After it failed to reach a deal with a preferred Engineering, Procurement and Construction (EPC) contractor that has delayed Mmamabula Export Energy Project, CIC Energy officials say they are still locked in negotiations for a cheaper solution in Asia.
This will allay fears from investors that CIC Energy being quiet might validate fears that the project might be abandoned for fear of costs as experienced by the Tati Activox in Francistown that was postponed because of costs.
The spokesperson for CIC Energy venture capitalistsÔÇöTau Capital Corp, Sabina Srubiski, told Sunday Standard on Friday that since they last made an update mid this year on the Mmamabula Energy Project, the ‘project remains on track’.
“CIC Energy’s negotiations with a select group of Asian EPC contractors are ongoing and are expected to be concluded before the end of 2008 with the announcement of a preferred contractor,” revealed Srubiski.
Mmamabula energy project developed complications after the promoters failed to clinch a turnkey EPC deal with a preferred contractor in May due to a tight market with contractors signing contracts with those with cash in hand and entering deals underwritten by power off takers.
In the case of Mmamabula, the two electricity starving power off takers, the Botswana Power Corporation (BPC) and Eskom of South Africa, felt that it was risky to underwrite the contracts as costs kept on rising.
Initially, Mmamabula was estimated to cost P37 billion, but projections because of tight market shot to P105 billion.
This forced CIC to downscale the project to a sizeable Phase One with a capacity to produce 1, 200 MW with space for expansion as time went on.
Initially, the energy project was supposed to be a mega power station with two phases with Phase One comprising a mine producing 10 million tons a year supplying a power plant of approximately 2, 400 MW.
The resized power station will comprise 600 MW units with commercial still on schedule for 2012 or early 2013.
“The next significant milestone is the selection of engineering, procurement and construction contractor for the first phase of the power station, which is being designed at 1200 megawatts with provisions for expansion,” Srubiski added.
Srubiski added that in August, CIC Energy announced a 28 percent increase in the coal resource at its Mmamabula Coal Field. The new coal resource estimate for Mmamabula now totals approximately 3 billion tonnes of coal.
The new coal resource indicates that there is enough coal for all three projects CIC Energy is planning at its Mmamabula Coal Field. As well as the Mmamabula Energy Project, the Company is undertaking a Coal-to-Hydrocarbons Project (CTH) and an Export Coal Project.
The CTH Project will convert coal to a variety of downstream products including fuels and petrochemicals, by first gasifying the coal to produce synthesis gas (syngas). A major technical feasibility study has been completed by Jacobs Engineering and CIC Energy has also signed an agreement with Shell for the option to acquire a license for Shell’s coal gasification technology for the CTH Project.
The Export Coal Project envisions seaborne traded A-grade thermal coal from the Mmamabula Coal Field being exported to international markets from the west coast of southern Africa.
Plans for this project include: dedicated mines with multi-product (double stage) beneficiation plants, an approximately 1,500 kilometer Trans Kalahari rail line west to the Namibian coast and upgrading an existing Namibian port to accommodate sufficient coal to load large ocean going vessels using a high capacity ship loader.
A mine, rail, coal terminal and port pre-feasibility study is underway and is being conducted by MRN Runge, DRA, Africon and CIC Energy. The Company’s initial talks with the Governments of Botswana and Namibia have been well received.