BPC subsidising mining companies � CEO
Brian Benza | Friday February 10, 2017 12:10
Latest BPC financial results for the year up to march 2015, show that the Corporation recorded an operating loss before tariff subsidy of P1.996 billion compared to P1.398 billion in the previous year. The mining sector consumes about 35% of the BPC total supply.
From the 3.9 GigaWatthour (GWh) the Corporation supplied in 2015, the mining sector consumed 1,194 GigaWattHour (GWh) or 1.194 billion KWh of power from BPC contributing P760 million in revenue to the power utility. “The tariff for mining is about 25 thebe below the production costs. “Because of the mismatch between the production costs and tariffs, government has been subsidising us. At BPC we can only work on being efficient.
“Even if we reduce our labour costs to zero, BPC will not be able to run profitably because of the low tariffs. So in the medium to long term, it’s a political decision that will need to be taken,” he said. There are currently eight operating mines in the country; six in diamond mining, one colliery and a soda ash mine.
Highlighting the losses incurred by selling power to mining companies, Schwarzfischer said the closure of the BCL Mine has had a positive effect on their net margins.
“What happened to BCL Mine was tragic but in terms of electricity it has turned out to be a positive for us. “On one hand we are losing money by the gap between the tariff and the production costs and on the other, in times when we had shortages we would buy from Eskom at expensive rates and selling it at such low prices,” he said.
BPC consumed 380.38 GWh in the 2015/16 financial year at a cost of P250 million.
The last tariff adjustment was effected in 2015 at an average rate of 10% and the government has committed to providing financial support for the Corporation to operate as a going concern.
BPC has been running at a loss for the past eight years and it is currently implementing a new strategy to turnaround its financial position with regards to reduction of operation costs and establishing Independent Power Producers (IPPs).
In its last published results, being 2015/16, the corporation posted a P1.9 billion operating loss, in a year that it also received a P2.3 billion tariff subsidy from the government. The sale of Morupule B to an IPP will leave the country with just a 120MW power plant, which is currently under refurbishment, being the only power plant that it directly owns.
Two other power plants producing a total of 600MW through IPPs are planned for the next five years with the tender for the first 300MW having being already awarded to a South Korean-Japanese Joint venture.
Under the Masa 2020 strategy, BPC is transforming itself from a power utility to a power distributor, as IPPs will be generators of the bulk of the country’s power needs.