Morupule�s P8bn expansion set to be aborted
Mbongeni Mguni | Friday September 29, 2017 10:57
From earlier this year, the government and the two firms, Marubeni and Posco Energy, have been engaged in a bitter dispute over the pre-conditions for the US$800 million expansion of the power station. The Asian joint venture won the contract to expand Morupule B by a further 300MW in December 2015.
Under the contract, the Asian firms were due to independently fund the construction of the project, known as Unit 5 & 6, and recoup their investment from a power purchase agreement (PPA) with the Botswana Power Corporation (BPC).
The project however stalled earlier this year, as the Asian firms demanded an US$800 million guarantee upfront from government, to cover the risk of the cash-strapped BPC failing to pay.
Yesterday evening, Mineral Resources, Green Technology and Energy Security minister, Sadique Kebonang told Mmegi that a delegation from the two firms, comprising local and international lawyers, as well as executives arrived in Gaborone last week, but no deal had been agreed upon.
Lenders and other financial partners of the two firms are also in town.
“We informed them that it had been nine months of us not moving, even when our concerns were made clear to them.
“These concerns have still not been addressed and at the beginning of September, we gave that statement to say by the end of the month, if these concerns are not addressed, Morupule B 5 & 6 will be canned, meaning from today.
“We cannot keep talking about the same issues.”
He said after the deadlock over the guarantee, the only document outstanding for the deal to kick in was a support agreement between the two parties.
“There were certain concerns that we raised about this agreement, mainly being that in terms of risk, it was one-sided,” the minister said.
“All the risk remains with government and we were not happy with that.
“That position was communicated to them a while ago and we have been raising these concerns since January.”
The two Asian firms, which together had revenues of US$145 billion in their last financials, insisted that they needed the government guarantee in order to access funding from their lenders, amongst others.
Insiders close to developments told Mmegi that after the guarantee stalemate, the Asian firms had requested a support agreement, whose terms government also felt uncomfortable with.
“The two firms were asked to revise the agreement and revert to government if they were still interested in the project.
“If that reply is not received by end of business today (Friday), then the project is off,” one source told Mmegi.
Kebonang said at present, there was no discussion about whether Morupule B would be re-tendered or abandoned in favour of the upcoming 100MW solar power plant.
“A lot of things can happen. We would opt for the solar plant which is part of our green energy targets, because we already have the existing Morupule B,” he said.
In August, the Asian firms were reportedly considering suing government for breach of contract in the dispute.
Reports suggested that a breach of contract existed under which government could be liable to a US$400 million demand, being the profit the two firms were set to make under the 30-year power purchase agreement.