The promoters of the Mmamabula Energy Project (MEP), CIC Energy, are pressing ahead with their ambitious plans to build the 1200 MW plant in Botswana despite the glitch they faced last week concerning the power purchasing agreement with Eskom of South Africa.
Barely a week after announcing that the off-take of the project was likely to be delayed by at least a year, CIC came back to excite the market this week by announcing the clinching of a project development agreement with International Power (IPR), a British independent power generation company.In a statement, TSX-listed CIC said on Monday it had signed a project development agreement with International Power with respect to its $3 billion (P22 billion) Mmamabula project.
"The agreement had been negotiated in accordance with an earlier agreement, in September 2008, pursuant to which CIC Energy and IPR agreed to continue to work together in developing one or more power stations in Botswana by using coal from the Mmamabula coal field," the CIC statement said.
"The project development agreement sets out the framework under which the two companies (will) 'endeavour to negotiate' definitive agreements pursuant to which IPR would become a 35-percent equity participant in the MEP.
IPR (will) be responsible for the operation and maintenance of the power station component of the Mmamabula project."
Last week, CIC announced that South African power utility Eskom had notified it that it could not commit to the purchase of electricity from the project because it had not yet finalised its funding model.
CIC had announced on July 2 that it had submitted a tariff offer to Eskom and had been hoping to finalise a power purchase agreement with the utility by mid-2009.
The project, which would also supply power to Botswana's national power utility, required
CIC president Greg Kinross said at the time that it would review its project development programme in light of Eskom's announcement.
The company's spokesperson Erica Belling told Engineering News Online that the signing of the project development agreement was one of the milestones the company had to reach before the financial closing of the project.However, she emphasised that the signing of an off-take agreement by South Africa's Eskom was an important requirement of the project as the 1 200 MW power plant capacity, which was one element of the Mmamabula project, was too large for Botswana to take up alone.
Eskom's announcement that it is not ready to commit to purchase power from the Mmamabula project constitutes a problem for Botswana Power Corporation (BPC) which expected to get only 25 percent of the initial 1 200 MW scheduled to come on stream in 2013.
The delay likely to result from this could worsen power shortages in Botswana. Eskom started to downscale supply to Botswana last year. MEP and other similarly ambitious projects such as the Morupule B were meant to address both the local and region-wide shortfall.
Statistics from the Botswana Ministry of Minerals, Energy and Water Resources indicate that the country's energy needs rose to 610MW in 2009 from 530MW, above a planned capacity of 510MW in 2009.
This deficit is forecast to widen even more in 2010 with available capacity standing at 445MW and demand at 670MW.