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. This independent power producer (IPP) project will help meet the region’s significant need for new baseload power generation capacity.

The MEP will be the largest single private sector investment ever to take place in Botswana.

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 commercial operations are expected four years after the signing of definitive loan agreements (or Financial Close).

CIC Energy has submitted formal bids for Power Purchase Agreements (PPAs) to Eskom Holdings Limited and Botswana Power Corporation in March 2009, the expected electricity offtakers for the ME . A formal response is pending. 

In July 2009, CIC Energy announced that it has signed a Project Development Agreement with International Power plc to operate the power station and become a 35 per cent equity participant in the project.

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

Financial Close for the MEP is anticipated as soon as practicable.

The Company is also in active discussions with potential partners, beyond International Power, to take an equity stake in the MEP. 

Future milestones for the MEP are:

• 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

• 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 Project is more than US$80 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

• Aurecon  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,Standard Bank and Bank of China – 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 in January 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 and an approval is pending.

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.