Four-way race opens for 300MW contract

Powering the nation: Morupule B is the country’s primary coal-fired power station PIC: MBONGENI MGUNI
Powering the nation: Morupule B is the country’s primary coal-fired power station PIC: MBONGENI MGUNI

Four local coal developers have been shortlisted by government to develop a 300MW power station, the last fossil-fuel-based electricity the state plans to procure in the next 20 years. Minergy Coal, Sese Power, Jindal Africa and Maatla have extensive resources on the country’s coalfields and are at varying, but largely advanced, stages of development. Of the four, only Minergy is already in production while Sese, Jindal and Maatla have coal mining licences.

The 300MW tender first floated in 2013, represents the only government-backed fossil fuel procurement in the 20-year Integrated Resource Plan prepared by the Ministry of Mineral Resources, Green Technology and Energy Security. The balance of projects in the plan is from sustainable sources.

“There is a 300MW tender that has been given out and we believe the companies shortlisted will prove successful at it,” Mineral Resources, Green Technology and Energy Security minister, Lefoko Moagi told a televised briefing on Monday. “The four companies are already advanced and we are yet to see which one will be selected. “The power station will be built next to the mine.”

Of the four shortlisted firms, Minergy is expected to be a nose ahead of the field as it already has a demonstrated coal mine in operation, while the other bidders will have to prove both coal mining capacity and readiness as well as power station readiness.

However, bidders will be ranked primarily according to technical and financial capacity, as well as any experience the project leaders have. Project funding for coal has been drying up globally ahead of the 2030 deadline set for developed nations to abide by the UN’s climate change commitments. Developing nations such as Botswana can use coal power until 2050, but many of the financiers of major energy projects are in developed countries already turning away coal, leaving China as the primary source of funding.

The 300MW being government-backed means all the bidders will have an added guarantee when they approach funders for the power station, particularly since Botswana still enjoys Africa’s best sovereign credit rating.

Botswana Chamber of Mines CEO, Charles Siwawa said Botswana would use all coal opportunities available at its disposal ahead of the official cut off by the UN.

“We have a lot of coal and even if we gain $10 billion between now and when they want us to stop, for us it means a lot for our economy, even if for some people it may not be anything,” he said. “We can use that $10 billion to improve and when we stop, the economy will be somewhere. “We are also not irresponsible in the development of our coal and the mining has to be done responsibly."

While the costs of a 300MW power station are not known, CIC Energy, which Jindal Africa took over in 2012, previously estimated that its own 300MW coal-fired power station could cost US$800 million including the cost of the capital equipment and infrastructure. The estimate was valid as at 2010 and adjusting for costs over the years, the 300MW power station could cost over $1 billion.

According to the tender award, the winning bidder will be expected to build, own, operate and maintain the plant which can be located anywhere in Botswana. The winning builder will also have to enter into a Power Purchase Agreement with the Botswana Power Corporation. Analysts said the pricing of the power coming out of the station will be determined by capital and operating costs, the profit mark-up charged by the developer and other factors.

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