State power utility ZESCO has agreed in international arbitration in London to pay Maamba Collieries Ltd $518 million by August to settle arrears outstanding arrears for power supplied.
Maamba through its parent company Nava has been pursuing international arbitration against ZESCO for outstanding debt.
The arbitral tribunal has issued a consent award, and as per the award, ZESCO shall, by August 2023, discharge the outstanding and overdue arrears aggregating to about $518 million.
“This is a consent award issued by an international arbitration tribunal based in London,” Sultan Baig, chief financial officer at Nava.
This award means that both the parties, Maamba Collieries and ZESCO, have agreed on bilateral terms on how the debt will be disposed of over the next course.
According to the settlement agreement, the money due to Maamba will come in tranches.
As per the Consent Award, ZESCO shall, by August 2023, discharge the outstanding and overdue arrears aggregating to about $518 million as at 31st October 2022 after adjusting for a cash discount of $60 million, extended by Maamba.
As part of the award, ZESCO is mandated to discharge the VAT liability of about $70 million forming part of the total arrears directly to the government.
The Consent Award is an international award for all purposes and validates the long-standing arrears from ZESCO.
The settlement has been reached in an amicable manner to address the overdue power purchase bills while the monthly payments for power sales from May 2022 are being realized in full.
“ZESCO has agreed that the entire money will be settled towards the end of August 2023. It will come to a designated escrow account. Out of this $518 million of outstanding receivables, about $70 million will go towards the payment liabilities of the government of Zambia. “From the balance, over $220 million will go for the repayment of the outstanding overdue principal amount to the lenders. Balance amount will be available with the company and the board will take a suitable decision when the right time comes for the utilization of this fund,” he explained.
The balance overdue receivable will be $227 million, which is net of tax.