Government is considering selling Morupule B Power Plant to China National Electric Equipment Corporation, the Chinese state contractor which was commissioned to build the plant under controversial circumstances.
Completion of all four units of the 600 MW coal fired power station have been delayed by up to 25 months. The units were to be completed on different dates with unit one due on January 15, 2012.
Unit two was scheduled for completion on April 15, 2012, unit three and four due on 15 July and 15 October respectively. Unit one was delayed by 18 months, unit two by 25 months and unit three and four by 12 months and 11 months respectively.
The minister said the EPC contractor, China National Electric Engineering Company (CNEEC), contributed to the delays, adding that some were beyond the control of either CNEEC or Botswana Power Corporation (BPC).
Government has already spent P11 billion on a project that went for tender at P7 billion. Government is currently spending more money on the project which has never been fully functional and has been suffering a number of break-downs.
Running out of ideas on how to bring the plant up to being fully functional government now is considering selling the whole plant to the Chinese Contractor.
Sunday Standard contacted the Minister of Minerals, Energy and Water resource Kitso Mokaila’s option to sell which he mentioned in passing at Parliament.
Mokaila confirmed his earlier statement saying “yes we are engaging and there are so many options on the table,” he said, adding that selling the power plant to the contractor is one of the options on the table.
If government decides to sell the plant to the Chinese Contractor it means that the plant now becomes an Independent Power Producer (IPP). This means government will now be buying power from the Chinese Contractor. As an independent power plant it also means the plant can sell to other customers like neighbouring countries depending on the offer on the table.
“By virtue of it being an Independent Power Producer, my job or the Ministry’s job will be more like paying for the power that we get as a country. If I do not get power from them it means I will not pay,” Mokaila told Sunday Standard.
Minerals Water, Energy and Natural Resource Minister said the issue is at the negotiation level.
“We are still negotiating and when you are negotiating you always want to put yourself on the safe side. This is one of the options that we are looking into. I will call a Press Briefing first week of March because I think by that time I would have gotten somewhere with the negotiations then you can get a better and clearer picture on the options and negotiations,” said Mokaila.
The other option is to take legal actions against the contractor. This surfaced last week when President of Umbrella for Democratic Change Duma Boko wanted to know whether the Minster has averted his mind to any legal implications of delaying in pursuing the contractor.
“You will have to pursue a claim for damages and there are periods in which such claims can be pursued. Have you paid attention to the time frame within which you can enforce any claims against the contractor?” Boko asked the Minister in Parliament last week
Mokaila said they were pursing lots of options, “I could even divulge that one of the options we are pursuing is selling the plant to the contractor and get our money back.” He said.
The project has been running into a number of problems. Two years ago, government appointed a German company to “identify problems created by CNEEC and rectify them.”
The decision to appoint the German company, STEAG Energy Services to take over the maintenance and operation services of Morupule B Power Station from CNEEC followed a collapse in the negotiations between Botswana Power Corporation and CNEEC.
At the time, Mokaila hinted that government is worried that CNEEC may not have followed set specifications and procedures in constructing the power plant.
Announcing government’s decision to appoint STEAG Energy Services, Mokaila said it had been difficult to establish why the Chinese company was experiencing repeated failures, and whether the company followed set specifications and procedures in constructing the plant. He explained that the German company that has been appointed to take over the maintenance and operation services of Morupule B “would be in a better position to identify problems created by CNEEC and rectify them.”
Explaining the appointment of STEAG, Mokaila further hinted that the relationship between CNEEC and Botswana had broken down; saying negotiations between Botswana Power Corporation (BPC) and CNEEC had reached a deadlock.
Mokaila said BPC at one point had to engage STEAG to help identify the problems at Morupule B. He said the engagement of STEAG would give the government and BPC the opportunity to have an oversight of what was happening. He said the project was expected to be completed by October 2012 with four units churning 150MW of electricity each. To date only two units are in operation. Mokaila said the coal fired power station was crucial for the economy of the country and that it was important to ensure that everything was delivered as agreed.
The project has branched off into many controversies, and at some point CNEEC was reported to be blackmailing Botswana with a threat to pull the plug off the project or abandon it all together if they were not exempted from paying the P600 million they owe the taxman in unpaid value added tax (VAT.
The threat came after the Botswana Revenue Services (BURS) obtained a garnishee order allowing them to impound the CNEEC payment from the Botswana Power Corporation (BPC).
Sunday Standard investigations turned up information that the BPC was forced to violate the High Court order and pay CNEEC its money because the Chinese company was threatening to either abandon the project or switch it off.
The Chinese company had initially approached government for a tax exemption. When their proposal was turned down, they then turned to the BPC to masquerade as the importer of construction material from China, thus offloading liability for VAT on the Botswana parastatal. Although the Chinese company has been claiming its VAT refunds from BURS, it has not been paying its share of VAT, which has accumulated to a staggering P600 million.
It has emerged that invoices for the project were generated in China and payments also made in China where the financing bank is based, and invoices only presented to the BPC for purposes of issuing certificate to facilitate payments ÔÇô cutting out BURS.