Road Town, Tortola, British Virgin Islands — MININGREVIEW.COM — 24 June 2008 – Canada’s CIC Energy Corporation – listed on the Toronto and Botswana stock exchanges – has confirmed that the phase one Mmamabula energy project in south-eastern Botswana cannot proceed as initially envisaged.
A CIC announcement here explained that this outcome had resulted from the conclusion of discussions with South African power utility Eskom Holdings Limited and the Botswana Power Corporation on the revised EPC risk allocations as required by the preferred EPC contractor.
Moody’s ratings agency stated earlier this week that the Mmamabula energy project – which includes a coal mine and two 2 500 megawatt power stations – was in danger of being scrapped or down-sized because of an almost threefold increase in costs. It was initially estimated to cost about US$6 billion (R48 billion), but this figure has risen to about US$16 billion (R128 billion).
In its latest statement, CIC Energy says it has been unable to reach an agreement for a turnkey EPC contract, on terms and conditions acceptable to potential MEP lenders, within the timeframe specified by the preferred EPC contractor. This agreement was necessary to secure the manufacturing slots for long lead-time equipment (such as boilers and turbines) which determine the project schedule.
Consequently, the statement added, these slots were no longer earmarked for the phase one Mmamabula energy project.
CIC Energy added that it intended to assess and consider alternative configurations for the phase one Mmamabula energy project to supply power for the region’s growing needs. One alternative was downsizing the project to a smaller power station.
A full update would be provided to all investors over the coming weeks on the company’s revised plans to develop the large Mmamabula coal resource in Botswana, the statement continued. This update would include:
- Alternative phase one power station project configurations
- Preliminary results from the feasibility studies on the company’s coal-to-hydrocarbons project
- Progress on the company’s coal export project
“We are disappointed that phase one of the Mmamabula energy project is not able to proceed as originally envisaged with our preferred EPC contractor,” CIC Energy president Gregory Kinross confirmed. “We are exploring alternative project configurations, and will provide a full update shortly.”