Botswana’s utility BPC has begun to work on a significant capital expenditure for a phased expansion of its sole power station and the introduction of IPPs. Frost & Sullivan predicts that the power provider is positioned to grow at 4.8% by 2015.
New analysis from Frost & Sullivan finds that the Botswana electricity industry earned revenues of $121 million in 2007 and estimates this to reach $170 million in 2015. This growth will be due to a sharp increase in the demand for electricity, driven mainly by significant developments in the mining sector.
“The Botswana electricity industry will remain robust despite a projected decline in revenues in 2008 as a result of a considerable reduction in electricity imports,” noted Frost & Sullivan energy industry analyst Jeannot Boussougouth. “As BPC shifts its focus from essentially being an electricity importing utility to a major electricity producer, earnings will increase tremendously.”
Revenues from the sale of electricity are anticipated to reach $130 million in 2010, underlining how the expansion of the Morupule power station will lift the country’s electricity industry. This will be compounded by the expected incremental increase of electricity tariffs and the sustained demand for electricity, which is presently growing by 6.5% per annum.
BPC is currently expanding the Morupule power station, with 400 MW of generation capacity expected to be added by 2012. This, combined with the start of operations of CIC Energy’s downsized Mmamabula project, should help generate solid revenues in the country’s electricity industry.
“The commissioning of the Mmamabula project and the potential of Saber Energy Corp.’s 1000 MW-gas-fired station in the Kalahari by 2011, will sustain growth in both the supply of electricity and revenues generated,” explains Boussougouth. “However, this would depend on CIC Energy’s ability to reach financial closure for its $3-billion Mmamabula integrated coal mine and energy project. It remains to be seen if this will be achieved due to the challenges posed by the prevailing global financial crisis.”
The mining sector is the most important consumer segment in Botswana in terms of electricity consumption. It accounted for about 45.1% of BPC’s total electricity consumption in 2006. However, the effect of the current credit crunch is already being felt in the Botswana mining sector as the demand for commodities worldwide and their prices continue to contract.
“The continuous slump in the demand for key commodities such as nickel and copper is having a negative impact on mines in Botswana,” Boussougouth adds. “Several mining companies such as Debswana and Diamonex have either suspended or ceased some of their production. This is expected to translate into a significant reduction of the sector’s electricity consumption. As a result, lower revenues than expected are likely in 2009.”