CIC Energy, the Botswana Stock Exchange (BSE) listed company, has extended the Engineering, Procurement and Construction (EPC) contract that it signed with a Chinese company for the development of the ambitious Mmamabula Energy Project.
In an update to Sunday Standard, the company revealed it was keeping systems ready for the regulatory matters to be resolved in South Africa.
“The extension of the EPC contract is a key accomplishment towards maintaining the Mmamabula Energy Project and keeping it ready to restart project development after the resolution of regulatory matters in South Africa. The resolution is with regards to new power projects,” said Greg Kinross, President of CIC Energy.
The planned capacity for the power station, located in the Central District, will be approximately 1,320 megawatts (MW) (gross) or 1,200 MW (net), comprised of two supercritical 660 MW units (gross).
The project is currently delayed by the lack of a conducive and ready environment in South Africa for Independent Power Producers (IPPs) that will fill the gap left by Eskom.
Mmamabula can only attain fruition when the Integrated Resource Plan (IRP2) is published, provided the IRP2 caters for Mmamabula.
South Africa is currently in the process of developing its second IRP2, which is expected to be a 20 year framework for electricity supply.
Under the new regulations passed in South Africa in August 2009 (Electricity Regulations on New Generation Capacity), the decision on signing PPAs with independent power producers rests with the South African government, through the Department of Energy.
South Africa’s IRP2010 is expected to be a 20 year country plan detailing how the country will acquire additional electricity supply to meet the projected demand hike from 2013 onwards.
IRP2010 is anticipated to include a combination of new government owned power stations and independent power producer (IPP) projects, like Mmamabula.
The first public consultation period for input parameters to the IRP2010 was completed in June. A first draft of the proposed IRP2010 approved by the South African cabinet is expected to be released to the public in August.
Based on this draft IRP2010, a second and final round of public consultation will then take place. South Africa’s target date to gazette the final IRP2010 is the end of September 2010.
“We remain cautiously optimistic that these regulatory matters will be resolved in the third or fourth quarter of this year, in conjunction with the gazetting of the IRP2010,” added Kinross.
Shanghai Electric Group was identified as a preferred EPC contractor after lengthy negotiations, as most of the contractors are busy somewhere else.
The Chinese outfit ranks amongst the largest manufacturers of power plants in the world, having sold 30 000 MW in 2007 comprising units of between 300 MW and 1000 MW each.
It uses technology base from Siemens/ Westinghouse, Alstom and Foster Wheeler.
Actually, Siemens owns 32 percent of Shanghai Electric turbine factories, and most of Shanghai Electric’s power plants are under the license of Siemens. Shanghai Electric accounts for 35 percent of every new power plant built in China.
The extension maintains the fixed price for this lump sum turnkey contract for the engineering, procurement, construction, testing and commissioning of the power station for the Mmamabula Energy Project.
The contract now extends beyond the period expected to be required for approval of the second Integrated Resource Plan (IRP2010).
Cost estimates for the first phase of the project are at $3 billion.