Friday, October 30, 2020

The BPC jigsaw puzzle is all yours to solve, Mr Schwarszfischer

It would appear that the sale of the power producing plant, Morupule B, is less likely to collapse not even in the face of stiff hostility from a number of politicians who consider the disposal of the national asset a grave mishap. 

One of the things that could be used to determine government’s will power in seeing the sale to completion is the appointment of Botswana Power corporation (BPC)’s new Chief Executive Officer (CEO) Stefan Schwarzfischer, who might be deemed a catalyst for the now desperate move to transform not only the structure of the corporation but also the way in which electricity is delivered to the nation. 

Schwarzfischer told journalists recently that the successful sale of Morupule B is one of the keys that would be used to measure the success of the new strategy that the corporation put into effect at the beginning of the year. 

BPC, he said, was implementing what it calls the Masa 2020 strategy which is set to change the corporation’s focus from being a “leading power utility to becoming a leading power distributor”.       

One of the things that hinges on this renewed focus is the weight of financial deficiency which the corporation is struggling to carry. 

“BPC is not in good shape financially,” said Schwarzfischer. 

He said the cash-strapped corporation with a current debt of P96 million is in dire need of a financial turn-around. It is this task of a financial re-engineering that is the reason the power producing Morupule B plant is attached to a price tag, which at present remains unspecified, according to Schwarzfischer. 

He explained that the corporation currently operates from a cash desk which handles the day to day cash obligations, with the salaries of the employees at the top of the list. He also said that it is quite hard to get additional funding given the over-indebtedness of the corporation. 

He described the debt as “huge” which as a result skewed the corporation’s balance sheet due to the burden of debt. 

Schwarzfischer was roped in to turn around the current status quo at the corporation and it does not seem that the German national is planning to fail to deliver on what he promised his boss ÔÇô the Botswana government. 

When responding to this publication’s question on how he would implement the corporation’s financial turnaround he said that it would be done through reducing loans by selling certain assets, protecting revenue and the reduction of costs. 

On the sale of assets, Morupule B was the easy target given that it was loan-financed but to date is yet to offer returns on investment and instead has dug deeper into government’s pockets. 

To abate the plant’s man-made financial dilapidation it seemed to government that selling was the best option. A previous statement sent to BPC from government said 

“It is on this note that the shareholder made a decision to sell one of the assets of the Corporation being Morupule B 600 MW Power Plant to ensure reliable power supply and reduce the Corporation’s debts”. 

Schwarzfischer also mentioned other assets such as houses which may also be put up for sale. On revenue protection he said that the corporation would work to keep as much as cash in it as possible and on cost reduction it is expected that the re-alignment of organisational structure will solve the problem. 

A challenge of costs, however, remains with the current set-up of power importation. Schwarzfischer specified that power imports remained the highest cost that the corporation incurs.

However, he anticipates that the huge spending will go down in 2019 when unit five and six are added to Morupule A. 

When explaining the rationale for not including Morupule A in the sale Schwarzfischer said that the plant in contrast to Morupule B was not funded by debt. “Cash was injected as equity in Morupule A,” he said. He said as a result that there’s no use to sell Morupule A from a financial sense.

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