Cash-strapped BPC heads for another loss

Staff Writer | Friday March 23, 2012 00:00

 

However, the projected deficit is far removed from the P607 million shortfall reported in the 2010/11 financial year and the P563.6 million recorded for 2009/10.For the current financial year that ends next Friday, the corporation's financial woes were rescued by a P454 million subsidy paid by government in lieu of a substantive tariff increase.According to figures made available this week, the average 22.5 percent increase last June also helped the BPC's revenues rise 69 percent to a projected P2.7 billion for 2011/12. However, costlier imports of power, higher purchases of emergency power, as well as increased staff and electricity generation costs are projected at P2.74 billion, resulting in the P87.3 million shortfall.

For the 2012/13 financial year, BPC's financial position will be helped by a P500 million subsidy which government is expected to avail to the corporation at the end of the current financial year.The glad tidings, however, have already been dimmed as BPC executives told Business Week that going into 2012, the corporation's precarious financial position would worsen, with operating expenses forecast to top P3.1 billion. Chief Executive Officer Jacob Raleru explained that the higher expenses would be associated with the introduction of Morupule B Power Station where the first 150MW unit is due within weeks.

'Although imported power is getting more expensive, it is actually lower in cost than any new facility, whether that facility is located in Botswana or elsewhere,' Raleru told Business Week.'In the immediate to medium-term, we are not going to see a reduction in costs of power when compared to the cost from Eskom imports. As we start to operate Morupule B, the costs are going to increase and that's a fact that we have to live with.' Chief Financial Officer Rebecca Mgadla elaborated:

'On an annual basis, for Morupule B, we should be paying a maintenance plan of P50 million, and our provision for replacement of components has gone up to P389 million from P260 million as a result of having the new plant. 'This is apart from the generation costs of the new plant. This shows that even though we will not be importing, the costs of operating the new plant will be much higher.' In addition, projections for both the 2011/12 and 2012/13 financial years do not explicitly cater for upsurges in other key inputs such as oils, fuels and water, as well as direct and indirect manpower costs.

As a result, BPC's operating expenses could rise further than the P3.1 billion projected for 2012/13, and with government silent on a third subsidy this year, the utility's coffers will again be threadbare.Raleru said while the solutions were complex, they generally revolved around two issues. 'One is internal, which is to say as BPC, we have to look at our own efficiencies and reduce our costs,' he said.

'However, when we have done all we can on that aspect, we have to look at tariffs to assist in the costs.'In other words, we have to make the utility as lean as possible, with minimum costs for the value being created, then also look at the tariffs to cover the costs. That's the only way going forward if we want to run an efficient and effective corporation.' According to 2011 figures, of each pula spent by BPC, 64thebe was for power purchases, 13thebe for staff costs, 8thebe for depreciation, 4thebe for generation costs and the balance of 11thebe categorised under 'other costs.'