BPC losses near P500m as power imports rise

Mbongeni Mguni | Monday July 25, 2022 06:00

Improved outlook: The BPC’s power imports for the first two months of the 2022/23 financial year were 63% down compared to the corresponding period last year. This was due to higher generation at Morupule B Power Station PIC: PHATSIMO KAPENG

By comparison, the corporation raked in pretax profits of P365.2 million in the 2021–2022 financial year, helped by improved generation at Morupule B and, thus, a reduced need to run the diesel plants at Orapa and Matshelagabedi which can collectively provide 160MW of emergency power.

Analysts also expect that the COVID-19-related restrictions on various sectors of the economy reduced the need for power imports in the 2020–2021 financial year.

The latest figures are contained in a Botswana Energy Regulatory Authority (BERA) brief outlining the BPC’s request for two subsequent tariff increases of five percent each for the 2022–2023 and 2023–2024 financial years.

BERA has called for public input on the tariff request and is expected to also hold a public hearing ahead of the final decision.

“The unsatisfactory performance of Morupule B Power Station was the key factor in driving the power imports up to meet the national demand shortfall,” reads the BPC tariff request. “Morupule B performed at an average availability rate of 36% less than the anticipated 47%.”

BPC paid P1.99 billion for imported power in the 2021–2022 financial year, up from P1.4 billion in the previous reporting period.

The 600MW Morupule B power station has operated below nameplate capacity since its commissioning in 2012, due to defects that caused frequent breakdowns in its four units. The power station is undergoing an extensive $1.2 billion revamp under which each unit will be taken down, refurbished and put back online. The revamp is expected to conclude in the 2025–2026 financial year at which point the plant’s availability will be 80%.

In its request to BERA, the BPC argued that in terms of costs per kilowatt hour, tariffs are presently 30 thebe below the break-even point, despite tariff increases of 22% and three percent in the last two financial years. The BPC has not been awarded a tariff increase for the 2022–2023 financial year and had initially sought a four percent increase for 2023–2024.

In addition, the corporation noted that government’s subsidy is expected to decline to P300 million in the 2023–2024 financial year, down from P400 million in the current financial year and P500 million in the 2021–2022 period.

BPC officials pointed out that the corporation has intensified efforts towards greater operational efficiency and has also been recording improved generation at Morupule B.

“The internal power generation assets are being mitigated, to the extent possible, by the optimal purchase of energy from the Southern African Power Pool (SAPP) market. “In the 2021-2022 financial year 252.8 gigawatts per hour of cheaper energy was purchased from the SAPP market, which was dependent on energy availability. “It constituted six percent of the total supply at a cost of P176.7 million. “The ongoing remedial works programme at Morupule B to rectify the construction and equipment defects are beginning to bear fruits,” the corporation’s tariff request reads.

The corporation also says it is reviewing major contracts, including generation supply agreements, to reduce the financial burden, while also optimising key business processes to improve efficiency and service delivery. Revenue protection initiatives are being introduced to reduce non-technical losses such as those that occur through illegal connections and other fraudulent activities.

The BPC’s latest request for a tariff hike will come as a hard blow to consumers who are recovering from the COVID-19 impact on disposable incomes and the shock 22% tariff increase awarded in 2020.