Government bails out BPC, again

Government, which is projecting a budget surplus this year, will release more cash to bailout the loss-making Botswana Power Corporation (BPC) in the coming weeks, Botswana Guardian learnt this week. The cash injection, which is likely to run into millions of Pula, is meant to cover the company’s day-to-day costs that include among others purchase of power from Eskom and other Southern African Power Pool (SAPP) member countries.

Officials from both BPC and Minerals, Energy and Water Resources ministry on Tuesday confirmed that the corporation will get a ‘cash injection’, but would not reveal any figures. “Government has agreed to help us financially,” BPC Marketing and Communications Manager Spencer Moreri said, adding that “they are best suited to answer your questions,” when asked on the fresh bailout. MEWR spokesperson Potso Thari was also tight-lipped. “We have only agreed in principle.

At this point we don’t have any specific figure,” she said, adding that they are still negotiating with finance and development ministry on the amount to be released to BPC. She could not state if more cash injection into BPC is the only answer to the increasing annual losses. BPC, which is under Jacob Raleru, has in recent years received extra cash due to poor balance sheet.

Between 2010 and 2011, BPC received close to P2 billion from government to continue running. This did not include the annual grant that the state parastatal receives from government. The injection comes after government allowed the cash-strapped corporation to hike power tariffs effective next month. According to a statement from the corporation, customers consuming up to 200kWh units of electricity and small business customers consuming up to 500kWh will pay 7 percent more effective April 1st.

Tariffs for those consuming above this level will pay 10 percent more. Medium business owners will also pay 10 percent higher than what they are currently paying. Business owners in Gaborone and Francistown this week complained the increase would further put strain on their operational expenses. It will appear government is prepared to give BPC extra cash on the basis that the corporation has already made a startling operating loss of P311 million (P153, 03 million in 2011) for the year ending March 2012.

This, according to a report passed to Botswana Guardian, but is yet to be released officially by the corporation. In the report, BPC board chairperson Ewetse Rakhudu explained that cost of supply for power went up by 25 percent, driving average costs to 85thebe per/kWh, against an average selling price of 57 thebe/kWh. Explaining the loss, Rakhudu said: “The net result was 22% increase in operating costs, against 18,2 percent growth in revenue. In the end, the total net loss for the year is P1, 122 billion (P796, 62 million in the prior year),” added Rakhudu in the statement.

For the year under review, a total of P1, 74 billion (74 percent of direct costs) was incurred in power purchases of which P220, 5 million was paid by government through an emergency power grant, said the 2012 annual report.

In the past five years, BPC has only managed to post a profit of P111 million in 2008. It continued to post losses of P133, 6million, P1, 5billion, P796 million and P1, 1 billion in the years 2009, 2010, 2011 and 2012 respectively. With the non-completion of Morupule B Power Station on time, the corporation is set to incur even more costs to make electricity available to households and businesses.

BPC has already signed a fresh contract of 100 MW with Eskom, which ends this year. The two corporations have also agreed a non-binding contract of 200MW. On a related matter, Deloitte and Touché auditors have raised flag regarding the company’s performances, especially for the year ended March 2012.

They said BPC has not met the requirement of Section 17 of the BPC Act, which requires it to conduct ‘its affairs on commercial lines so as to produce net operating income by which a reasonable return can be measured.’