Mmamabula Will Proceed On Schedule - Kinross

Staff Writer
Johannesburg: The first phase of the $3 billion Mmamabula Energy Project (MEP) will not fall victim to the global credit crunch.

Speaking at a press conference here last Thursday, the President of CIC Energy, Greg Kinross, whose company are the promoters of MEP, said he is confident that they will be able to raise the required capital because the targeted sources of the finances have not been affected by the financial crisis that is forcing a host of mining and energy development projects across the globe to be either shelved or downsized.

Kinross said the huge demand for energy in the southern Africa should see mining and energy development projects getting enough support to see them through financial closure, construction and full scale operation.

"We are looking at sourcing our funds from mostly development finance institutions (DFIs) and export credit agencies and these, unlike most commercial lenders, have not been scathed by the credit crunch," he said.

 "Although we are operating in a very volatile environment at the moment, potential funders should also get security from the power purchasing agreements (PPAs) we are going to sign with the governments of Botswana and South Africa through their respective power utilities."

CIC Energy, along with a yet to be identified independent power producer, will finance 20 percent of the project through equity investments while 80 percent of the funds will be sourced from debt instruments from DFIs, export credit agencies and South African commercial banks.

CIC hopes to submit formal bids to the two off-takers South Africa's Eskom and the Botswana Power Corporation for long-term PPAs as well as reach an agreement with an independent power producer (IPP) partner early next year.

But Kinross declined to

comment on negotiations with PPAs which have been dragging for some time over pricing, saying the matter was highly "sensitive at the moment".

The procurement process for the construction of the coalmine is also expected to start early in the New Year with commencement of early infrastructure works expected in mid-2009.

Eddie Scholz, CIC's Chief Operations Officer (responsible) for Mining, said its power station could produce 6,000 megawatts of power over 40 years.

"There is enough coal for 6,000 megawatts of power for a 40-year period," Scholz said. 
Commenting on the ambitious plan to commission the plant by late 2012 or early 2013, CIC's Chief Operations Officer for Projects Tore Horvei said he was confident that Chinese EPC contractor, Shanghai Electric (SEC), will deliver within the targeted timeframe because of their vast experience in this line of business.

"SEC should deliver within the stipulated time because of their huge experience in erecting power plants and also the fact that they manufacture their own raw materials, unlike other EPC contractors that have to procure from somewhere," Hoevei said.

"I believe the target that we have set for ourselves is not very ambitious. Infact, judging by Chinese standards, it is conservative (because) some power generation units in China were being brought online within 15 months from the start of construction."

Horvei said they had asked the Botswana government to allow them to use expatriate skills only during the construction phase and pledged to transfer the skills to Batswana during the operation stage where about 1,000 people are expected to be employed.



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