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Chinese firm tables offer for Morupule B

A decision on the Morupule B offer price in expected in the next two weeks
China Machinery Engineering Corporation (CMEC) has submitted an offer to buy the 600MW Morupule B power station from the Botswana Power Corporation (BPC).

BPC chief executive officer (CEO), Dr Stefan Schwarzfischer confirmed to BusinessWeek that they are currently evaluating the offer  but declined to indicate how much it was.

“CMEC has submitted an offer which we are currently evaluating, so I assume the evaluation would be finalised within the next 10 days and then Public Procurement and Asset Disposal Board (PPADB), the ministry and BPC would sit together and map a way forward,” he said.

Following this, the Chinese bidder would then start negotiations with the negotiating team from government, a process that should be done before the end of this year. If successful, the handover of the plant would be done around February or March next year.

 CMEC is the sister company to the Chinese firm that built the trouble-ridden plant in 2012, China National Electric Equipment Corporation (CNEEC).

According to Schwarzfischer, the disposal process is defined and there are certain steps and milestones that need to be fulfilled.

The CEO told the BusinessWeek earlier that by beginning of next year, CNEEC would have to conduct remedial work at the power station that would cost around $120 million.

The process, which is expected to take five years, would start with the refurbishment of Unit 1, which would be totally shut down.

However the corporation would still be supervising the remedial works, as they prefer the materials not to be purchased in China.

“BPC would still be overseeing the remedial process as ahead of the bidding process we have been negotiating with the CNEEC and agreed that they need to buy quality materials and we would ensure that,” he said.

In April this year a team from the energy ministry went to China to conduct due diligence on the sale

of the Morupule B with expectations to conclude the deal by July this year.

By then Schwarzfischer declined to speculate on how much the plant could cost, but said CMEC would be the first external entity to put a value on the plant that was built for $1.2 billion in 2012, but has incurred billions of pula in extra costs for remedial works.

The bungling of works at the power plant has forced government to spend an additional P5 billion in remedial works as well as power imports, the Public Accounts Committee was told.

But appearing before the Committee earlier in the year, Obolokile Obakeng of the Ministry of Minerals Resources, Green Technology and  Energy Security said on top of the initial investment of $1.2 billion (P12 billion) for the construction of the plant and related transmission lines, an additional amount of P5 billion was spent, mostly on importing power to cover the deficit. This brings the total investment in Morupule B and related power imports to around P17 billion, an amount that government is unlikely to recoup from the impending sale of the power station back to the Chinese contractors.

Since commissioning in 2012, the plant often broke down leading to reliance on diesel generators and imports from South Africa. The sale of Morupule B to an independed power producer (IPP) will leave the country with just a 120MW power, which is currently under refurbishment, being the only power plant that BPC directly owns. Two other power plants producing a total of 600MW through IPPs are planned for the next five years with the tender for the first 300MW having been already awarded to a South Korean-Japanese Joint venture.




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