NamPower unprofitable and breaches debt agreements

Kahenge Haulofu

THE national power utility Namibia Power Corporation Limited (NamPower) was unable to pay interest on its loans last year and risks the possibility of lenders demanding an immediate repayment of N$517 million.

These lenders include German government-linked KfW, the Asia Development Bank, and the European Investment Bank.
The lenders have not yet requested early repayment of the loan as of the date of these financial statements.

The Namibian understands that NamPower’s management has also negotiated a waiver with the lenders for the loan condition not to trigger an event of default and for the current loan conditions to remain unchanged.

The interest on all these loans are above 6,9%.

Loans from the said banks are normally offered on a concessional basis, and according to NamPower, funds earned during the financial year were insufficient to service them.

“The operating losses incurred and the low collection rate from customers discussed earlier resulted in negative cash flow from operations being available to meet debt service obligations,” reads the company’s financial accounts.

According to the board of directors, the credit rating for the period under review is maintained, and despite having received a waiver from the lenders, the directors have satisfied themselves that the company has adequate financial resources to continue operating for the foreseeable future.

The state-owned company released its financial statements for 2022 yesterday, with an after-tax loss of N$1,2 billion.
Last year, it recorded an after-tax profit of N$1,2 billion.

Operations are running at a loss of N$2,3 billion, meaning the N$6,5 billion income the company gets from selling electricity was not enough to cover all its expenses.

The company bought the electricity it sold for N$5 billion, and after adding salaries of close to N$1 billion, it would only make a profit of N$500 million.

Other expenses of N$620 million would then swallow up this profit and the company will remain in a ditch.

NamPower managing director Simson Haulofu says the company “will continuously strive to deliver sustainable security of supply and a least-cost tariff structure that supports economic growth and maintains its financial sustainability”.

Although the company has decried low cash collection, it had a cash balance of N$1,7 billion, of which N$1,1 billion was deferred revenue at the end of the financial year.

About N$6 billion was collected from consumers during the 2022 financial year – N$1 billion less than collections in 2021 at N$7,1 billion.

Chairperson of the board of directors Daniel Motinga says the cost of electricity has increased by 14%, and the approved tariff was not sufficient to cover this rise.

The company still imports larger volumes of electricity, and has listed reliance on imports as a key strategic risk, which it aims to mitigate by building its own power plants and by relying on local energy sources.

The ultimate goal it says is to be able to meet 80% of the future load demand.
During the 2022 financial year, NamPower imported electricity from Zambia (180MW), Zimbabwe (80MW) and South Africa (100 MW).

The Namibian economy is paying for these imports as it scoops up at least N$4,2 billion worth of electricity.

Since this is quoted in US dollars, NamPower now also has an unrealised foreign exchange loss of N$797 million on its books, and a N$442 million derivative liability.

Local suppliers of electricity, such as Anirep and others, share less than N$850 million.

NamPower presently imports between 60% and 70% of its energy requirements.

The company has an infrastructure worth N$37,6 billion – depreciated at N$1,3 billion for the 2022 financial year.

The return on this bill of infrastructure for the 2022 financial year was negative, but there are still plans to boost infrastructure by N$10 billion over the coming years.

NamPower has not declared any dividends to the state for the 2022 financial year.

It holds a 33,33% equity interest in Nored Electricity (Pty) Ltd, which also made a loss of N$12 million for the 2022 financial year.
Nored’s sales were at N$1,11 billion, while electricity expenses came in at N$1,12 billion.

NamPower also holds a 45% equity interest in the Central-North Electricity Distribution Company, which returned a profit of N$31,2 million for the 2022 financial year.

The City of Windhoek remains the power utility’s biggest customer, buying electricity (21%) worth N$1,4 billion.

The company’s directors, executive and non-executive, were paid N$7,6 million for the financial year, and N$4,5 million were paid to its auditors PwC Namibia.

The full financial statements are available on NamPower’s website.
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