Morupule B sale to be finalised by July
Tumelo Mouwane | Wednesday April 12, 2017 18:00
Speaking to Mmegi Business on the sidelines of kgotla meetings he held here this week, Minister Sadique Kebonang said negotiations have so far progressed smoothly with China Machinery Engineering Corporation (CMEC) having completed their due diligence.
“The process of the sale of Morupule B is ongoing, we expect it to be done by end of July. We have been meeting with the prospective buyer and we have been changing notes. My team from the ministry will be heading to China in three days for due diligence purpose and bench marking,” he said.
The Botswana Power Corporation (BPC) was due to receive an offer for the 600MW power station in February from CMEC and thereafter negotiations begin.
BPC chief executive officer, Stephan Schwarzfischer previously told Mmegi Business
that in the event that negotiations do not succeed, they had something to fall back on as two other companies have offered to buy the troubled Chinese-built power station.
“We expect negotiations to last until June 2017, and if we agree we should finalise the deal by January 2018. But if talks fail, then we go back to the two other firms that have expressed interest to buy the plant,” he said.
Schwarzfischer declined to speculate on how much the plant could cost, but said CMEC will be the first external entity to put a value on the plant that was built for $970 million in 2014, but has incurred billions of pula in extra costs for remedial works.
The plant was built by a different Chinese company, China National Electric Equipment Corporation (CNEEC) but it has often broken down since commissioning in 2012, leading to a reliance on diesel generators and imports from South Africa.
BPC has been running at a loss for the past eight years and it is currently implementing a new strategy aimed at turning around its financial position with regards to reduction of operational 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 the year that it also received a P2.3 billion-tariff subsidy from government.
The sale of Morupule B to an IPP will leave the country with just a 120MW power, 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 been already awarded to a South Korean -Japanese Joint venture.