Botswana Power Corporation (BCP) has finally confirmed that it was blackmailed by Morupule B Power Station Chinese contractor, The Business Weekly & Review has established.
In doing this, BPC fell just short of conceding that Morupule B, which has gobbled up billions of pula in initial capital outlay and a series of subsequent subventions, is a failed project.
For some time local media was awash with reports of how China National Electric Engineering Company (CNEEC) had at some point blackmailed BPC by threatening to shut down the plant following an alleged dispute with the government over tax. After consistently playing down these allegations, BPC has confirmed them in a report that it filed with Botswana Energy Regulatory Authority (BERA) as a part its application to adjust electricity tariffs for the 2021/22 financial year.
“The Morupule B 600MW project, which was to be completed in November 2012, did not meet its intended objective of providing 600MW (gross) firm generation capacity over a period of 30 years,” it says in a report to BERA. “The plant was taken over by BPC in June 2014 prior to the contractor meeting its contractual obligations in order to gain control of the power plant as the contractor was threatening to shut down the plant to force BPC to accept the works.”
According to BPC, the total cost of the project, including cost of transmission infrastructure for power evacuation, was P12 billion. The document says the Corporation engaged an Operation and Maintenance (O&M) contractor to operate the plant and train BPC staff to enable the takeover of its operation. The contract ended in June 2019 and the plant is now operated by BPC staff.
According to the power utility, before the takeover of the plant in June 2014, a comprehensive technical study (Gap Analysis) was conducted to determine the scope of measures to be undertaken by the contractor to remedy construction and equipment defects in order to deliver a fully compliant plant.
“Subsequently, the Corporation signed a Defects Remediation Agreement with the contractor in August 2016 (1st Defects Remediation Agreement),” says the report. “This agreement was subsequently amended in June 2018 and the parties signed the second Defects Remediation Agreement, which allows the contractor to implement its preferred design of one of the critical boiler components.” BPC says implementation of Remedial Works on the first unit (Unit 4) started on 19 June 2019 and was originally scheduled to be completed on 4 September 2020. However, the planned completion date was not met due to the impact of the outbreak of the coronavirus on the project.
Because of this, says the document, the contractor declared Force Majeure in February 2020, saying it could not mobilise staff from China to site to carry out the remedial works (commissioning activities). BPC says the total impact on the timeline is not yet known. It is understood that commissioning activities commenced after a lockdown that had been in force and after mobilisation of staff from China to site. BPC says it was working closely with all relevant stakeholders to facilitate travel arrangements of Chinese staff to Botswana at the time.
In its tariff application to BERA, the power utility wants a 5 percent upward tariff adjustment for the year 2021/22. However, BERA subsequently said it decided to increase the tariff by a less rapid rate of 3 percent. “This was done in recognition of the need to cushion consumers against a higher tariff adjustment on the back of a previous 22 percent increase for the year 2019/20,” said BERA in its 2020/21 annual report that was released recently.
