Gaborone, Botswana — MININGREVIEW.COM — 23 June 2008 – Botswana’s giant Mmamabula energy project – which includes a coal mine and two 2 500 megawatt power stations – is in danger of being scrapped or down-sized because of an almost threefold increase in costs, says Moody’s rating agency.
Reuters reports that the project – led by Canada’s CIC Energy Corporation – is situated in south-eastern Botswana, and was initially estimated to cost about US$6 billion (R48 billion). But Moody senior vice president Kristin Lindow has told the news agency that costs were now calculated at about US$16 billion (R128 billion).
“The huge Mmamabula project is in trouble,” she said, referring to rising construction, equipment and project management costs. “It was originally estimated at US$6 billion (R48 billion), two years ago it went up to US$9 billion (R72 billion), and now is has reached US$16 billion (R128 billion).”
Asked if there was a risk of the project being scrapped due to the soaring costs, Lindow added: “I think there is a definite possibility, although they are working tooth and nail to prevent that from happening.”
Lindow said the future of the project depended partly on developments in neighbouring South Africa, which was expected to be a big customer for the electricity produced.
“If South African tariffs are not going to be high enough to warrant the cost of producing the electricity on the Botswana side, then they will scale back the project to produce just enough for the medium to longer term domestic needs,” she added.