Cash-strapped BPC receives P1.5bn bailout
Mbongeni Mguni | Thursday December 19, 2013 15:17
The details are contained in a report by Parliament’s Finance and Estimates Committee on the 2013/14 Supplementary Budget. The supplementary was passed last Friday, with reservations by some legislators on certain items requested by line ministries.
According to the report, a presidential directive was issued on September 11 for treasury to provide the BPC with P1,49 billion. The funds were specifically for Eskom imports, obligations of the Morupule B loan, Morupule Coal Mine bill and operation and maintenance for the Morupule B project.
The BPC is presently sourcing 100 megawatts (MW) from Eskom, as well as up to 200MW on an auction basis, as Morupule B lies half-functional with only two units running out of four.
The bailout directed at Morupule B’s repayment is in respect of more than P6 billion in World Bank and African Development bank loans government underwrote for the power station’s construction.
In a previous interview, BPC CEO Jacob Raleru told Mmegi Business that it “would bode ill for the BPC and Botswana” if the government was forced to step in and pay off the BPC’s loans.
Economists were alarmed three years ago when the loans became repayable before the project was fully completed, while Morupule Coal Mine also made contractual demands for payment, despite no uptake from the BPC. The power utility was contractually bound to pay Morupule Coal Mine for the costs of its production, even if the BPC did not necessarily take up the production.
According to the Parliamentary documents, P388 million of this year’s total bailout will be sourced from “the slow spending projects within the ministry, namely Molepolole and Kanye sewerage”.
“The committee is rather perturbed by the turn of events at Morupule B as it is becoming more and more uncertain regarding the completion and success of the project,” legislators in the Finance and Estimates Committee noted.
The 2013/14 bailout follows a similar relief effort in the last financial year under which the BPC received P540 million towards its Eskom bills and P330 million for its Morupule Coal Mine obligations.
In the 2011/12 financial year, the corporation received P454 million in cash injections.
This year’s bailout, in line with previous years, is designed to reduce the actual tariff adjustment awarded to the BPC, which has attributed its operational malaise to the lack of cost-reflective rates. While the Corporation received a tariff adjustment of between seven and 30 percent in April, executives have said the rates are still far below par.
The BPC’s operating losses were pegged at P311,4 million in 2012, P153 million in 2011, P563,6 million in 2010 and P376,4 million in 2009 due mainly to escalating costs of imported power and the lack of cost-reflective tariffs.