Gov’t sets aside P600M for BPC consumer tariff subsidy
Government continues to support Botswana Power Corporation (BPC) with a revenue grant meant to cushion consumers against what would otherwise be exorbitantly high electricity tariffs, this yearly cash injection through the Ministry of Mineral Resources, Green Technology and Energy Security, goes a long way in keeping the corporation afloat. For the 2022/23 Financial year BPC will receive P600 million, Parliament recently approved.
BPC, the country’s sole power utility is faced with a challenge of unbearable operational expenses against low revenue from its services rendered, resulting in operational losses year in and year out.
Without this revenue grant from Government, BPC would have to significantly hike electricity tariffs in order to recover its operational expenses and stay afloat, tariffs that are already unbearably high according to consumers.
OPERATIONAL LOSSES
A look at Botswana Power Corporation financials for the past 10 years reveals that the over 50 year old organisation has been swimming in billions of losses.
Before taking into account revenue grant from Government, the corporation registered an operational loss of over 1.3 billion in 2020, after a P3.398 billion revenue against whopping operational expenses of P4.7 billion.
BPC ‘s operational losses ( before Government grant) were hovering at over a billion pula and for some years almost clocking P2 billion ; P1.3 billion in 2020, P72 million in 2019, P299 million in 2018, P1.4 billion, P1.99 billion,P1.98 billion, P1.32 billion, P1. 62 billion, in 2017, 2016, 2015, 2014, and 2013 respectively, with P819 million in 2012 and P607 million in 2011.
BPC biggest cost drivers are power purchases which hovers around P2.5 billion every year in addition to already existing costs of local power generation, transmission, electricity distribution to consumers and personal emoluments to workers, BPC is one of the highest paying organisations in the country because of its highly technical staff that makes a significant percentage of the corporation’s employ.
Botswana imports most of its power from South Africa’s state owned power behemoth Eskom, with other purchases made from the Southern African power pool.
According to 2020 Annual report available on BPC website the corporation spent a whopping P2.2 billion on power purchases, over 100 percent increase from the P861 million spent in the previous year 2019.
The P600 million Government grant to Botswana Power Corporation for 2022/23 Financial year reflects a continued move by government to slash BPC subsidy in response to ailing revenue on the part of national fiscals, albeit a P100 million increase from P500 million in 2021.
In 2020 Government pumped P600 million into BPC, a decrease from P800 million in 2019. The Government has been slashing the subsidy in a bid to drive the corporation into self-reliance, from a peak of P2.326 billion in 2015 declining gradually to P2. 321 billion in 2016, P1.667 billion in 2017, and P1.457 billion in 2018.
ELECTRICITY TARRIFS
In response to shrinking of government grant, BPC has been increasing its electricity tariffs to try recover costs; 10 percent increase in 2018 for domestic consumers, 22 percent hike in the middle of COVID-19 pandemic in 2020, 3 percent against an initial request of 5 percent last year.
For the 2022 /23 financial year beginning 1st of April the corporation has bagged for a 5 percent increase which if not granted “the organisation would plunge into financial crisis ”
Botswana Energy Regulatory Authority (BERA) the organisation approving these increases is currently reviewing the request and is expected to announce the outcome anytime from now.
LOCAL POWER GENERATION
According to latest electricity figures by Statistics Botswana, during the third quarter of 2021, the physical volume of electricity imported by Botswana was 424,703 MWH.
Compared to the 2021 second quarter, imported electricity during the third quarter of 2021 shows a decrease of 8.3 percent (38,468 MWH), from 463,171 MWH during the second quarter of 2021 to 424,703 MWH.
Even though there are fluctuations in the physical volume of imported electricity, Statistics Botswana said generally importation of electricity shows a downward trend.
This according to authorities indicates the country’s “continued effort to generate adequate electricity to meet demand, hence the decreased reliance on electricity imports.” Botswana imported 42.3 percent of total electricity distributed during the third quarter of 2021.
Eskom was the main source of imported electricity at 53.7 percent of total electricity imports. ZESCO accounted for 26.7 percent, while the remaining 13.1, 4.8 and 1.7 percent were sourced from the Southern African Power Pool (SAPP), Cross-border electricity markets and Nampower.
Cross-border electricity markets is an arrangement whereby towns and villages along the border are supplied with electricity directly from neighbouring countries such as Namibia and Zambia.
In an effort towards energy security Botswana’s biggest power plant that hasn’t been fully operational since commissioning, the 600 MW Morupule B Power Station is still under remedial works.
Minister of Mineral Resources Green Technology and Energy Security Honorable Lefoko Maxwell told parliament that Morupule B continues to generate less power than its design capacity due to a perpetuation of defects.
He noted that remedial works on the plant are on-going and currently, the power plant is generating 380MW from three of its four units, [unit 1 (150MW), units 2 (80MW) and 3 (150MW)].
Lawmakers were briefed that boiler heat exchangers are the major components that require replacement on all the four units with a new design. “These pieces of equipment have exhibited perennial failures since the 1st commissioning of the plant,” Moagi revealed.
The remedial works on Unit 4 which commenced in June 2019 were delayed due to the Covid-19 Global Pandemic which prevented service providers based in China from mobilizing and providing the required services at site. However, the Unit is now undergoing re-commissioning of the boiler and turbine where major remedial works were undertaken, Parliament was told.
Remedial works on all the four units are expected to be completed by end of 2024 after which the plant will be generating at its design capacity of 600MW on firm basis.
In the meantime, the diesel based power generators at Matshelagabedi and Orapa power peaking plants continue to be deployed in cases of power supply shortfalls experienced intermittently.
Of the Ministry’s 2022/23 financial year budget of P893, 776,080 (Eight Hundred and Ninety Three Million, Seven Hundred and Seventy Six Thousand and Eighty Pula), approved the largest share of P600, 000,000 representing 67% of the budget for Botswana Power Corporation Support Programme. The provision is to cushion BPC against non-cost reflective tariffs.
Business
LLR transforms from Company to Group reporting
Botswana Stock Exchange listed diversified real estate company, Letlole La Rona Limited (“LLR” or “the Company” or “the Group”), posted its first set of group financial statements which comprise the Company and Group consolidated accounts, which show strong financial performance for the six months ended 31 December 2023, with improvements across all key metrics.
The Company commenced the financial year with the appointment of a Deputy Chairperson, Mr Mooketsi Maphane, in order to bolster its governance and enhance leadership continuity through the development of a Board and Executive Management Succession Plan.
At operational level, LLR increased its shareholding in Railpark Mall from 32.79% to 57.79% and proudly took over the management of this prime asset.
The CEO of LLR, Ms Kamogelo Mowaneng commented “During the period under review, our portfolio continued to perform strongly, with improvements across all key metrics as a result of our ongoing focus on portfolio growth and optimisation.
“We are pleased to report a successful first half of the 2024 financial year, where we managed to not only grow the portfolio through strategic acquisitions and value accretive refurbishments but also recycled capital through the disposal of Moedi House as well as the ongoing sale of section titles at Red Square Apartments. The acquisition of an additional 25% stake in JTTM Properties significantly uplifted the value of our investment portfolio to P2.0 billion at a Group level. Our investment portfolio was further differentiated by the quality of our tenant base, as demonstrated by above market occupancy levels of 99.15% and strong collections of above 100% for the period”.
The growth in contractual revenue of 9% from the prior year’s P48.0 million to the current year P52.2 million, increased income from Railpark Mall, coupled with high collection rates, has enabled the company to declare a distribution of 9.11 thebe per linked unit, which is in line with the prior year.
In line with its strategic pillars of ‘Streamlined and Expanded Botswana Portfolio’ as well as ‘Quality African Assets’, the Group continuously monitors the performance of its investments to ensure that they meet the targeted returns.
“The Group continues to explore yield accretive opportunities for balance sheet growth and funding options that can be deployed to finance that growth” further commented the CEO of LLR Ms Kamogelo Mowaneng.
Ms Mowaneng further thanked the Group’s stakeholders for their continued support and stated that they look forward to unlocking further value in the Group.
Business
Botswana’s Electricity Generation Dips 26.4%
The Botswana Power Corporation (BPC) has reported a significant decrease in electricity generation for the fourth quarter of 2023, with output plummeting by 26.4%. This decline is primarily attributed to operational difficulties at the Morupule B power plant, as per the latest Botswana Index of Electricity Generation (IEG) released recently.
Local electricity production saw a drastic reduction, falling from 889,535 MWH in the third quarter of 2023 to 654,312 MWH in the period under review. This substantial decrease is largely due to the operational challenges at the Morupule B power plant. Consequently, the need for imported electricity surged by 35.6% (136,243 MWH) from 382,426 MWH in the third quarter to 518,669 MWH in the fourth quarter. This increase was necessitated by the need to compensate for the shortfall in locally generated electricity.
Zambia Electricity Supply Corporation Limited (ZESCO) was the principal supplier of imported electricity, accounting for 43.1% of total electricity imports during the fourth quarter of 2023. Eskom followed with 21.8%, while the remaining 12.1, 10.3, 8.6, and 4.2% were sourced from Electricidade de Mozambique (EDM), Southern African Power Pool (SAPP), Nampower, and Cross-border electricity markets, respectively. Cross-border electricity markets involve the supply of electricity to towns and villages along the border from neighboring countries such as Namibia and Zambia.
Distributed electricity exhibited a decrease of 7.8% (98,980 MWH), dropping from 1,271,961 MWH in the third quarter of 2023 to 1,172,981 MWH in the review quarter.
Electricity generated locally contributed 55.8% to the electricity distributed during the fourth quarter of 2023, a decrease from the 74.5% contribution in the same quarter of the previous year. This signifies a decrease of 18.7 percentage points. The quarter-on-quarter comparison shows that the contribution of locally generated electricity to the distributed electricity fell by 14.2 percentage points, from 69.9% in the third quarter of 2023 to 55.8% in the fourth quarter. The Morupule A and B power stations accounted for 90.4% of the electricity generated during the fourth quarter of 2023, while Matshelagabedi and Orapa emergency power plants contributed the remaining 5.9 and 3.7% respectively.
The year-on-year analysis reveals some improvement in local electricity generation. The year-on-year perspective shows that the amount of distributed electricity increased by 8.2% (88,781 MWH), from 1,084,200 MWH in the fourth quarter of 2022 to 1,172,981 MWH in the current quarter. The trend of the Index of Electricity Generation from the first quarter of 2013 to the fourth quarter of 2023 indicates an improvement in local electricity generation, despite fluctuations.
The year-on-year analysis also reveals a downward trend in the physical volume of imported electricity. The trend in the physical volume of imported electricity from the first quarter of 2013 to the fourth quarter of 2023 shows a downward trend, indicating the country’s continued effort to generate adequate electricity to meet domestic demand, has led to the decreased reliance on electricity imports.
In response to the need to increase local generation and reduce power imports, the government has initiated a new National Energy Policy. This policy is aimed at guiding the management and development of Botswana’s energy sector and encouraging investment in new and renewable energy. In the policy document, Minister of Mineral Resources, Green Technology and Energy Security Lefoko Moagi stated that the policy aims to transform Botswana from being a net energy importer to a self-sufficient nation with surplus energy for export into the region. Moagi expressed confidence that Botswana has the potential to achieve self-sufficiency in electric power supply, given the country’s readily available energy resources such as coal and renewable sources.
Business
MMG acquires Khoemacau in a transaction valued at P23Bn
MMG Limited, the Hong Kong-based mining company specializing in base metals, has successfully concluded the acquisition of Khoemacau Copper Mine, a state-of-the-art, world-class copper asset nestled in the northwest of Botswana.
On Monday, MMG announced that the acquisition of Khoemacau Mine in Botswana was finalized on 22nd March 2024. “This acquisition enriches the company’s portfolio with a top-tier, transformative growth project and signifies a monumental milestone in the Company’s journey,” MMG communicated in an official statement published on the Hong Kong Stock Exchange.
Upon completion of the acquisition, MMG remitted to the Sellers an Aggregate Consideration of approximately US$1,734,657,000 (over P23 billion), a sum subject to potential adjustments post-Completion.
In addition to the Aggregate Consideration, MMG, in accordance with the Agreement, advanced an aggregate amount of approximately US$348,580,000 (over P4.5 billion) as the Aggregate Debt Settlement Amount, to settle certain debt balances of the Target Group (Cuprous Capital/Khoemacau).
On November 21, 2023, Khoemacau announced that the shareholders of its parent company [Cuprous Capital] had agreed to sell 100% of their interests to MMG Limited.
MMG is a global resources company that mines, explores, and develops copper and other base metals projects on four continents. The company is headquartered in Melbourne, Australia, and has a significant shareholder, China Minmetals Corporation, which is China’s largest metals and minerals group owned by the Government of the People’s Republic of China.
On December 22, 2023, Khoemacau Copper Mining (Pty) Ltd received the approval from the Minister of Minerals and Energy of Botswana regarding the transfer of a controlling interest in the Project Licenses and Prospecting Licenses associated with the Khoemacau Copper Mine, a result of the Acquisition.
The Botswana Competition & Consumer Authority (CCA) on January 29, 2024, notified the market that it had given its approval for the takeover of Khoemacau Copper Mining by MMG Limited.
On January 29, 2024, the CCA issued a merger decision to the market, stating that after conducting all necessary assessments, it was ready to proceed.
The Competition Authority affirmed that the structure of the relevant market would not significantly change upon implementation of the proposed merger as the proposed transaction is not likely to result in a substantial lessening of competition, nor endanger the continuity of service in the market of mining of copper and silver ores and the production, and sale or supply of copper concentrate in Botswana.
Furthermore, the CCA stated that the proposed merger would not have any negative impact on public interest matters in Botswana as per the provisions of section 52(2) of the Competition Act 2018.
Earlier this month, Minister of Minerals & Energy, Lefoko Maxwell Moagi, informed parliament that his Ministry was endorsing the Khoemacau acquisition by MMG Limited. He noted that not only was the company acquiring the existing operation but also committing to an expansion program that would cost over $700 million to double production, create more jobs for Batswana, and increase taxes and royalties paid to the Government.