SAPP looks to capital markets for funding

MBONGENI MGUNI
Staff Writer | Friday February 26, 2010 00:00

 

SAPP has engaged Mercados, an energy consultant from Spain, to assess the Botswana Power Corporation and utilities from Mozambique, Zambia and Lesotho with a view to enhancing their credit rating and thus their ability to negotiate affordable credit in local and international markets.

The need for higher credit ratings for SAPP members is driven by the need for the region to generate at least 47, 000 megawatts of new power in the next 15 to 20 years, requiring investments running into hundreds of billions of pula. All utilities and their governments in the 12-member strong SAPP will be unable to raise the amount of capital needed to ensure that lights stay on in the region by 2030.

This week, Mercados experts met with the four utilities in Gaborone to kick-start training in raising their credit risk profiles and accessing capital for infrastructural investment. The initiative, made available by a World Bank loan to SAPP, will tackle six tasks that include a utility credit rating workshop, gathering and reviewing information on utility performance, performance benchmarking of utilities against world-class peers and short-term recommendations to improve credit worthiness.

Mercados will also facilitate the introduction of shadow credit rating for the utilities and finally help the four corporations undergo a credit worthiness improvement plan.

Mercados partner, Roberto D'Addario, said the credit worthiness initiative was critical and timely as governments in the region could not finance the cost of expanding electrification going forward.

'Expanding electrification requires very heavy investment and usually governments cannot provide all these funds because they have other needs and sometimes their ability to borrow money externally is exhausted', D'Addario said.

'The only hope then is for the utilities to be able to borrow money internationally, locally or wherever it is available to be able to move this investment in power forward.'

He said the credit worthiness initiative was a world first as previous studies and initiatives into electricity focused on improving efficiency, management, skills and capacity. 'We have not seen a study looking at how a utility can improve its credit worthiness in order to have a chance to borrow money and expand electrification,' he added.

'This project will be the first time a study goes deep into the problem of what's required to be able to borrow money on the capital market for power generation. Hopefully, the results of this initiative will be good so that we can go to the rest of the utilities in SAPP and do the same.'

SAPP's Coordination Centre Head, Mussa Beta, said the initiative would prepare and improve viability and service delivery among SAPP members, starting with the four utilities that have volunteered.

Part of the credit worthiness exercise will involve commercial and operational performance assessment and the improvement of financial viability and service delivery among SAPP members. The exercise will also involve training on credit ratings, technical benchmarking concepts and reviews.