The planned US$800 million (P8.6 billion) expansion of Morupule B has suffered a crippling blow after the Japanese government its financial support.
Two government-affiliated financial institutions of Japan, the Japan Bank for International Cooperation and the Nippon Export and Investment Insurance announced earlier this year that they had stopped their official consideration to finance and insure the Morupule B coal-fired power plant project.
The plant was a subcritical 150MW x 2 units project planned by a Japanese company, Marubeni Corporation, a Korean company and a number of citizen partners.The decision by the two Japanese financers came at a time when the government of Botswana was plotting a way out of the Morupule B 5&6 multi-billion Pula lopsided agreement with Japanese contractor Marubeni Corporation.
The Botswana power Corporation had already sought legal advice from Lawrence Khupe Consulting on circumstances under which their agreement with Marubeni Corporation “can be renegotiated and/ or alternatively terminated.” This was after the former BPC Chief Executive officer Dr. Stefan Peter Schwartzfischer who was worried that the Marubeni agreement would bankrupt the corporation wrote to President Khama, proposing a plan to wiggle out of the contract.Local and international anti-coal power lobbyist this week however claimed credit for the decision by the Japanese financier to pull out of the deal.
The Botswana Climate Change Network (BCCN) has been campaigning in tandem with Japanese NGOs to end the financing of the two new Morupule coal plants by Japanese investors. BCCN’s National Coordinator Tracy Sonny was quoted saying, “This is a great milestone that we have achieved and we will continue working closely with the government on investing in solar.”
Documents passed to the Sunday Standard detail how Japanese contractor Marubeni Corporation and its politically connected citizen partners trapped government into a lopsided contract with significant windfall profits at the expense of the tax payer and the BPC.
Marubeni Corporation was awarded the tender to expand Morupule B power plant by another 300MW (Unit 5&6). The Sunday Standard has in its possession a letter from former BPC Chief Executive Officer Dr. Stefan Peter Schwartzfischer dated 6th June 2017 warning President Khama about how the Morupule B5&6 unconscionable contract with Marubeni Corporation would cripple the BPC and the Botswana economy.
Schwartzfischer took issue with the firm Purchase Power Agreement (PPA) between government and Marubeni Corporation. The tariff structure of a Purchase Power Agreement (PPA) came in two forms; a firm (take and pay) and a non firm (pick and pay). The disadvantage of a firm PPA is that the buyer pays for 100% of the power generated whether used or not, while a non-firm PPA is favourable to the buyer as the buyer pays only for utilized capacity.
The BPC boss came up with a six year projection of the financial burden on BPC which would arise from the firm PPA agreement between government and Marubeni Corporation. Botswana’s demand forecast indicated that the country would have surplus generation capacity from year 2020 and in that year, BPC would lose P1.9 billion in payment for surplus electricity it does not need. In 2020 BPC would pay P1.95 billion for the electricity it will buy through the firm PPA instead of the P 26 million it would pay for its electricity needs under the favourable non-firm PPA.
Government officials who negotiated the project also undertook to provide a sovereign guarantee to the contractor to raise a loan for the project. The project which would have been Botswana’s first Independent Power Producers (IPP) project where the contractor funds construction of the power station and recouped their investment from selling power to BPC was supposed to have commenced two years ago but stalled because government would not provide the sovereign guarantee.The Japanese contractor was demanding a P8.5 billion ($804 million) suret.