Legacy debts continue to haunt Hwange Colliery

07 Oct, 2022 - 00:10 0 Views
Legacy debts continue  to haunt Hwange Colliery

eBusiness Weekly

Nelson Gahadza

Hwange Colliery Company (HCC), under Administration, continues to swim under debt due to legacy debts despite various government interventions over the years.

The Government holds a 52 percent stake in the coal mining entity, whose debt obligations stood at US$333 million owed to various creditors as at December 31 2016.

Prior to the current Reconstruction Order, HCCL, the company’s shareholders and creditors had agreed on a Scheme of Arrangement whose sole purpose was to raise fresh capital, restructure management and rescheduling and settling debt.

According to its financials for the interim period to June 30, 2022, the coal miner made a $3,97 billion loss in inflation-adjusted terms, a 356 percent increase year-on-year. The net loss is a result of an $8 billion exchange loss on foreign legacy debts during the period under review.

HCC was placed under administration by a reconstruction order made by Zimbabwe’s Justice, Legal and Parliamentary Affairs Ministry in terms of the reconstruction of State-Indebted Companies Act on or about October 26, 2018.

The reasons for this included gross losses, persistent losses over a long period, negative cash flow, obsolete and antiquated plant and equipment, technical insolvency with liabilities significantly exceeding assets, non-payment of creditors as they fell due, and non-payment of employees over a long period of time.

During the period under review, the company’s long term creditors amounted to $9,6 billion while borrowings amounted to $181 million.

The coal miners’ revenue in the period totalled $16,49-million, up 87 percent from the $8,83 million of the interim period of the 2021 financial year.

Mining operations revenue accounted for the bulk of the topline at $14,9 billion while Estates accounted for $1,4 billion and the Medical Services at $143 million.

However, despite a 52 percent increase in production and a 74 percent increase in sales for the six months period, that failed to offset the loss position.

The company’s gross profit increased by 74 percent year-on-year to $4,54 billion in inflation-adjusted terms, largely as a result of a combination of an increase in sales volume and regular product price adjustments in line with market value.

Basic earnings a share totalled $7,20, while basic headline earnings a share totalled $7,30. The company’s administrator, Munashe Shava, in a commentary said during the period under review, the company focused on various strategic initiatives.

He said the total coal mined by opencast operations amounted to 1,29-million tonnes  a 55,59 percent increase in production year-on-year.

He said the steady production is mainly attributed to the successful contract mining model the company has employed.

Shava said a total of 676 387 tonnes of coal was produced for Hwange Power Station and Zimbabwe Zhongxin Electrical Energy for electricity generation during the course of the period, a 124 percent increase year-on-year.

He noted that deliveries into the power station were, however, negatively affected by limited stock holding space in the power station.

In terms of underground mining production, Hwange produced 19,49 percent less year-on-year, mainly owing to ageing underground mining equipment.

In this regard, he said the miner’s strategic plan is to have two new continuous miners within the next 18 months, resulting in the company’s underground mine reaching its nameplate production capacity.

“The first continuous miner is expected to be commissioned before the end of this year,” he said.

Looking ahead, Hwange Colliery expects global coal prices to continue to rise amid the ongoing Russia-Ukraine conflict, and the company intends to position itself to benefit from the increase in global demand for fossil energy.

In this regard, Hwange Colliery will focus on coal beneficiation and improving the quality of its coal.

Shava said the company is set to receive a washing plant that will be located near mining areas and this equipment will be commissioned during the first quarter of 2023.

The company has plans to build a coke battery by 2025.

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