State power utility ZESCO Limited (ZESCO) has received a $100 million World Bank grant to improve its financial and operational position.
The funds make up the first phase of the Bank’s $700 million Zambia National Energy Advancement and Transformation (NEAT) program, designed to increase the financial sustainability, operational reliability, and resilience of the electricity sector in Zambia.
It’s the World Bank’s first energy project in Zambia since 2018.
World Bank Country Director Mr. Nathan Belete and Minister of Finance and National Planning Dr. Situmbeko Musokotwane signed for the program’s phase 1 today, which will be implemented between 2024 and 2026.
Belete explained that the 1-year NEAT program is designed to increase the financial sustainability, operational reliability, and resilience of Zambia’s electricity sector.
Musokotwane said the facility will support ZESCO in managing its debt and arrears and assist the utility in optimizing operational costs. The grid connection subsidy aspect of the grant will help reduce the upfront cost of connecting new customers.
The minister said the program will also support the establishment of the Rural Electrification Fund to catalyze the electrification of rural communities.
The Ministry of Finance first announced the Bank’s approval of the disbursement of the $100 million grant and the NEAT program on May 17, describing it as a clear demonstration of the confidence that the World Bank has in Zambia’s home-grown strategic reforms, and in the country’s recently strengthened public financial governance credentials, among other factors.
“The World Bank’s approval of the NEAT Programme is timely because it will deliver an immediate financial boost to ZESCO and support the procurement process for non-hydropower renewables at this critical time when Zambia is experiencing an extensive drought. In the long run, the NEAT program will facilitate ZESCO’s return to financial sustainability, reduce its fiscal burden, attract private sector investment to enable new growth, and deliver more inclusive electrification and broader development countrywide.”
In addition to supporting the implementation of the ZESCO and Rural Electrification Authority (REA) strategic plans, the program will also cater to the energy sector Integrated Resource Plan.
For ZESCO, the grant will be channeled towards improving its operational and financial performance and supporting the implementation of its 10-year turnaround strategy and business plan, which aims to return the utility to profitability while meeting growing demand by expanding revenue-generating initiatives across the key operational and financial segments.
In REA’s case, the grant will be channeled towards operationalizing the Rural Electrification Fund, which will ensure the financial sustainability of capital expenditures for social objectives while increasing energy access for the country’s outlying areas.
The NEAT program is expected to further augment the Government’s efforts to enhance the electricity sector’s reliability and climate resilience by supporting the implementation of ZESCO’s strategy for improved customer management, reliability of supply, and system resilience.
