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Eskom makes CIC sweat over Mmamabula power agreement

Staff Writer
CIC Energy, the promoters of the proposed Mmamabula Energy Complex says it is still waiting for a response from South Africa power utility Eskom for power purchase agreement offer.

In a statement yesterday, CIC says the offer was taken through Eskom's formal governance process, culminating in consideration of the offer at an Eskom board meeting held on June 18.

The company said it had expected that a response to the offer would be received from Eskom soon after the board meeting. However, a response to the offer has not yet been received.

"Eskom has informed us that the delay in receiving a response is the result of ongoing discussions between Eskom and the government of South Africa," the statement said.

The BSE-listed company says it expects to receive a response to the offer from Eskom once these discussions have been completed.

"As soon as a response has been received from Eskom, CIC Energy will provide a further update, including an update to the anticipated schedule to reach Financial Close, which is no longer expected to be achieved during the third calendar quarter of 2009."

NM Rothschild & Sons, the project's financial adviser, is currently finalising a preliminary information memorandum and terms sheets for distribution, while South African banks Absa Capital and Standard Bank were unveiled

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as the mandated lead arrangers for the commercial bank facility and the Export Credit Insurance Corporation (ECIC) of South Africa will provide a portion of the debt financing.

CIC said the project would be financed from three sources of debt, which include commercial borrowings and export credit agency finance, with organisations such as the ECIC and the Export-Import Bank of China.

But CIC Energy also intended raising funds from development finance institutions such as the Industrial Development Corporation, the Development Bank of Southern Africa, the World Bank's International Finance Corporation and the African Development Bank.CIC Energy is also in active discussions with potential partners to take an equity stake in the Mmamabula Energy Project; these discussions include an IPP partner. A lender technical due diligence process will start within weeks with the appointment of the "lender's independent engineer".

A number of independent engineers had reportedly been short-listed by the lender groups, which comprised development finance institutions, export credit agencies and commercial banks.The power facility will be air-cooled to conserve water and embrace flue gas desulphurisation to remove sulphur from its air emissions.



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