Zesco won't list on LuSE
Zesco won't list on LuSEBy Kabanda Chulu
Tuesday November 06, 2007 [11:05]
Zesco Limited will not list at the Lusaka Stock Exchange (LuSE) because it is an expensive undertaking. According to Zesco Limited senior manager for public relations, Monica Chisela the company does not intend to raise funds from the stock market because they have been advised that it was expensive.
“Various options are being considered to raise funds for the company but our officers from the financial department have indicated that it is expensive to list and raise money through the capital markets at LuSE,” said Chisela.
But LuSE officials have argued that instead of increasing electricity tariffs, Zesco should find alternative means of raising funds.
The analysts observed that many institutions and companies were raising funds through the capital markets at LuSE through issuance of bonds.
They stated that Lafarge Cement Zambia recently issued a bond to raise K200 billion to fund the ongoing expansion projects and the Development Bank of Zambia has also issued a K150 billion bond medium term note programme whose proceeds would be utilised to fund the increase in loan asset book and other corporate purposes.
Other examples cited included the bond issuance by Investrust Bank to raise K100 billion for expansion of the branch network and other capital projects and the rights offer which Farmers House successfully conducted to raise US $10 million for the construction of an office complex in the show grounds.
Zesco is proposing to increase electricity tariffs by 60 per cent for both domestic and commercial consumers pending approval from the Energy Regulation Board (ERB).
And Energy Minister Kenneth Konga refused to comment on the issue of Zesco raising funds at LuSE, but added electricity tariffs being paid at the moment are not commensurate with production costs.
“This position of low tariffs is not attracting new investment into the sector despite the country having several sites that can be developed into Hydro electric power generation hence the need for upward adjustment of tariffs to sustain the sector and its production,” said Konga.
“On that issue of raising funds at LuSE we cannot comment because Zesco is a legal entity with an independent board and management, which decides what the company should.”
However, sources at LuSE stated that Zesco’s reasons for not listing or issuing out bonds to raise funds was not true because raising funds through the capital markets was cheaper, transparent and is the most effective way of raising funds.
Speaking recently, Zesco Limited managing director Rodney Sisala said the current load shedding was as a result of inadequate investment in infrastructure.
Sisala said upward adjustment to the current electricity tariffs could help the power utility finance some of its huge projects for efficient and quality supply of electricity in the country.
And a business consultant Jones Kalyongwe said investments in infrastructure for power generation should be made if that was the immediate solution to current power deficits the country was experiencing.
"In order to guard the economic life of Zambia, there is need to find a solution to the problem of power shortages by investing heavily in this sector and I don't think increasing electricity tariffs will be the best way to generate resources to fund Zesco's projects,” said Kalyongwe.
Zesco limited currently generates around 1,200 mega watts of electricity against a peak demand of over 1,400 mega watts, meaning the power utility has to either import the deficit of about 250 mega watts or carry out load shedding in order to stabilise the system.
Rehabilitation works and up-rating of Zesco's major equipment was being undertaken with the aim of increasing installed capacity from the current 1,670 mega watts to close to 1,900 mega watts at the end of the projects in 2009.
posted by MrK @ 12:25 PM
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