STEAG gets two-year Morupule B deal
Brian Benza | Friday April 25, 2014 16:12
According to Botswana Power Corporation (BPC) chairperson, Sebetela Sebetela, negotiations for a substantive O&M deal are at an advanced stage.
STEAG, which piped Chinese company CNEEC to the lucrative deal after negotiations between the contractor and BPC, broke down, is currently operating and maintaining the plant on an interim contract.
In a recent interview with Business Week, Sebetela said that the Chinese company would continue with remedial works to bring the plant to full generation while STEAG will run the plant on long-term basis.
“We have not finalised all contractual aspects of a long term O&M deal but the negotiations are for a two year contract,” he said.
While efforts to get an estimate on how much the O&M deal would be worth failed, Morupule B sources say it is likely to be more than double the offer that CNEEC had tabled.
“CNEEC has proposed a contract sum of between $60 and $70 million over two years but with STEAG that figure could double or triple due to the high manpower costs charged by the Europeans,” said the source at the plant.
CNEEC was involved in the construction, maintenance and operation of Morupule B Power Station before the boiler failures broke the plant down leading to widespread power outages. According to Sebetela the plan is to have all the four units running by the end of June.
“We expect to have Unit two back on line by end of May and Unit four recommissioned by the end of June if not before,” he said, adding that the success of the plant will be key to the efforts of turning round and the operational and financial performance of BPC.
“We can generate power at Morupule B at far more favourable rates than the current costs of imported power and once its up and running at full capacity, it means there would be no need to import power and this will greatly cut down our costs,” he said.
A team of energy experts from the US will jet into the country next month for an intensive analysis of the causes of technical failures at the power station. They are expected to do a root cause analysis to enable government and the BPC to trigger recourse clauses in the contracts surrounding Morupule B’s development.
CNEEC officials recently said the Chinese firm had thus far lost about P300 million due to the delays in Morupule B’s completion.
“The project has been delayed for over 18 months now and we have incurred out of budget costs of over P20 million a month,” one official said.
“We will not make any money in this project. In fact we are going to make a huge loss. But our president has said that despite the losses, we should make sure we deliver the project and bring it to completion,” said the CNEEC official.
While CNEEC is expected to bear the brunt of the root cause analysis’ findings, any one of the numerous contract parties to the P11.1 billion project could share the blame. Contractual players in Morupule B include government; the BPC and its consultants; and CNEEC and its sub-contractors.