No one is to blame for decrepit Morupule B
Far in excess of P12bn may have gone down the drain because BPC has made the astonishing revelation that the Chinese contractor has blamed the incessant state of decrepitude at Moruple B power station on a force of nature over which the contractor had no control
Batswana will be burdened with hefty tariff escalations because the company contracted for remedial works at Morupule B to bring the chronic decrepitude of the power plant to an end and on stream has declared force majeure on the project and may be trying to advance the advent of Covid-19 as the reason.
“The contractor has since declared force majeure,” the CEO of Botswana Power Corporation (BPC), Edward Rugoyi, said this week. “We are yet to determine the total impact of COVID-19 on the timeline.”
Rugoyi was speaking at a public hearing arranged by the Botswana Energy Regulatory Authority for BPC to present its case for seeking a 5 percent tariff increase on Monday. However, his astonishing revelation of force majeure went unremarked and was perhaps even unnoticed by everyone present, including BERA personnel who included the regulator’s Chief Operations Officer, Duncan Morotsi.
It is therefore unknown how far the contractor, China National Electric Equipment Corporation, went with this declaration and whether BPC and BERA have accepted it. In the event that it has been accepted, it means that the contractor will not be held responsible for anything concerning the project even though the force of nature that is being advanced as the reason only began in China in December last year and did not Botswana until February this year while the project goes back to 2014.
The initial cost was P12 billion but more money, including P8 billion that it shared with Morupule 1, has been added in the course of the years.
The CEO was at the head of a six-man delegation at the public hearing to explain BPC’s application for permission to increase tariffs by 5 percent in 2021 and 4 percent in 2022. In motivating for the increment, Rugoyi argued that BPC’s tariffs had to be cost reflective in order if the utility should deliver reliable and affordable energy to the nation.
However, the long running malfunction of Morupule B became a spanner in the works for Rugoyi as the BERA panel raked him over hot coals, demanding certainty about when the plant will come into full operation. The panel asked Rugoyi how he expected government to account for Morupule-B, given that it is almost always out of commission.
BPC’s unaudited financials for the year ended 31 March 2020 show a Total Comprehensive Loss of P1.456 billion and utility continues to accumulate losses due mainly to low availability of Morupule B – which is estimated at 31 percent. Botswana currently generates 40 percent of its power and imports 52 percent. This is so costly that BPC spent P861,352 million buying power from the Southern African Power Pool (SAPP) in 2019.
Morupule B was commissioned in 2012/13 amid much pomp and fanfare as Botswana looked forward to becoming an exporter of electricity to the region. But the P12 billion plant failed to provide the expected 600MW generation because most of its units soon collapsed. After taking over the ‘defective’ plant in 2014, BPC conducted a gap analysis to determine the scope of remedial works and signed a Defects Remediation Agreement with China National Electric Equipment Corporation.
Only two units are functional at Morupule B at the moment, producing 230MW out of the expected 600 MW. Unit 2 is operating at restricted capacity, generating 80MW while Unit 3 is operating at full capacity.
According to Rugoyi, remedial works at Unit 4 were delayed by COVID-19 lockdowns, which made it impossible to mobilise staff and equipment from China. “The contractor has since declared force majeure,” he said. “We are yet to determine the total impact of COVID-19 on the timeline.”
Asked why the project is taking so long, Rugoyi answered that BPC wanted to make sure that the right contractors, designs and materials are used so as not to repeat previous mistakes. “We have to fix all the construction defects that emerged after the plant was commissioned, carry out due diligence on the equipment manufacturers and suppliers, and even conduct tests at every stage to ensure good workmanship,” he said.
Rugoyi told the panel that BPC’s precarious financial position will continue unabated if electricity tariffs are not cost reflective in the face of an ever-decreasing government subsidy.
While private sector representatives like Botswana Chamber of Mines were not averse to a single-digit increment, it remains to be seen whether BERA will accede to BPC’s request.