Sese power project granted tax breaks
Brian Benza | Friday April 28, 2017 14:16
ASX-listed coal and energy junior, African Energy on Wednesday announced that the Ministry of Finance and Economic Development has approved the Sese Joint Venture’s (JV) application for a Manufacturing Development Approval Order (DAO) for the proposed 450 MW Sese power station.
“Sese Power, the JV entity responsible for power generation, has been granted a five year tax holiday from its first year of commercial operation and thereafter a preferential 15% company tax rate,” the company said.
Corporate tax rate in Botswana stands at 22%. Sese Power is now required to enter into a formal tax agreement with Botswana, which requires the approval of Parliament.
The Sese Joint Venture is planning to develop an integrated coal mine as well as a 450MW power plant in eastern Botswana for the delivery of power to Zambia and neighbouring countries.
The JV is managed by majority shareholder, First Quantum Minerals Ltd, who are earning up to a 75% interest in the project.
Under the terms of the JV, First Quantum will take about half of the power to its Zambian copper mine operations with the rest supplied to other markets.
Botswana holds an estimated 212 billion tonnes of coal resource, but the industry remains largely undeveloped with state-owned Morupule Coal Mine (MCM) being the only operating coal mine.
The government recently awarded a mining licence to Sese Joint Venture coal project marking a key step towards setting up Botswana’s second independent coal mine and power station.
The Sese coal project becomes only the third coal mining licence holder in the country after MCM and Jindal’s Mmamabula project.
Most junior coal miners in Botswana are looking to partner with larger companies with a stronger balance sheet to develop the coal mining and power project.
Most junior mining firms have balance sheets of under $10 million and it requires between $700 million and $900 million to set up a 300MW power station.
Junior energy company, Shumba Energy has also partnered with a South African firm, Mulilo Renewable Project Developments, for the joint development of the Mabesekwa Export Independent Power Plant (MEIPP), which will export power to the neighbouring country.
Another coal firm Jindal, which owns 2.7 billion tonnes of coal resources in the Mmamabula coalfields has shelved initial plans to offload 74% of their company to South Africa’s Glendal Trading.