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TheStreet Open House

Botswana To Push Power Infrastructure Investment As Power Imports Phase Out, Says Frost & Sullivan

CAPE TOWN, South Africa, April 19, 2012 /PRNewswire/ -- Electricity demand in Botswana is projected to grow at a compound annual growth rate (CAGR) of 4.6 per cent from 2011 to 2020, following robust economic growth and increasing rural electrification. It is further estimated that about $750 million will be invested in the Botswana electricity industry within the next five years. Such investments will be critical, as power imports from South Africa (which supplied 68 per cent of Botswana's power needs in 2011) will stop from 2013 onwards, in an attempt by the latter to address its domestic power supply deficit.

New analysis from Frost & Sullivan ( http://www.energy.frost.com), 2011 Update of the Botswana Electricity Industry, finds that Botswana's electricity industry is expected to grow significantly with additional power generation capacities coming on stream in 2012-13 (the 600 MW Morupule B coal-fired power station currently under construction). Some other power generation capacities are planned to be commissioned in 2015-16 (300 MW), and possibly in 2017-18 (300 MW).

"New power generation capacities will most probably be based on coal, given the large untapped deposits available in the country. They will be owned by independent power producers (IPPs) given the limited financial means available to the loss-making state-owned power utility, Botswana Power Corporation (BPC)," remarks Frost & Sullivan's Energy and Power Systems Research Analyst Celine Paton. "Indeed, new power generation capacities are urgently required in Botswana as peak power demand is hardly met."

As the Botswana electricity industry moves forward, key challenges will include low electricity tariffs, combined with an inadequate electricity regulatory framework and a general lack of infrastructure.

"Electricity tariffs are not cost-reflective, explaining the increasing operational losses encountered by BPC," notes Paton. "Also, BPC has been facing spiralling costs of electricity imports, as a consequence of the tight power supply in the region as well as the successive electricity price hikes implemented by Eskom in South Africa."

Botswana will need to decrease its reliance on its neighbours as a source of (expensive) power supply. Toward this objective, the government will need to revise its electricity regulatory framework with, as a first step, the establishment of an independent regulatory agency.

A new independent regulatory agency – Botswana Energy and Water Regulatory Agency (BEWRA) – is expected to be put into place by end 2012, if the process runs smoothly. It should help ensure a more cost-reflective tariff structure that will attract private sector investment.

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