Morupule�s new coal mine hangs in balance
Brian Benza | Friday April 21, 2017 17:52
The new mine is supposed to supply coal to a new power station at Morupule B whose construction has been delayed due a dispute between government and the Independent Power Producers (IPPs).
Japan’s Marubeni and South Korea’s Posco last year won a tender to build Unit 5 & 6 at Morupule B power plant but works, which were due to start in January this year, have been delayed after the joint venture said it required a P8 billion sovereign guarantee from government for it to secure funding from banks.
In a response to BusinessWeek enquiries, MCM chief communications officer, Bontle Maruatona said the expansion of the underground coal mine through a 1.35 million tonnes per annum open cast mine is dependent of the IPPs (Marubeni) securing funding to start the project.
“The construction phase of the Unit 5 & 6 project is planned to start in April 2018. However, this is dependent on the Independent Power Producer (IPP) financial close.
“Morupule Coal Mine (MCM) Unit 5 & 6 opencast mine, will supply a total of 1.35 million tonnes of coal at 100% to the Independent Power Producer (IPP) per annum. The Unit 5 & 6 will not ordinarily supply Morupule B,” she said.
Unit 5 & 6 power plants are due to become Botswana’s first IPPs projects where the Asian joint venture would build the plants at their own cost and recoup their investments from selling the power to Botswana Power Corporation over a 30-year period at P812 per Kilo Watt hour (KWH).
But that project has been stalled due to a standoff with government over a P8 billion sovereign guarantee that the IPPs are demanding before they start works.
The Minister of Minerals, Energy Security and Green Technology, Sadique Kebonang revealed to BusinessWeek that it appeared that the IPPs need the sovereign guarantee to secure funding from financial institutions.
“All along the understanding was that Marubeni already has the funds in place to start the project as soon as the Power Purchase agreement (PPA) was signed. It now looks like they need the sovereign guarantee to secure funding,” Kebonang said.
When they won the tender early last year, Marubeni and Posco announced that $600 million will be financed by Export-Import Bank of Korea, Japan Bank for International Cooperation (JBIC) and an international commerce bank through project financing.
If government gives in to demands for a sovereign guarantee, it would need approval from Parliament, which is currently on recess until July. Current production at MCM is two million tonnes per annum with 70% of this production supplied to Morupule B and the remaining shared between local users and exports to neighbouring countries being Namibia, South Africa and Zimbabwe.
According to Maruatona, final costs for the expansion project have not been confirmed as the bankable feasibility study process is being optimised.
“The funding of the project will be by both equity and debt,” she said.
MCM and the IPPs have already signed a 30-year coal sales agreement to supply the new power station.
During construction stage, the mine is expected to employ between 600 and 700 workers with about 350 workers retained when the mine is operational.