Wednesday, October 27, 2021

Botswana snared in BPC snarl-up

Scores of Batswana with powerful political connections are lining up to dip their snouts in the multi-billion Pula Morupule B feeding trough in a deal that is expected to bankrupt the cash-strapped Botswana Power Corporation (BPC) and sink Botswana deeper into debt ÔÇô Sunday Standard investigations have revealed.

Documents passed to the Sunday Standard detail how Japanese contractor Marubeni Corporation and its politically connected citizen partners have trapped government into a lopsided contract with significant windfall profits at the expense of the tax-payer and the BPC.

Marubeni Corporation has been awarded the tender to expand Morupule B power plant by another 300MW (Unit 5&6). The Sunday Standard has in its possession a letter from BPC Chief Executive Officer Dr Stefan Peter Schwartzfischer dated June 6, 2017 warning President Ian Khama about how the Morupule B5&6 unconscionable  contract with Marubeni Corporation would cripple the BPC and the Botswana economy.

Schwartzfischer took issue with the firm Purchase Power Agreement (PPA) between government and Marubeni Corporation. The tariff structure of a Purchase Power Agreement (PPA) comes mainly in two forms: a firm (take and pay) and a non-firm (pick and pay). The disadvantage of a firm PPA is that the buyer pays for 100 percent of the power generated whether used or not, while a non-firm PPA is favourable to the buyer as the buyer pays only for utilised capacity.

The BPC boss came up with a six-year projection of the financial burden on BPC which would arise from the PPA agreement between government and Marubeni Corporation.

Botswana’s demand forecast indicates that the country will have surplus generation capacity from 2020 and in that year, BPC will lose P1.9 billion in payment for surplus electricity it does not need.

In 2020 BPC will pay P1.95 billion for the electricity it will buy through the firm PPA instead of the P26 million it would pay for its electricity needs under the favourable non-firm PPA.

To put the figure into perspective, the P1.9 that government will throw away in 2020 under the current PPA agreement is more than 10 percent of the country’s development budget for 2017 and more than 5 percent of the national recurrent budget under the current plan period.

The amount government will bleed in one year is bigger than budget allocations for the Ministry of Local Government and Rural development (P1.7 billion) Ministry of Transport and Communications (P1.7 billion) Ministry of Agriculture (P983 million) Ministry of Basic Education (P732 million).

In 2021 government will pay Marubeni Corporation P1,8 billion instead of P705 million it would pay under the non-firm PPA resulting in a waste of P1,1 billion. In 2022 government will pay P2, 3 billion instead of P565 million resulting in a waste of P1, 8 billion and in 2023 government will pay P2, 2 billion instead of P432 million resulting in a waste of P1.8 million. The PPA with Marubeni Corporation will span a period of 30 years.

Government officials who negotiated the project also undertook to provide a sovereign guarantee to the contractor to raise a loan for the project. The project which is Botswana’s first Independent Power Producers (IPP) project where the contractor funds construction of the power station and recoup their investment from selling power to BPC was supposed to have commenced four months ago but has stalled because government will not provide the sovereign guarantee.

The Japanese contractor is demanding a P8.5 billion ($804 million) surety upfront as security for any potential payment defaults by the struggling Botswana Power Corporation (BPC).

There is however resistance at the government enclave that government cannot give a P8 billion guarantee to a “briefcase” private company that does not have an office in Botswana and would only create 145 jobs after failing to give a P2 billion bail out to BCL, which is wholly owned by government and had created over 6 000 jobs.

The Ministry of Finance and Development Planning is worried that the P8,5 billion guarantee may cripple the country’s economy, and has called for an investigation into its financial implications on Botswana. P8,5 billion is equal to more than 50 percent of Botswana’s total development budget for the financial year 2017.

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