Nov 21, 2008, 4:52 AM
The National Water and Electricity Company (NAWEC) is currently owed a whopping sum of D150,000 million, the company's 2008 annual report and financial statement submitted to the Public Accounts/Public Enterprises Committees of the National Assembly has revealed.
"Although Government has been able to significantly reduce its arrears owed to the National Water and Electricity Company (NAWEC) through a cross-settlement arrangement, there still remains more than D150 million owed to the company by others," the report, which was submitted last Wednesday, stated.
According to the report, the amount owed by the local area councils and some few Government institutions account for more than 70% of the total arrears. "Thus, it is hoped that the on-going Government intervention may go a long way in assisting the company to recover a substantial part of the arrears, which will also, undoubtedly, go a long way in reducing liquidity problem of the company," the reports added.
The NAWEC report further states that given that the cost of sales is more than the total revenue for 2008, there is an anticipated loss of more than D200 million for the year. This, it said, is due to the unprecedented increases in the price of oil in the international market in 2008 which, as a consequence, also increased the operating costs of the company as well as invoices amounts of the Global Electrical Group.
Besides the huge loss for 2008, the liquidity situation of the company has also not been very good and the company has been finding it difficult to meet some of its loan repayment, the report notes.
It also stated: "Fuel prices in 2008 have adversely impacted on the overall financial performance of the company and on its liquidity in particular. For instance, in 2007, NAWEC spent D241 million and D639 million on fuel and lubricants and energy purchases respectively. However, in 2008, D480 million was spent on fuel and lubricants and D825 million on energy purchases, thus representing an increase of 98% and 29% respectively."
Despite the impact of the global financial and economic crisis, the report went on, revenues of the company increased by a marginal 4% in 2008 to D1.3 billion from 2007. Electricity sales alone, it added, account for more than 86% of the total revenue. "The increase is partly due to the existing policy of installing only prepayment meters for new applications and replacement of existing credit meters," the report noted.
It further stated that the challenge of NAWEC over the past couple of years has generally been to access sufficient financial resources to be able to procure fuel and pay for energy supplied by the Global Electrical Group under a Power Purchase Agreement. "With soaring oil prices in 2008 in the international market, at a time of global economic and financial crisis, coupled with the need to repair and overhaul some of the engines at the Kotu Power Station to ensure the availability of generation capacity, NAWEC has to borrow significantly from local banks to be able to meet its obligations to suppliers," the NAWEC report highlighted.