Government is considering dropping the planned P8 billion expansion of Morupule B, looking at the preferred bidders’ demands for default guarantees and the improved supply outlook for the country, BusinessWeek has learnt.
Mineral Resources, Green Technology and Energy Security minister, Eric Molale has written to finance minister, Kenneth Matambo asking for final advice on whether to proceed or drop the project.
The expansion involves the addition of two 150MW to the existing 600MW Morupule B. In 2015, the government named two Asian mega-corps – Marubeni from Japan and Posco from South Korea – its preferred bidders with work due to have begun last January.
However, a dispute over guarantees and other commitments for the project has meant a prolonged delay, with government threatening to put the project on the backburner, arguing that the country was being asked to shoulder an unfair proportion of risk for the project.
“We have been discussing with people from finance looking at the supply and demand of electricity and the demands of the bidder. “We are now at the moment where I have drafted a letter to the finance minister to say are we going forward or we stop? “That will be dealt with through the advice of the Attorney General. It is important to note that we had not signed with them,” Molale said in response to BusinessWeek questions on Tuesday.
Specifically, Marubeni and Posco wanted a sovereign government guarantee or surety in the form of an upfront payment of about $804 million, to cushion them against the risk of the Botswana Power Corporation defaulting on future payments for power from the new units at Morupule B. The two Asian mega-corps upped the ante on the deal earlier this year by launching a project office at which their senior executives from Japan and South Korea attended in person.
Top minerals ministry officials skipped the event, whose highest-ranking government official was the assistant trade minister, Moiseraele Goya.
With the 600MW Morupule B, the refurbished 120MW Morupule A, a 100MW solar plant in the works and a 160MW in installed diesel plants, government is reportedly reluctant to take on any more commitments for electricity. On Tuesday, Molale said developers, particularly those in solar, were constantly knocking at government’s door with proposals for various projects.
“We are bogged down with unsolicited bids in solar, promising us all sorts of good things, but when we say how will this be done, many say they want sovereign guarantees and we cannot do that,” he said.