that Power Supply Agreements customers owed Zesco $520,647,237.58.

The Report also stated that the power utility company made losses of $1,781,302,250.84 because it purchased electricity from Independent Power Producers at higher rates than it sold to its customers.

“During the period under review, Zesco Limited sold a total of 31,285,919,187.17kWh of electricity to six (6) bulk customers which generated revenue in amounts totalling at US$1,945,863,222.85. However, the cost of sales was US$2,285,845,474.47 resulting in a loss of US$339,982,251.62 as the cost of producing the electricity per kWh (i.e own generation blended with purchases from Independent Power Producers) was higher than the individual tariffs at which Zesco Limited was selling this electricity to its customer,” the report read.

“A review of Local Power Purchase Agreements for the period under review revealed that Zesco Limited procured power (electricity) from Independent Power Producers at higher rates or tariffs than it sold to its customers. In this regard, the Corporation purchased a total of 6,749,524,592.28 kWh of electricity from eleven (11) domestic PPA customers at costs amounting to US$1,781,302,250.84 which were sold at a total of US$402,324,247.61 resulting in a loss of US$1,378,978,003.22.”

The Report stated that Zesco’s current liabilities exceeded its current assets.

The current ratio is a liquidity ratio that measures an entity’s ability to pay short-term obligations or those due within one year. It is calculated by comparing an entity’s current assets to its current liabilities. The generally acceptable ratio is 2:1.

“During the period under review, Zesco Limited’s current liabilities exceeded current assets resulting in current ratios that were less than one except in 2015, which indicates that the company was unable to meet its short-term obligations as they fell due. The low current ratio was due to increase in payables. The payables increased by K12,616,231,000 from K1,454,185,000 in 2015 to K14,070,416,000 in 2019 representing a percentage increase of 868 percent.”

The Report stated that Zesco’s profit base decreased by K4,971,054,000 from a profit of K19,595,000 in 2015 to a loss of K4,990,649,000 in 2019.

“During the period under review, Zesco Limited’s profit before tax decreased by K4,971,054,000 from a profit of K19,595,000 in 2015 to a loss of K4,990,649,000 in 2019. Although the company recorded profits after tax of K1,308,639,000; K345,567,000 and K1,560,679,000 in 2016, 2017 and 2018 respectively, these profits were due to tax credits awarded to the company,” stated the Report.