In a statement released on Tuesday, CIC Energy, which is listed on both the Toronto and Botswana bourses, said it had extended the Engineering, Procurement and Construction (EPC) contract, originally signed by its subsidiary Meepong Energy, with Shanghai Electric Group in March 2009.
"This extension maintains the fixed price for this lump sum turnkey contract for the engineering, procurement, construction, testing and commissioning of the power station for the Mmamabula Energy Project," the statement says.
"The contract now extends beyond the period expected to be required for approval of the second Integrated Resource Plan (IRP2010) by the Department of Energy of South Africa."
CIC says the extension of the EPC contract is a key accomplishment towards maintaining the Mmamabula Energy Project in a ready mode so as to be in a position to restart project development as soon as South Africa's regulatory matters regarding new power projects are resolved.
"We remain cautiously optimistic that these regulatory matters will be resolved in the third or fourth quarter of this year, in conjunction with the gazetting of the IRP2010," says CIC President, Greg Kinross.
South Africa's IRP2010 is expected to be a 20-year country plan for how South Africa will bring on new electricity supply to meet projected demand for power from 2013 onwards. IRP2010 is anticipated to include a combination of new government-owned power stations and independent power producer (IPP) projects like the Mmamabula Energy Project.
South Africa's target date to gazette the final IRP2010 is
end of September 2010 and cannot commit to any Power Purchasing Agreement (PPA) with CIC before then.
The PPAs were designed around a 30-year off-take agreement, which would see Eskom buy 75 percent of Mmamabula's 1 200-MW capacity and BPC the remainder.
The delay has frustrated Botswana's plans to cover its energy supply-demand gap as the country was expected to get 25 percent of the project's 1 200MW in the first phase.The Minister of Minerals, Energy and Water Resources told the Energy Pitso held in Gaborone this week: "I have not quite given up hope yet on Mmamabula." Ponatshego Kedikilwe was referring to the scepticism surrounding the project.
Initially, the Mmamabula project was to supply electricity to South Africa and Botswana by as early as 2013. However, the bureaucratic hiccups in Botswana's powerful neighbour will delay it even further by a couple of more years, if it does go ahead.
The planned capacity of the Mmamabula Energy Project power station will be approximately 1,200MW comprising two supercritical 600MW units. MEP is being developed independently of CIC Energy's smaller power station project, the 300MW Mookane Domestic Power Project ("MDPP"), which is also located at the Mmamabula Coal Field.
Electricity generated from the MDPP will be targeted to supply Botswana. Estimations are that the project will produce six million tonnes per annum with the power plant producing 1,200 megawatts of power from the Mmamabula Coal Field, which boasts 2.63 billion tonnes of coal.