Mmamabula power project costs could top $10bn - AfDB

| Friday June 6, 2008 00:00

The project costs have been going in one direction and that is upwards and so I personally won't be surprised if it ends up being higher than $10-billion, Tim Turner, director of private sector and microfinance development at the AfDB, told delegates at the World Economic Forum conference in Cape Town.

The project, which includes a coal mine and two 2, 500 MW power stations, is situated in southeast Botswana on the border with South Africa and was initially slated to cost around $6-billion (P38 billion).

The project is being developed jointly by Canada's CIC Energy Corp, International Power Plc from Britain and Japan's Sumitomo.

Uncertainty over the final costs were fuelling the funding crunch, said Turner, adding that the equipment supply market for the energy sector was extraordinarily tight given a global power shortage.

Turner said the AfDB, which has suggested that the Mmamabula scheme form part of the banking groups new African Financing Partnership, was hopeful it could commit funding in the near future.

The challenge on this particular project is just now how to mobilise that amount of financing given the global credit crisis, said Turner of the project which would provide 75 percent of its power generated to South Africa and the remaining 25 percent to Botswana.

South Africa, one of Africa's strongest economies, is in the midst of an energy crisis which has scared investors and hit the mining sector amid regular blackouts.

Turner said given the banking industry's hesitancy in lending money, development finance institutions and export credit agencies might have to play a larger-than-usual role to raise funding. (Engineering news)