A recent decision by government to directly award a tender for the construction of units 7 and 8 at Morupule B to a South Korea-based consortium came as a blow to Botswana’s own local companies, energy and coal firm, African Energy decries.
Government says it is currently in negotiations to use the direct appointment method to engage a joint venture between two South Korean firms, KEPCO and Daewoo, to construct Unit 7 and 8 at Morupule B.
In a statement, the Botswana Stock Exchange (BSE)- listed African Energy says the South Korean consortium has no operations in Botswana and has not previously invested anything in the country, while Botswana-based coal and energy companies have made considerable progress towards exploration and development of mines and power stations.
“African Energy, Jindal Botswana and Shumba Energy have invested an estimated P3 billion in the past 10 years and created employment for over 300 Batswana.
The government’s decision could have a negative impact on the participation of private-sector coal companies in assisting with diversifying the economy. Companies in the country have had their sights on a government’s 300MW greenfield power plant tender, which is now at risk of being handed over to the international consortium,” said the company.
African Energy currently owns coal projects at Sese, Mmamabula and Mmamantswe. Of the three projects, Sese is the most advanced where the company has completed a joint venture agreement with First Quantum Minerals to jointly develop a 300MW power with a captive 1.5 million tonnes per annum coal mine. Additional 300MW developments at Sese are proposed.
African Energy says due consideration in the Morupule B expansion tender process should be given to companies operating and with interests in Botswana as a country.
“Botswana remains a popular destination for mining investment and is consistently ranked among the top mining jurisdictions in Africa. But this status could be compromised if the competition is being eliminated from the industry,” said the company.
Local coal and energy companies have been eyeing government’s
proposed 300MW greenfield power plant tender which was first floated in 2013, but now feel that the power station will never see the light of day due to the coming on stream of unit 7 and 8.
With Unit 7 and 8, local power production will be catapulted to over 1,300MW, well above local demand.
Companies that were invited to submit bids include; IK Holdings (Australia), Mabesekwa Holdings (China/Botswana), Goldington (USA), Jindal Steel and Power (India), PPN Power (India), ACWA & African Energy (Saudi Arabia/Australia), Marubeni (Japan) and American Energy and Infrastructure (USA).
Since the shortlisting in 2013, the companies claim there has not been any progress on the tender.
After burning fingers at the Chinese built units 1-4 at Morupule B, government seems to have taken a deliberate decision to skew towards South Korean firms. Currently, a South Korean firm is refurbishing the 120MW Morupule A while another Seoul-based firm Posco has won tender to develop units 5-6 at Morupule B.
Furthermore, African Energy says serious concerns surround the impact of the recent establishment of the state-owned Minerals Development Company Botswana (MDCB), which controls state-owned Morupule Colliery, on the potential for the private sector to develop, given that government power stations are the largest local market for coal. MDCB chief executive officer, Paul Smith was recently quoted saying that they would expand Morupule Colliery to compete with the private sector both domestically and in coal exports.
“These decisions may also affect South Africa, since the Department of Energy (DoE) and National Energy Regulator of South Africa (NERSA) recently passed a verdict to formally determine the terms for cross-border electricity procurement. The determination states that electricity must be purchased from independent power producers (IPPs),” African energy laments.