SA investors bag another local power project
Staff Writer | Tuesday July 7, 2015 15:04
The deal for the Mmamantswe coal and power project was worth an initial A$10 million (P77 million).
The project, which is estimated to host 1.25 billion tonnes of coal, has an approved Environmental Impact Assessment (EIA) for a coal mining operation of up to 10 million tonnes a year and a 2,000MW power station.
In a statement released yesterday, the Botswana Stock Exchange (BSE) listed African Energy announced it had signed a term sheet with a South African project developer to divest of Mmamantswe.
It did not disclose the name of the developer. Subject to certain conditions precedent, African Energy would sell the Mmamantswe project, which is just 20km from the South African border, for an initial sum of $10 million to the developer, with the option of another $10 million if the deal is concluded.
The developer is expected to use the Mmamantswe project to form a bid consortium to fund the preparation and submission of a bid into South Africa’s upcoming Coal Base-load Independent Power Producer (IPP) Procurement Programme.
“African Energy will be paid an initial sum of $10m if the project bid is shortlisted by South Africa’s Department of Energy.
“On receipt of the initial $10m, African Energy will transfer ownership of its shares in the Mmamantswe project company to the developer,” read the statement.
African Energy would receive a second payment of $10m if the project reaches financial close. If it reaches closure, the deal would see African Energy remaining with only the Mmamabula west coal project as the only 100 percent owned asset in Botswana.
Last year, African Energy sold off 51 percent of the Sese power project to Canada’s First Quantum Minerals.
African Energy’s partnership with a major mining company mirrors similar developments in the rest of the local coal mining industry. Most junior coal miners are looking to partner with larger companies with stronger balance sheets to develop coal mining and power projects.
Most junior miners have balance sheets of under $10 million while it requires between $700 million and $900 million to set up a 300MW power station.
Botswana junior coal explorer, Shumba Coal has partnered with a South African firm, Mulilo Renewable Project Developments, for the joint development of the Mabesekwa Export Independent Power Plant (MEIPP), which will export power to the neighbouring country.
The MEIPP is a 300MW energy capacity project with a minimum 260MW net supply to grid after auxiliary and mine consumption.
Another coal firm Jindal, which owns 2.7 billion tonnes of coal resources in the Mmamabula coalfields, also recently announced plans to offload 74 percent of their company to South Africa’s Glendal Trading.
Due to the depressed coal prices coupled with the lack of suitable evacuation infrastructure to the sea, most coal focused mining companies in Botswana have shifted focus from exports to power generation, with South Africa’s Eskom the primary off taker target.