Thursday, July 9, 2020

BPC faces uncertain future -report

The Botswana Power Corporation’s (BPC) future hangs in the balance as it is in danger of deterioration due to poor planning and shortage of investment, according to a report passed to the Sunday Standard.

While the report states that “there is now a serious need for investment in the network”, it also observed “that both BPC and the Government are currently at or close to the respective borrowing limits.

The report titled “Draft Strategy” which was prepared for Public Enterprises Evaluation and Privatization Agency (PEEPA) by AF-Mercardos Energy Markets International in collaboration with Collins Newman & Company was among other things to carry out an asset and business valuation of BPC.
The consultants say while there are serious problems at BPC, they largely relate to two major issues that could have been resolved by Government action. The consultants cite a reliance on imported power which has recently become less available and failure to maintain tariffs at a cost relative level.

“There is now a serious need for investment in the network. In addition, we have identified elements in the governance structure of the BPC which could be improved. We believe there are major advantages to be realised from private sector intervention in both raising the needed finance and also in bringing private discipline. A “Do Nothing” option is not recommended,” states the report.

“We have seen that both BPC and the Government are currently at or close to the respective borrowing limits. Private sector participation in the power sectors has the potential to realise substantial sum through share sales,” says the report.

According to the report, there are limited electricity generation skills in BPC, particularly generation.

“Prior to the implementation of Morupule B the corporation had no experience of implementing a major procurement since the early 1980s when Morupule A was constructed. The Board of BPC has limited electricity generation or supply skills. It seems likely that the Board would be strengthened by including one or two members with direct experience of electricity supply in other countries,” states the report.

While the subsidies by Government from 2010 to 2012 were aimed partly to compensate for the non-cost-reflective tariffs, the basis for such subsidies is not transparent to outsiders.

“Thus BPC income is both inadequate and uncertain. The failing of the business (BPC) are largely the result of three external factors beyond the control of the management, namely; shortage of supply, shortage of income and consequent under investment, and unclear governance and responsibility for long term planning,” state the report.

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Sunday Standard July 5 – 11

Digital copy of Sunday Standard issue of July 5 - 11, 2020.