Dar es Salaam. A memorandum of understanding (MoU) on a Power Purchasing Agreement (PPA) between Kibo Mining’s Mbeya Coal-to-Power-Project (MCPP) and Tanzania Electric Supply Company (Tanesco) is in the final stages.
This was revealed by Kibo Mining’s chief executive officer Louis Coetzee, who added that the matter was only awaiting clearance from the office of the Attorney General.
By way of elaboration, the CEO said in an official statement that the MoU is a precursor to a final PPA with Tanesco, the drafting of which was ready by end of September.
Once signed, the MoU would provide a fixed framework within which the fundamental commercial and technical components of the PPA would be negotiated and – hopefully, agreed.
“With the final negotiations of the PPA approaching, full feasibility studies completed – and development finance on its way to being secured – this nationally-significant project is reaching the tipping point that, I believe, will see the stakeholders rewarded,” Mr Coetzee said.
MCPP says that the first coal production activity is expected to start within the next few years, as it has already secured project financing. It will produce 1.5 million tonnes of coal annually.
The project is developing a coal mine in tandem with a 300MW ‘mine mouth’ power station, aiming to satisfy the acute need for power in Tanzania.
Tanzania’s power sector suffers heavily from inefficiencies (across installed generating capacity, transmission and distribution).
Indeed, the 2015/16 World Economic Forum’s Global Competitiveness Report ranked Tanzania at number 122 out of 140 countries studied for reliability of electricity supply.
In that regard, Tanzania was ranked barely above Burundi – but below Kenya, Rwanda and Uganda next door, all members of the East African Community.
Environmental and Social Impact Assessment (Esia) certificates have already been awarded to both the Mbeya Coal Project and the Mbeya Power Generation Project by the government. The power project benefits from strong local regional and governmental support, which sees it as a national priority playing a key role in the Mtwara development corridor.
The project, which partners with Sepco-III, a large Chinese construction and engineering firm that designs, builds and operates power plants across the world, was recently awarded the US-based General Electric’s Innovative Project of The Year award.
It is stated that MCPP has already successfully completed a range of studies related to it: a power pre-feasibility study; a mining pre-feasibility study; a definitive power feasibility study; a definitive mining feasibility study; an independent integrated financial model, and an integrated bankable feasibility study.
“The MCPP is now part of the Tanzania government’s National Energy Strategy (NES). It is committed to support development of the infrastructure in southern Tanzania to enable the project to proceed,” Mr Coetzee revealed in his statement.
The company recently concluded the final bid clarification for construction of the transmission line that would deliver power from the Mbeya power plant to the Tanesco-owned Mbeya sub-station.
The company’s half-year results published in September showed that Kibo Mining reported a loss-after-tax status for the six months to June 30, 2017 of £2.36 million. This is compared to the loss of £2.32 million it incurred the same period in 2016.