BPC abandons leasing out Morupule A
Mbongeni Mguni | Friday March 7, 2014 16:13
The Botswana Power Corporation (BPC) has thrown out the idea of leasing out the mothballed Morupule A power station and is, rather, due to select a refurbishment contractor by July, BusinessWeek has learnt.
Last March, the Corporation floated a Request for Expressions of Interest offering two options for the future of the aging power station, whose operations were suspended in August 2012 after an adverse cost-benefit analysis.
One option for the 25-year-old station’s future was to lease it out to an energy firm that would “refurbish and operate the power station under a Power Purchase Agreement (PPA) over an agreed period”.
Under the second option, the BPC would secure the services of an EPC contractor to undertake the required refurbishment works as a turnkey project.
On Tuesday, acting BPC CEO, Nchena Mothebe revealed that the Corporation had decided between the two options.
“We are on track to refurbish Morupule A and we have appointed the transaction advisers,” he told captains of industry at a power briefing.
“We are expecting closure of the Engineering, Procurement and Construction contract by July.
“By 2016, we should be having the whole plant available, giving us 120 megawatts.”
Had the BPC gone with the lease-out option instead, the successful developer would have been required to sign a power station lease agreement with the BPC, as well as the PPA, fuel and water supply and human resources agreements.
Speaking at the same briefing, minerals, energy and water resources minister, Kitso Mokaila, said the Morupule A situation had taught policy makers the value of continuous maintenance. Prior to its suspension two years ago, the iconic power station had been constantly operating since 1989, with plant availability dropping from over 84% in 2008 to below 30% in 2012.
In closing the station, government cited unreliable and aged equipment whose frequent breakdowns had led to escalating operational and maintenance costs. The suspension resulted in the loss of 52 jobs with full resurrection estimated to cost P500 million.
Government allocated the power station P160 million in the 2013/14 budget, while another P60 has been proposed for Morupule A and B in the 2014/15 budget which kicks off in April.
“I guess with hindsight one could say we should not have closed Morupule A before Morupule B was finalised,” Mokaila said.
“However, at the time any positive thinker would have said it was costing too much to run. By the time the plant was suspended, it did not make sense to keep it going.
“The lesson is about how much we must invest in continuous maintenance.”
Two separate studies by government and the BPC have indicated that Morupule A can be brought back to design level capacity through refurbishment of boilers, turbines, generators and other equipment. Once refurbished, the station could run for another 15 years at 80% plant availability.
The BPC’s own estimates indicate that Morupule A will contribute nearly 20% of the projected national electricity demand when it is fully returned to the grid in 2016.