The country’s highest office has entered the four-year deadlock over whether government should go ahead with the US$800 million (P8.6 billion) expansion of Morupule B; several highly placed insiders have confirmed to BusinessWeek.
Two Asian mega-corps – Marubeni from Japan and Posco from South Korea – won the tender to expand Morupule B by 300MW in 2015 and were due to have begun work in January 2017 on a 42-month contract.
While Morupule B currently has four units capable of producing 600MW, it has never produced that much due to frequent breakdowns and is due to undergo intensive repairs over the next four years. The Asian joint venture meanwhile has still not kicked off due to a dispute over a government support agreement required for the two firms to reach financial close.
This week, authoritative sources said President Mokgweetsi Masisi had been alerted on the deadlock and had resolved to discuss the matter definitively at an upcoming Cabinet meeting.
“This issue has gone through two Ministers and numerous officials who have been referring it back and forth, much to the frustration of the joint venture partners,” insiders told BusinessWeek. “The Minerals Minister is expected to lay out the status of this project before Cabinet and explain what has been delaying it for the past several years.” BusinessWeek is informed that Marubeni and Posco had already secured funding for the project, including US$100 million from each partner, with the funds held in escrow, awaiting the support agreement. The funds, from lenders such as the Japan Bank for International Cooperation, Korean EXIM and Sumitomo Mitsui Banking, are earning interest against the joint venture partners. The stalemate is troubling local businesses, particularly as Morupule B continues to operate below capacity, while the return of Morupule A has become mired in technical and financial issues. In South Africa, Botswana’s go-to supplier of power, is experiencing deepening load shedding with indications that these may last for years as two of Eskom’s major new builds, Kusile and Medupi, reportedly require major overhaul.
Business Botswana president, Gobusamang Keebine said it was essential government made a final decision
“Government saw the need for this expansion four years ago, so why are we will running around four years later?
“The problem is indecisiveness when we need to move quickly and ensure that power is available in this country.
“Government, at Ministry level, is not making decisions and this will hurt the economy.
“This process has been long, tedious and it may affect the long term relationship we have with the Japanese and the Koreans,” he told BusinessWeek.
Keebine added: “If we are reneging on that agreement, let us be precise and we must also say what the alternative is, in terms of power supply”.
The Ministry of Mineral Resources, Green Technology and Energy Security, which calls the government support agreement a sovereign guarantee, at one point threatened to put the project on the backburner, arguing that the country was being asked to shoulder an unfair proportion of risk for the project.
The joint venture partners say government had unilaterally offered to provide the support agreement as part of the tender floated in August 2014. Posco and Marubeni argue that the agreement does not amount to a sovereign guarantee, which would need to be passed by Parliament. The joint venture partners say the agreement is only required because the cash-strapped Botswana Power Corporation may fail to pay for the power coming out of the new units.
For some time, the Ministry has said it is seeking advice from the Finance Ministry and the Attorney General on whether it is still prudent to go ahead with the project.
This week, Ministry officials maintained the same stance. “Consultations are still on-going regarding Morupule 5 & 6 power station.
“Relevant stakeholders will be informed of government’s decision in due course,” the Ministry said in response to written enquiries.