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Morupule B power station

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Morupule B power station is a 600-megawatt (MW) coal plant near Palapye, Botswana.

The power station is proposed to be expanded by 300 to 600 MW.

As of 2016 Morupule and its proposed expansion is the only coal-fired power station for domestic use in the country. All other coal plant proposals in Botswana are for exporting power to neighboring South Africa.

Location

The map below shows the location of the plant, near Palapye, Central District. It is approximately half a km east of Morupule A Power Station.

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Units 1-4

Background

Morupule B power station is a 600 MW expansion of Botswana Power Corporation's (BPC) sole existing power station, the Morupule A Power Station. BPC was considering an expansion of the Morupule Power Station since 2006. One option was a 400 megawatt expansion with another option being a 1,200 megawatt expansion. The bigger expansion option would involve the sale of surplus electricity into South Africa and possibly other neighboring countries.[1]

BPC eventually decided on 600 MW, consisting of four 150 MW units. According to BPC, the impetus for the project was the country's reliance on importing approximately 80% of its power from the South African utility, Eskom. In response to electricity shortages in South Africa, Eskom decided that it would cease power exports to Botswana by 2012.[2]

The project was expected to be completed by October 2012, but by the end of 2013 only two units were in operation. BPC said the delay was due to mismanagement by the plant contractor China National Electric Equipment Corporation (CNEEC).[3] The other two units were completed in 2014, but three of the four units had broken down by October 2014, and Botswana was considering importing more energy from Eskom in South Africa until the units were repaired.[4]

Two units were running in June 2015, and the government was reportedly considering shutting the power station down.[5] By 2015 the project had cost Botswana tax payers an estimated 11 billion pula – making it the most expensive project ever undertaken in the country.[6]

In June 2016 Botswana Energy Minister Kitso Mokaila said there were plans to refurbish Units 1-4 and negotiations to sell it and have it operate as an IPP.[7]

In December 2016, it was reported that Units 1-4 of "troubled" Morupule B power station, although rated at 600 MW, were only operating at 21 percent capacity and producing 130 MW of power.[8]

In 2017 China Machinery Engineering Corporation (CMEC) submitted an offer to buy the 600MW Morupule B power station from the Botswana Power Corporation (BPC). BPC said it was evaluating the offer but declined to indicate how much it was. The negotiating process is expected to be done before end-2017. If successful, the handover of the plant would be done around February or March 2018. CMEC is the sister company to the Chinese firm that built the plant in 2012, China National Electric Equipment Corporation (CNEEC).[9]

In June 2018 Botswana scrapped the talks to sell the plant to CMEC,[10] reportedly because the offer made by CMEC fell short of what the Botswana government felt Morupule B was worth, given the initial capital expenditure and subsequent expenses. There was also disagreement over terms for remedial work on the plant, which will involve taking each of its four units down for a year, completely overhauling that unit, then putting it back online. CNEEC is bearing the costs under a contractual clause in the original agreement, and CMEC wanted to be able to use Chinese equipment for the remediation, but Botswana officials refused, given the experience with Morupule B.[11]

In November 2018 the Minister of Mineral Resources, Green Technology and Energy Security Eric Molale said only one unit was working at the Morupule B Power plant, contradicting statements by the Chief Executive Officer of Botswana Power Corporation (BPC) Dr Stefan Schwarzfischer, who said two units at Morupule B Power station were operational while unit 4 was undergoing remediation and unit 3 was out of service.[12]

Financing for units 1-4

In October 2009 the World Bank’s Board of Executive Directors approved a US$136.4 million loan for the the Morupule B project and also approved a Partial Credit Guarantee of US$242.7 million of commercial bank financing for the project. In a media release the World Bank stated that "the financing will help secure a reliable electricity supply for the country’s economic growth and poverty reduction programs. Financing will also help Botswana prepare a robust low-carbon growth strategy (consistent with the current Tenth National Development Plan: 2009-2016), strengthen management skills in the power sector, and establish a new, independent electricity regulator."[2]

The World Bank stated that the funding was for "the construction of the 600 megawatt Morupule ‘B’ coal-fired power station, accompanied by related transmission lines and a water supply system. Moreover, the project will support the country’s evolving low-carbon growth strategy, including fast-track exploration of alternatives such as coal-bed methane (CBM), concentrated solar power (CSP), and new, emerging technologies such as carbon capture and storage. In addition, the financing will provide for the establishment of an independent energy regulator, and also help to improve project implementation capacity at Botswana Power Corporation and the Botswana Ministry of Minerals, Energy, and Water Resources."[2]

The World Bank's Vice President for the Africa Region, Obiageli Ezekwesili claimed that support for the project "will help to not only increase generation capacity and access but also serve as a down payment for a greener future."[2]

Insurance from the China Export & Credit Insurance Corporation covers 95 percent of the scheduled and unpaid principal and interest amount during the first fifteen years of the WB loan.[13]

Controversies

During the bidding process for construction of the power station, there were allegations that the Chinese contractor chosen (CNEEC) was awarded the tender through questionable means, as it was said to be pre-qualified without the necessary expertise. The Chinese Ambassador to Botswana, Ding Xiaowen, had advised Ministers Ponatshego Kedikilwe and Mompati Merafhe that the Chinese state owned company was not certified to undertake a project of that magnitude.[14]

During construction, the Ministry of Minerals, Energy and Water Resources (MMWER) temporarily shut the power station down due to environmental issues. The contractors are alleged to have been pumping raw sewage to water their gardens, with the residual water contaminated with sulphuric acid flowing into the village's river networks. There are also reports that at least two Chinese workers died during construction, and some Botswana workers were injured at the power plant as a result of lax observation of safety principles. In June 2015 media reports revealed that one of the boilers at the Morupule B Power Station had melted down when it was being tested.[14]

After a 2015 investigation into problems at the plant, CNEEC contracting manager Jianio Caiyi and two other company project supervisors allegedly fled the country, leaving the Station Project Manager, Glenn Black, who later handed in his resignation.[14]

Units 5-6

Background

The 2 x 150 MW project was put out for tender in 2014. It was initially referred to as Morupule C, but was later reported as expansion of Morupule B.[15] The project would be set up by an Independent Power Producer that will enter into a Power Purchase Agreement with the Botswana Power Corporation outlining tariff charges. The project is planned along with a new open-cast mine at the Morupule coalfield.[16]

In March 2016 it was reported that Japanese company Marubeni had formed a joint venture with South Korean firm Posco Energy, which together have been named as the preferred bidder for the 300 MW expansion of the Morupule B Power Station. This will be the first Independent Power Producer (IPP) operated plant in Botswana.[17] The two firms say they will jointly design, finance and construct two 150MW circulating fluidised bed coal-fired units and then operate and maintain the plant for 30 years. Construction is expected to start late 2016, with the first electricity into the national grid by May 2020. The joint venture has contracted South Korean GS Engineering & Construction Corp to execute the project.[18]

In December 2016 the Botswana Ministry of Environment, Wildlife and Tourism of Botswana issued and environmental permit for the plant, and concluded the Purchase Power Agreement (PPA) with Marubeni. Construction was planned to begin in January 2017.[19]

However, in April 2017 it was reported that BPC was considering renegotiating or even terminating its Power Purchase Agreement (PPA) with Marubeni. Under the PPA, BCP has to buy all of the generated electricity, regardless of the amount used, leading to concerns by BCP that it would have to pay for excess electricity and risk default. In June 2017, BPC submitted a petition to the President of Botswana to reconsider the PPA. It is unclear when or if construction will begin.[19]

In January 2018 it was reported the expansion had been put on hold due to a disagreement over terms. Botswana Energy Security Minister Sadique Kebonang said the government failed to agree with Marubeni and Posco Energy on a number of issues, notably a proposed US$800 million state-backed guarantee to protect the companies’ investments. According to Kebonang: "The Power Purchase Agreement has now expired since the project failed to take off within a year from the date of signing as stipulated in the agreement.”[20]

In November 2018, it was reported that the "government is reportedly reluctant to take on any more commitments for electricity" as the country already had "the 600MW Morupule B, the refurbished 120MW Morupule A, a 100MW solar plant in the works and a 160MW in installed diesel plants".[21]

Financing

Of the US$800 million (P8.7 billion) tender for the expansion, US$600 million will be financed by the Export-Import Bank of Korea, the Japan Bank for International Cooperation (JBIC), and an international commerce bank through project financing. Marubeni and POSCO will recover their costs by selling power to the BPC through a 30-year Power Purchase Agreement (PPA). Nippon Export and Investment Insurance (NEXI) will cover the private banks’ insurance.[18]

Coal supply

The Morupule open cast mine, which will be built adjacent to the existing underground operations, is projected to be completed by 2017.[18]

Units 7-8

In April 2016 the Botswana Public Procurement and Asset Disposal Board (PPADB) announced it had approved a request by the Ministry of Minerals, Energy and Water Resources to use the direct appointment method to engage a joint venture between two South Korean firms, KEPCO and Daewoo, to construct Units 7 and 8 at Morupule B. According to the notice, the IPP contractors would be required to design, finance, construct, own, operate, maintain and decommission at the end of the economic life a 300MW brownfield coal-fired power plant comprising two 150MW units. The tender had not yet been awarded.[22]

It is planned for completion in 2020.[23]

In October 2016, African Energy issued a statement objecting to the awarding of the project to KEPCO and Daewoo at the expense of local companies, stating that the Korean companies had no previous track record in Botswana.[24]

As of May 2018 there have been no developments on the units, while the PPA for units 5-6 have expired.

Project Details of Units 1-4

  • Sponsor: Botswana Power Corp
  • Parent company: Botswana Power Corporation
  • Location: Palapye, Central District, Botswana
  • Coordinates: -22.5223291, 27.0488334 (exact)
  • Status: Operating
  • Capacity: 600 MW (Units 1-4: 150 MW)
  • Type: Subcritical
  • In service: 2013 (Units 1-2); 2014 (Units 3-4)
  • Coal Type: Bituminous
  • Coal Source:
  • Source of financing: World Bank, China Export & Credit Insurance Corporation

Project Details of Units 5-6

  • Sponsor: Botswana Power Corporation
  • Parent company: Marubeni, POSCO
  • Location: Palapye, Botswana
  • Coordinates: -22.5223291, 27.0488334 (exact)
  • Status: Shelved
  • Capacity: 300 MW (Units 5&6: 150 MW)
  • Type: Subcritical
  • In service:
  • Coal Type: Bituminous
  • Coal Source: Morupule coal mine (planned for completion in 2017)
  • Source of financing: Export-Import Bank of Korea, Japan Bank for International Cooperation (JBIC)

Project Details of Units 7-8

  • Sponsor: Botswana Power Corporation
  • Parent company: KEPCO, Daewoo
  • Location: Palapye, Botswana
  • Coordinates: -22.5223291, 27.0488334 (exact)
  • Status: Shelved
  • Capacity: 300 MW (Units 7&8: 150 MW)
  • Type:
  • In service:
  • Coal Type: Bituminous
  • Coal Source: Morupule coal mine (planned for completion in 2017)
  • Source of financing: Financing to be secured by KEPCO and Daewoo

Articles and resources

References

  1. Stewart Bailey"Morupule to feed power-hungry Botswana", Business Report (South Africa), July 13, 2006.
  2. 2.0 2.1 2.2 2.3 World Bank, "World Bank Financing for Continued Growth, Enhanced Poverty Reduction in Botswana Board of Directors approves US$136.4 million for critical electricity supply project", Media Release, October 29, 2009.
  3. "Gov’t turns against Morupule B contractor," Sunday Standard Reporter, 12-01-2014
  4. "Total blackout at Morupule B," Mmegi Online, Oct 15, 2014
  5. "Morupule B might shut down," Business Weekly, June 3, 2015
  6. "Morupule B project uncertainty persists," Weekend Post, Feb 2, 2015
  7. "Morupule B capacity to be doubled," Mmegi, June 15, 2016
  8. Brian Benza, "Another 300 MW extension for Morupule B," Mmegionline, 16 December 2016
  9. "Chinese firm tables offer for Morupule B," Mmegi, Nov 3, 2017
  10. "Botswana cancels plans to sell troubled power plant to Chinese firm," Reuters, June 12, 2018
  11. "Revealed: Why Morupule B deal failed," Mmegi Online, August 24, 2018
  12. "BPC turns profitable," The Patriot, Nov 28, 2018
  13. "IBRD Partial Credit Guarantee (PCG) to advance Botswana power sector development," Financial Solutions, March 2010
  14. 14.0 14.1 14.2 "Morupule B environmental disaster," Mmegi, July 30, 2015
  15. "Domestic Coal Project," Shumba Coal, accessed July 2015
  16. "Plans underway to refurbish Morupule A," Botswana Daily News, Oct 2, 2014
  17. "Botswana to attain self-sufficiency in power generation by 2019," Mining Weekly, Mar 29, 2016
  18. 18.0 18.1 18.2 "PPADB approves P8bn Morupule B expansion tender," Mmegi, Mar 9, 2016
  19. 19.0 19.1 "1 Fact Sheet: Morupule B Coal-fired Power Station Project (Units 5&6)," Japan Center for a Sustainable Environment and Society (JACSES), Oct 20, 2017
  20. "Botswana power plant expansion plan stalls over terms," Reuters, Jan 29, 2018
  21. "Gov’t could drop Morupule B P8bn expansion," Mmegi Online, Nov 23, 2018
  22. "Another 300MW extension for Morupule B," Mmegi, Apr 22, 2016
  23. "Morupule B capacity to be doubled," Mmegi, June 15, 2016
  24. "Investors bemoan govt's decision on Morupule B tender," DS ter Haar Advisory, 15 October 2016

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