17 January 2008 – The loan made by NamPower to Zesa, for the repair and refurbishment of the Hwange power station has effectively been written off, it is reported from Windhoek.
In the NamPower Annual Report, profits were shown to have dropped by 18%, despite an increase of 17% in electricity sales.
"Included in the cost is the impairment of the loan that was made to the Zimbabwe Electricity and Transmission Company (Zetco) for the refurbishment of the Hwange coal-fired power station," it says in the annual report.
"The impairment was occasioned by the volatile economic and political climate experienced in Zimbabwe."
According to standard definition, a loan is impaired when "it is probable that the creditor will be unable to collect all the amounts due according to the contractual terms of the loan agreement".
A total loan of US$50 million was made to Zimbabwe. In return, Namibia would benefit by receiving 150MW of electricity as of January 2008 for a minimum of five years. The loan made to Zimbabwe carried an interest rate of 6.25%.
However, given the prevailing economic conditions in Zimbabwe, the decision was made to impair the loan.
It has been speculated that while no cash may been seen by NamPower, that repayment may well be done by way of electricity provision instead.