Sable Chemicals in US$7 million loss

Business
BY BLESSED MHLANGA KWEKWE — Zimbabwe’s sole ammonium nitrate fertiliser producer Sable Chemicals says it is likely to record over US$7 million in losses this year if the Zimbabwe Electricity Supply Authority does not slash its tariffs.

The company, which is currently operating at 43% of its capacity utilisation told the Parliamentary Portfolio Committee on Agriculture, Water and Lands Resettlement Zesa tarrifs were unsustainable.

Zesa charges the company US4, 5c per kilowatt-hour while Sable wants them reduced to US3c per kwh saying the current charges mean the power bill alone accounts for 57,66% of its operational costs.

The company, which has the largest electrolysis plant in the world consumes 115 megawatts of electricity per month.

“We have been making losses and if the tariffs are not reviewed then this whole investment could collapse,” Misheck Kachere, the deputy chairman of the Sable board told the visiting parliamentarians.

“When you make losses as is the case, refurbishment of the plant is neglected and investors tend to disinvest and we don’t want that to happen.”

In early January Zesa pulled the plug on Sable over a debt which was hovering over US$22 million, which the company is struggling to pay. Kachere confirmed that they were still behind in paying their bills.

“We have good relations with Zesa. At that time we were faced with cashflow challenges and had not paid according to our payment plan but we are paying our bill,” he said.

Sable management told the committee that they wanted a power supply subsidy to run for three years by which time they would have invested an estimated US$200 million in building a coal gasification plant which would subsitute the electrolysis plant.

Technical services manager Allen Manhaga said the plant would use coal instead of electricity which has now proved to be very expensive to produce in most developing countries.

He said a feasibility study had already been commissioned and that construction of the new plant would take three years. Sable Chemicals will also expand its current production capacity when the gasification plant is commissioned.

“Normally it takes about five years to build such a plant but we have the capacity to do it in three years and finish everything by December 2013 at which time we will release the 100MW to the national grid,” Manhanga said.