Botswana has passed a law opening up electricity generation to the private sector, which could reduce its reliance on South Africa.
Credit rating agency Moody’s said the Energy Regulatory Bill was passed last week and called it a credit-positive move for Botswana.
“Although the bill will not instantly boost Botswana’s electricity-generating capacity, we expect that it will do so over time,” said Moody’s on Thursday.
The rating agency said the new law would set up an independent Botswana Energy Regulatory Authority to oversee the legal framework in the electricity sector and would facilitate private sector entry, particularly independent power producers (IPPs), and help IPPs attract funding.
“In the future, the IPPs will be able to charge tariffs, approved by the independent regulator, that are both cost effective and consumer friendly,” said Moody’s.
“Two recently approved 300-megawatt extensions of the state-owned Morupule B electricity plant rely on IPPs. One of the 300-megawatt plants, to be completed in 2020, will be jointly operated by Korea’s POSCO Energy and Japan’s Marubeni. The additional electricity generation will reduce severe electricity shortages and frequent outages that Botswana has experienced over the past several years.”
The extra power will ultimately reduce Botswana’s reliance on South African electricity.
Moody’s said Botswana imported about 40 percent of its power in the last two years; before that it had imported up to 90 percent a year.
In the fiscal year ended March 2015, Botswana imported 1 528GWh, which was almost 40 percent of its distribution; most of this was from South Africa’s Eskom, said Moody’s.
“However, this import dependence has made Botswana vulnerable to Eskom’s inefficiencies and South Africa’s power shortages, making electricity imports from South Africa increasingly costly and unreliable,” said Moody’s.
The Southern African Power Pool is made up of South Africa, Botswana, Lesotho, Mozambique, Namibia, Swaziland, Zambia and Zimbabwe; South Africa both sells electricity to and buys it from this group.
Eskom’s 2016 integrated annual report records that it exported 13 465GWh of power during 2015/16, including 1 099GWh to Botswana, and imported 9 703GWh. During 2014/15, Eskom exported 12 000GWh, including 1 237GWh to Botswana, and imported 10 731GWh.