After considering the funding requirements of the Group into the future, power utility, NamPower has revealed that it has taken a decision to de-list the NamPower bond programme from both the Johannesburg Stock Exchange (JSE) and the Namibian Stock Exchange (NSX) subsequent to year end.
Going forward, plans are underway to register an appropriate programme on the NSX; NamPower reflected in its recently released Integrated Annual Report for the 2021/2022 Financial Year.
“In addition, the Group is in discussions with several Development Funding Institutions (DFIs) to source the financing needed to support its capital development programme. The successful conclusion of these initiatives will result in an increased level of debt being carried on NamPower’s statement of financial position,” expressed NamPower adding that the shareholder, the Government of the Republic of Namibia, continues to support NamPower, without which the delivery of its mandate would not be possible.
In the same financial year, as a result of the combined effects of the increase in cost of electricity, the net fair value loss on embedded derivatives on Power Sale Agreements and Power Purchase Agreements and a lack of growth on electricity sales, the Group made a loss before interest and tax amounting to N$2.3 billion compared to a profit of N$1.1 billion achieved in the previous year.
The operating losses incurred and the low collection rate from customers resulted in negative cash flow from operations being available to meet debt service obligations.
“As a result, the Group has informed the affected lenders (being KfW, ADB and EIB collectively referred to as the affected lenders) that it failed to comply with the financial covenants under the various finance contracts, namely the Debt Service Coverage Ratio (DSCR). As a result of this notified event and pursuant to the terms of the contracts in place, the affected lenders would, inter alia, be entitled to demand immediate repayment of the loan outstanding.
“In light of the above, NamPower requested the affected lenders to amend and waive certain provisions of the finance contracts. Pursuant thereto, the affected lenders waived their rights to demand an immediate repayment of the loans outstanding. In line with the international reporting standards adopted for use, the Group has disclosed the loans outstanding relating to the breach amounting to N$524 million as current liabilities as at 30 June 2022,” NamPower further revealed.
CHALLENGING YEAR
Despite a 2.92% tariff increase awarded to NamPower by the regulator, group revenue for the 2021/2022 financial year remained the same as the prior year, at N$6.5 billion. This is primarily driven by the decrease in sales volume of 5% (2020/2021:10.3%) from 3,903 GWh to 3,701 GWh, indicative of the prevailing challenging economic conditions in the country. Maximum demand increased to 638 MW compared to 617 MW achieved in June 2021, an increase of 3.4% (2020/21: 10.3% decrease) due to extreme weather conditions experienced in the country during June 2022.
The cost of electricity increased by 13.9% from N$4.5 billion achieved in the previous financial year to N$5.1 billion for the year under review.
NamPower relies on regional trading partners to meet the country’s electricity demand. Ruacana Power Station operated mainly as a mid-merit peaking plant for the year, except between March 2022 and April 2022 when late rains were received in the middle-lower Kunene River catchment area. The flow averaged 78 cumecs (2020/2021: 93 cumecs), decreasing NamPower’s generation to 19.9% compared to 24.1% achieved in the previous year. Of the total 4,097 GWh units of electricity into the Namibian system during the year under review, 71.2% (2020/2021: 67.4%) was imported from the region.
“The high cost of imported electricity was the main contributor to the increased cost of electricity, driven by the depreciation of the Namibia Dollar against the United States Dollar, in which some major import contracts are denominated,” the power utility said.
Cash generated from operations decreased from N$992.4 million during the previous year to negative cash generated of N$350.2 million.
“This is mainly attributed to the increased cost of electricity and slow collection of revenue from customers. Management has reached out to the customers in order to find solutions for customers to clear outstanding debts. NamPower acknowledges the financial challenges posed by the difficult economic situation in the country, the impact of the Covid-19 pandemic on businesses and has engaged customers to negotiate reasonable payment plans to settle their accounts. Although this initiative has not yet yielded the desired results, it is encouraging to report the improved debtors’ collection days from 90 days to 77 days over the reporting period,” NamPower said.
NamPower went on to say that the impact of the Covid-19 pandemic on businesses, combined with the struggling economy remains persistent, with only a gradual improvement in economic activity expected.
“In addition, weather patterns have become more and more unpredictable, impacting on generation output from NamPower’s intermittent sources. NamPower nonetheless, continues to focus on delivering on its mandate – of ensuring the security of supply amidst these challenges faced. We have concluded another financial period marked with consistent availability of power to our customers.
“Such achievements within a region experiencing significant power shortages than ever before came at a cost which is evident in the financial results presented herein. NamPower’s role as a supplier of last resort stretched the Company’s financial resources to avoid load shedding. Ensuring security of supply remains the guiding principle in our dealings with our counterparts within the region, as the cost of load shedding to the economy far outweighs high import prices. Namibia will remain dependent on imported electricity and will continue to experience the effects presented by other regional utilities, both positive and negative, until several new generation sources are implemented within the country by NamPower, supplemented by independent power producers.”
Employee costs for the year amounted to N$992.5 million (2020/2021: N$996.6 million) representing a decrease of 0.41% (2020/2021: 4.1% increase) for the year under review. There were no salary increases granted to employees during the year under review. The head count decreased by 2.7% from 1,165 to 1,134 at the end of the financial year. Combined, these accounted for the decrease in employee costs.