Morupule Colliery seeks funding for P1.7 billion expansion

MBONGENI MGUNI
Staff Writer | Wednesday June 30, 2010 00:00

 

The colliery's expansion, from its current one million tonne per annum production, involves tapping into the estimated 83 billion tonnes of coal the mine holds within its concession area between Palapye and Serowe. The expansion is necessary to support the existing and adjacent Morupule Power Station (Morupule A) as well as the 600MW Morupule B Power Station, presently under construction.

Morupule Colliery, a whollyowned Debswana subsidiary, plans to raise the capital expenditure through equity and debt, with the latter raised in the domestic banking sector. Speaking at the seventh Resource Sector Conference that kicked off yesterday, Debswana Senior Project Manager David Scott said the colliery was aiming for financial close by October this year, paving the way for construction.

'The equity funding has been allocated and in the next week or so, we will approach the market for limited recourse debt packages,' he said. 'The feasibility study has passed full review by the appointed independent consultants and we are looking at financial close by September or October this year.'

In an interview with Mmegi, Scott said the structure of the capital raising was still being resolved. When it is finalised, Morupule will know what its shareholder will contribute and the quantum to approach the local market for.

'The final structure has not been resolved,' he said. 'We are working through the funding processes at the moment. When we finish our funding packages, we will approach the market and this will be in a few weeks' time.'

The colliery and the Botswana Power Corporation have signed a 20-year contract for the supply of 50 million tonnes of coal for the Morupule A and B power stations. The contract period ends in 2023 and includes pricing, quality and other terms.

Asked whether the high capital expenditure involved in the colliery's expansion was reflected in the contract, Scott said negotiations were based on securing reasonable returns for Morupule Colliery.

'We have to purchase new machinery and other equipment for the expansion and the price of the coal has to cover this investment over the 20-year duration of the contract.'

Said Debswana officials in an earlier response to Mmegi enquiries: 'The price and quality of delivered coal provides a fair and reasonable basis for the long-term sustainable operations of the colliery in support of the expanded power generation requirements of BPC for the nation of Botswana until 2032.'

The enquiries were on the back of consumer fears that new coal under the 20-year contract, coupled with the multi-billion pula investment in Morupule B, would lead to soaring power prices from 2012 onwards.

With Morupule Colliery targeting first production from the expanded mine by June 2011, Scott revealed that major contracts worth P900 million associated with the project were being rolled out. Early works in the expansion, which include connection to the North-South Water Carrier and temporary power supply, are already complete.

According to the project schedule, the first deliveries to BPC should be made on June 1, with the expansion project team confident of meeting the timelines.

Of the three million tonnes to be pumped out by the expanded project, 2.8 million is dedicated to BPC operations while the remainder will be sold to other clients.