Govt pumps P454 million into BPC

MBONGENI MGUNI
Staff Writer | Friday April 30, 2010 00:00

The bailout is part of a rescue package for BPC which also includes the recently announced 30 percent electricity tariff hike. The cash-strapped utility reportedly required a 55-percent hike, but with consumers in mind, Government opted to minimise the hike and complement it with the P454 million cash injection.

The bailout is timely as the BPC, weighed down by ballooning costs of imported power, maintenance and generation, has recorded its second net loss in as many years. In addition, the BPC annually incurs the costs of subsidised rural electricity connections which often run into hundreds of millions. Government later pays for these subsidies but has now introduced a levy on all electricity charges that will act as a fund for rural connections.

The net losses indicate that revenues from the utility's investments have not been able to cover losses from operations for two years running. This in turn means BPC is unable to carry out its statutory task of having enough returns to meet loan interest payments, expand electricity network, accommodate reserves for maintenance and replacement of infrastructure and to make dividend payments to the government.

On Wednesday, the Deputy Permanent Secretary at the Ministry of Minerals, Energy and Water Resources, Boikobo Paya, told BusinessWeek that Government would soon avail the cash injection to BPC.

'The cash injection is support for the shortfall in the tariff increase awarded to BPC,' Paya said. 'The funds have not been released yet. We have to look internally to see where we can squeeze the money from because the budget has already been passed. This is a non-repayable cash injection and it has been done in the interest of consumers, to cushion them from a higher tariff increase.'

He explained that the cash injection was part of Government's efforts to mitigate the impact of higher electricity costs on consumers. 'The ideal increase in tariffs would have been 55 percent,' he said. 'But because of the difficulties this would have caused to consumers and industry, we contained it to 30 percent.

'However, even in this 30 percent, we have said for domestic consumers using less than 200 kilowatts per hour (kWh) per month, the tariff increase will only be 15 percent. The whole idea is to make sure that the tariff is not too weighty for household consumers and industry.'

The Minister of Minerals, Energy and Water Resources Ponatshego Kedikilwe has appeared on Btv to explain the government's rationale in limiting the tariff hike and its plans to provide sustainable power for households and industry going forward. The cash injection comes as the prospects for retrenchment of some of the BPC's 1, 900 workers were growing increasingly likely, owing to the utility's financial woes. The BPC has also taken on massive debt for capital projects such as the P11 billion expansion of Morupule Power Station and the refurbishment of the existing power station.

However, the efficacy of the P454 million bailout is under scrutiny following recent revelations by the Auditor General concerning the BPC's operational efficiency. The Auditor General said the BPC's accounting and financial discipline were 'extremely poor'.

'The auditors observed that the general state of the accounting records and related reconciliation procedures were extremely poor and were a major area of concern,' the Auditor General said.

'It was further noted that account balances were generally not reconciled and where reconciliation was prepared, reconciling items were seldom supported by valid authorised documentation. There was lack of financial discipline and the accuracy of monthly financial reporting was questionable.'

BPC management, the Auditor General said, had noted the negative report and committed themselves to enforcing more supervisory control over all finance functions across the various strategic business units.