Developers of ambitious Mmamabula Export Power project said on Friday the regulatory uncertainties regarding South Africa are the biggest challenge to the advancement of the integrated power plant, allaying fears to shareholders that it has been scrapped.
There has been talk in the energy sector that the project has been shelved with some calling for government to back alternative energy sources including abundant solar energy.
“The MEP has not been shelved and the project is ready to be restarted if and when the IRP2 is published, provided the IRP2 caters for the MEP”, Erica Belling, Vice President Investor Relations at Tau Capital Corp told Sunday Standard.
“All Independent Power Producers with projects that intend to sell electricity to South Africa, which are planned to be commercial beyond 2013, like CIC Energy’s Mmamabula Energy Project, must wait for the IRP2 to be gazetted before negotiations of power purchase agreements can be undertaken”, Belling added.
The Government of South Africa is currently in the process of developing its second integrated resource Plan (IRP2) for the country, which is expected to be a 20 year framework for electricity supply.
“Until this IRP2 has been gazetted in South Africa, which is expected this year, discussions regarding a power purchase agreement for the Mmamabula Energy Project with the Government of South Africa remain pending,” Belling said.
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 is the Government of South Africa’s, through the Department of Energy.
Eskom, which will be electricity off taker with Botswana Power Corporation (BPC), is no longer the decision maker.
South Africa’s stated policy is that 30 percent of its electricity supply will come from Independent Power Producers (IPPs).
IRP2 is expected to provide the framework under which IPPs will operate following the Electricity Regulations on New Generation Capacity that were published by the Department of Energy of South Africa in August 2009.
In the meantime, to use its vast coal resource, CIC Energy has previously announced it is working on a second smaller power station project primarily for the Botswana market, which will not be affected by the regulatory delays in South Africa.
The 300 MW Mookane Domestic Power Project (MDPP) is being developed independently from the Mmamabula Energy Project (1200 MW), and will also be located at the Mmamabula Coal Field.
In March 2010, CIC Energy said it had signed a Memorandum of Understanding with GCL Projects Limited regarding the development of this project.
The project developers base their hope that based on forecasts of South Africa’s future needs for electricity, the current supply (including new projects that have been approved) is not expected to be adequate to meet the county’s anticipated consumption of electricity.
Therefore, additional electricity supply will be needed to support economic growth and development.
“The MEP is the most advanced large IPP project under development and therefore it is well positioned to be able to supply substantial quantities of electricity to South Africa in the shortest possible time frame.”
Botswana Government said it not true that parties in the project have sabotaged plans to the development of Mmamabula.
There is talk in Botswana that South Africa might be dwarfing Botswana’s attempts to be a power exporter.
Botswana has been importing almost 80 percent of electricity from the giant neighbour therefore forgetting to build capacity.