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EDM power purchase deal close

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Radar Holding Limited says a deal by the local timber industry to import power from Electricadade de Mozambique (EDM) and wheel it through Zesa’s transmission subsidiary has reached an “advanced stage”, and should soon sail through as parties involved are close to agreeing on a price.

A source suggested EDM may charge five cents per kilowatt-hour for the load-flow, while the Zimbabwe Electricity Transmission and Distribution Company (ZETDC) would set its wheeling charge at three cents per kilowatt-hour, which would bring the landed cost at eight cents per kilowatt-hour.

Zimbabwe’s timber producers approached EDM — a stand-by, hydro-plant fired by Chikamba Dam in western Mozambique — with an offer to import 40MW to head off crippling unscheduled power outages.

“Negotiations with the ZETDC on direct power imports from Electricadade de Mozambique (EDM) to Manicaland are at an advanced stage. Should this initiative be successful, the impact thereof on production costs and production output would be positive,” Elias Hwenga, Radar’s group’s managing director, said.

“A price from Mozambique and Zesa is still being worked on so that the power will be available.

Mozambique has excess power to give to us but there are still administrative issues to be finalised.

Radar, which operates Border Timbers in Manicaland, is one of the companies that signed up for the independent power purchase deal.

The company says the plan would increase output at the two firms and cut costs arising from the frequent use of stand-by generator power to reduce production downtimes.

Hwenga said power outages impacted negatively on Radar’s performance in the first half of the year, interrupting production, paring operating margins and damaging machinery.

Overall, Radar’s turnover increased 123% to $24,8 million during the six-month period from $11,1 million last year, as timber and brick businesses increased output.

However, operating margins were depressed due to high operating costs driven by high wage and power costs.

EBITDA recovered to $4,5 million from a loss position of $74 512 the year before.

The group incurred $2 million for repairs and maintenance in MacDonald Bricks and Border Timbers, which resulted in improved availability of machinery in the company’s sawmills and at MacDonald’s Bricks.

“The bulk of expenses on repairs and maintenance is attributable to work that accumulated over the period of hyperinflation during which your company had to deal with land invasions, arson and price controls, “the group said.

Total assets for the group stood at $159 million.

The capital expenditure for the group amounted to $4,4 million that was financed from short- term facilities from banks, that the group would be retiring the debts in the next two years.

Of the total capital expenditure, $1,9 million was targeted for plantation development while $2,5 million was for property, plant and equipment. The group would be rolling out a major asset replacement programme in the next three years.

Looking forward, the group is expecting to have a sustainable political settlement based on reducing costs of finance, improving assets position by appropriately financing capital expenditure and increasing growth in sales.

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