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The Mmamabula Energy Project (MEP) is a planned power station and integrated coal mine to be built at the Mmamabula coalfield in Botswana, Africa. Significant new baseload power generation capacity is required in southern Africa to sustain economic growth and restore critically low system reserve margins. The MEP will help meet the region’s significant need for new baseload power generation capacity.
CIC Energy announced in March 2009 that it had signed a contract with Shanghai Electric Group (SEC) as the engineering, procurement and construction (EPC) contractor for the MEP power station. The planned capacity for the power station is 1200 MW (net) and it is expected to be in commercial operation in early 2013.
CIC Energy has submitted formal bids for Power Purchase Agreements (PPA) to Eskom Holdings Limited and Botswana Power Corporation, the expected electricity offtakers for the MEP. As the terms and conditions of these agreements had been substantively negotiated previously, CIC Energy anticipates concluding the PPAs in mid 2009.
Eighty per cent of the project funding for the MEP is expected to be financed with debt and the remaining 20 per cent with equity. The debt financing is expected to come from three sources:
- Development Finance Institutions (DFI) with a mandate to fund projects in developing countries (examples of DFIs include Industrial Development Corporation of South Africa Limited, Development Bank of Southern Africa Limited, IFC and African Development Bank)
- Certain export credit agencies like the Export Credit Insurance Corporation of South Africa (Pty) Ltd (ECIC) and export facilitation banks like the Export-Import Bank of China
- South African and other commercial banks
The signing of definitive loan agreements (or Financial Close) for the MEP is expected in the third quarter of 2009.
The Company is also in active discussions with potential partners, including independent power producers, to take an equity stake in the MEP.
CIC Energy’s estimated capital equipment and infrastructure costs related to the MEP power station and mine are approximately US$3 billion.
Future milestones for the MEP are:
Mid 2009
- Reach agreement with an independent power producer (IPP) partner
- Conclude PPAs and other project agreements including those with the Government of Botswana
- Issuance of mining, power generation and other licences
- Commence the procurement process for the construction of the first coal mine
- Begin site preparation and other pre-construction work
- Signing of definitive loan agreements or Financial Close
Late 2009
- Start of construction for the power station and coal mine
All technical feasibility studies have been completed on the Mmamabula Energy Project and total investment by CIC Energy in the Mmamabula Energy Complex is more than US$100 million.
MEP Feasibility studies include:
- Snowden & CIC Energy’s Mining Team – NI 43-101 compliant mineral resource estimates
- CIC Energy’s Mining Team – Mineral resource modeling & mine planning
- Environmental Resources Management (ERM) and Digby Wells and Associates for Groundwater and Environmental Studies, and Gibb Africa – Surface Water Studies
- Dowding, Reynard and Associates (Pty) Limited (DRA) – Mine beneficiation plant designs
- Africon and DRA – Design of common infrastructure
Advisors to the Mmamabula Energy Project include:
- Project Legal Counsel, International: Clifford Chance, Local: Edward Nathan Sonnenberg
- Lenders Legal Counsel, International: Shearman & Sterling, Local: Webber Wentzel Bowens
- Parsons Brinckerhoff (PB Power) – Owner’s Engineer
- NM Rothschild and Sons Limited – Project Financial Advisors
- Absa Capital and Standard Bank – mandated lead arrangers
CIC Energy must obtain an independent power producer (IPP) licence and a mining licence from the Government of Botswana for the MEP. The Company announced on January 24, 2008 that new legislation to amend the country’s Mines and Minerals Act and Electricity Supply Act received approval from the Government of Botswana cabinet and passed the third and final Parliamentary reading. This new legislation facilitates the MEP. In February 2008, these bills became law following Presidential approval and gazetting.
CIC Energy has completed the final mine plan for the Serorome Block of the Mmamabula Coal Field that will supply the MEP power station. The planned capacity for this coal mine will be approximately 4.5 million metric sales tonnes per annum. In December 2008 CIC Energy submitted its application for a mining licence to the Government of Botswana.
Environmental approvals for amended Environmental Impact Assessment (EIA) studies that reflect a 1200 MW (net) power station and mine from the Government of Botswana are expected in 2009. Environmental approvals are a prerequisite for the granting of a mining licence, an independent power producer licence, and surface rights at Mmamabula, as well as the acquisition of transmission line and other necessary servitudes in Botswana. Full environmental approvals for the previously proposed 2100-2400 MW power station and mine had been received in 2007.
CIC Energy has commenced a formal tender process for the common infrastructure related to the MEP including clearing of the project site and certain earth works, roads, water supply and wastewater treatment facilities, housing development, a railway spur, waste disposal and other facilities. These infrastructure construction contracts are expected to be awarded in mid 2009.
The Mmamabula Energy Project is being developed in accordance with the Equator Principles, a voluntary set of guidelines based on the International Finance Corporation’s (IFC) environmental and social standards. The IFC is the private sector arm of the World Bank Group and these standards are considered best practice for projects in developing countries. MEP will also meet important standards of the World Health Organization.
- March 2009 -
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