As a result of frustrating and tedious regulatory process in South Africa that will pave way for the Power Purchasing Agreement (PPA) with Eskom, the developers of Mmamabula Energy Project have been forced to defer some of the activities.
The company said Monday night it was deferring certain financial, legal and engineering activities related to the mega power project in Africa.
CEO of the Botswana Stock Exchange (BSE) listed company, Greg Kinross said the move does not, however, affect CIC Energy’s program of project development activities for the Export Coal Project and the Coal-to-Hydrocarbons Project, which the company intends to continue as previously planned.
“While the slow pace of the regulatory process in South Africa is frustrating, these spending deferrals and our C$41 million treasury give us the flexibility to weather this delay,” said Kinross.
The company said the decision follows regulatory developments in South Africa.
The Minister of Energy of South Africa recently announced an integrated resource plan, which is to be approved and gazetted by the Minister pursuant to the Electricity Regulations on New Generation Capacity that were published by the Department of Energy of South Africa on August 5, 2009.
The minister suggested that the first integrated resource plan (referred to as IRP1 will only cover requirements for new generation capacity for the three year period from April 2010 to March 2013. 
“Requirements for new generation capacity for later periods (i.e. 2013/2014 and beyond), being the period the Company considers to be the relevant period for the Mmamabula Energy Project, will be addressed in a second integrated resource plan referred to as IRP2, which will be prepared following an extensive public consultation process that will commence in the first quarter of 2010 and is targeted for completion in mid-2010”, stated CIC Energy.┬á
CIC Energy said as a result of these developments in South Africa, it has reassessed its current program of project development activities for the project.
The company’s program was designed to facilitate a rapid achievement of financial close and commencement of construction once a regulatory approval had been received.┬á
“Given the anticipated content of the IRP1 and the current timetable for completion of the IRP2, the Company has determined that it would be prudent to defer those project development activities unrelated to the regulatory approval process in South Africa until such time as the IRP2 has been completed”, it stated.
CIC Energy has presented formal bids to Eskom (75%) and Botswana Power Corporation (25%) for offtake agreement.
However, there have been problems in South Africa as the Independent Power Producer (IPP) model is relatively new in the region hence laws needed to be changed.
BPC can only sign the agreement after Eskom has done so.
