27 March 2009
The long-awaited expansion of Morupule B Power Station is set to take off in earnest next month, following the fulfilment of an Engineering, Procurement and Construction (EPC) contract between the Botswana Power Corporation and Shanghai Electric Company of China, the main contractor.
BPC hopes to fund the project through debt and equity finance. The Morupule B Power Station project involves the installation of 4 x 150 megawatt units. Associated projects include water supply works and the construction of transmission lines and substations for the distribution of power to the rest of the BPC grid.
The project also involves expansion of Debswana-owned Morupule Colliery that traditionally produces less than a million tonnes of coal annually.
Responding to written enquiries from Mmegi, Modiri Badirwang, BPC's General Manager (Strategic Projects) said following the signing of the EPC contract with China National Electric Equipment Corporation (CNEEC) on November 15 last year, BPC and the Chinese firm have been working towards the fulfilment of the contract and that BPC strategists have set themselves a target of commencing work next month.
BPC and Morupule Colliery are working together towards the realisation of the power project. "Coal supply to Morupule B Power Station is critical," Badirwang said. "BPC and Morupule Colliery are working in consultation with each other to ensure that the two projects, Morupule B and the coal mine expansion, are synchronised."
CNEEC officials revealed more details about the nature of the agreement sealed with the BPC. "The contract is for a Circulating Fluidized Bed Power Plant in Botswana in which CNEEC will act as the general contractor," they said. "The contract value was 970 million US dollars. The successful signing of this project marks a breakthrough to the power market in Botswana by Chinese enterprises. It is also the largest power plant project in Botswana, attracting great attention from the Government of Botswana," the officials said.
"For CNEEC, this project is also their largest EPC contract ever signed in terms of contract value. The successful signing of this contract not only marked the new breakthrough of the CNEEC's capabilities in the independent development and implementation of major projects, but will also play a very important role in CNEEC's growth in the years to come."While BPC officials were unable to comment on how far the parastatal has gone in raising capital to start the project, it is understood meetings with possible financiers and equity partners are taking place frequently.
Last December, several international financiers met in Gaborone to assess the possibilities of funding the Morupule B Power Station project. According to media reports, these financiers included bilateral, multilateral and commercial lenders such as the World Bank, Citi Group, Fortis Bank, Deutsche Bank, China Exim Bank, the African Development Bank, the Southern African Development Bank, Investec Bank, Standard Bank of South Africa, Nedbank, Absa, Capital Bank and Caylon. Local banks such as Barclays, Stanbic and FNB as well as several fund managers also participated in the meeting.
All indications are that securing funds for the massive project will be an uphill task. With the global financial crisis, credit has become scarce on the international market, while on the home front, most financiers will be unable to participate in the project to the levels required by BPC due to liquidity issues.
However, there is a positive slant to the position BPC finds itself in. Financiers are likely to be attracted to the Morupule B Power Station project due to the government's underwriting of all credit to be extended to it. Botswana's credit rating has slipped a notch lately in Moody's ratings, but the country remains among the most stable in the world. In addition, Botswana's current power demand/supply balance represents a fail-safe opportunity for a return on investment for any financier.
Also, prices of engineering materials are expected to slide in the near future, owing to the continued low prices base metals such as nickel and copper are fetching on international markets. This could improve Morupule B's economics, making it more attractive for investors to enter.
The Morupule B Power Station Project is one of many initiatives BPC will undertake to restore a healthy power demand/supply balance in Botswana. According to statistics from the Ministry of Minerals, Energy and Water Resources, Botswana's energy needs will rise to 610 megawatts (MW) in 2009 from 530MW in 2008, above a planned capacity of 510MW in 2009.
This deficit is forecast to widen even more in 2010, with available capacity of 445MW and demand at 670MW. The deficit is expected to fall gradually over the years that follow as new projects come on stream, including the 250MW Independent Power Producer coal bed methane gas project and the coal-fired Morupule B Phase 1 and Phase 2 projects. This will increase Botswana's power grid capacity to 645MW in 2011 and 795MW in 2012 against a demand of 720MW in 2011 and 750MW in 2012
Be the first to Write a Comment!
Copyright © 2009 Mmegi/The Reporter. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
