Zambian Investor Pulls Out of Sese Coal-fired Project

African Energy Resources has confirmed that Zambia’s largest investor, First Quantum Minerals, has pulled out of the Sese mining and energy project in Botswana which was to supplly electricity to its Zambian mines. The Sese project was a joint venture in which African Energy held a 33.3 percent stake and First Quantum Minerals owned the remainder.[ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="1" ] In 2020, the Botswana Energy Regulatory Authority (BERA) approved an energy generation license application for a proposed 300-MW Sese coal-to-power project. In a letter addressed to shareholders, African Energy (AEL) said it has now executed an agreement with First Quantum Minerals Ltd (FQM) to terminate the Sese JV and return the 100 percent interest to AEL. The letter states that under the agreement, FQM has provided AEL with US $308,457 in working capital and transferred their holding in Alma Metals Ltd (86,692,308 shares) to AEL. FQM also provided AEL with US $108,000 to fund 30 percent of possible rehabilitation costs at the Sese trial pit. FQM remains liable to pay the remaining 70 percent of pit rehabilitation costs (capped to US$360,000 total rehabilitation budget) if the pit is rehabilitated within 24 months. AEL said it currently has approximately AUD $900,200 cash on hand (which includes the US $108,000 provision for 30 percent of the Sese pit rehabilitation cost). The company said this would cover budgeted working capital requirements for the next 15-18 months. AEL indicated that it is engaged with multiple parties who are interested in acquiring an interest in the Sese project and has commenced a sale process for the Mmamabula coal project. The company said in the last 15-months, the power shortages in southern Africa have worsened significantly. In Zambia the water levels at Lake Kariba early this year were at the lowest levels seen in over 20-years, causing restrictions in hydro power generation. In South Africa a further deterioration in Eskom’s coal-fired fleet availability has resulted in widespread and persistent load shedding. In Botswana, AEL said, ongoing problems with the Morupule power plant has resulted in regular load shedding. The generation problems in major power producers have caused severe power disruptions across the southern African region with blackouts and widespread load shedding on a regular basis in many countries. “This regional power crisis, which in February was declared as a ‘State of Disaster' in South Africa, is driving strong interest in the Sese Project. Sese is one of very few fully permitted, large scale, power generation projects in the SAPP (Southern African Power Pool) and is therefore one of the very few options for quickly developing new generation at significant scale,” the company said. It added that “Whilst investment in new coal generation is considered difficult in many western countries, the reality is that coal remains the main fuel for baseload power in most countries and particularly in the fast-growing economies of India and China.” AEL revealed that it has commenced a process of engagement with parties who wish to develop new generation. A project data room has been established and multiple expressions of interest have been received. “We expect this process to progress over the coming months with the intention of concluding a transaction that will see the introduction of a new investor to the Sese Project,” the company said. It added that: “This may result in AEL selling down its equity position in the project to facilitate the new partners and retaining a minority interest or a coal production royalty” adding that “These arrangements will be the subject of commercial negotiations with the interested parties…” In January 2020, African Energy signed a 15-year power sales agreement with First Quantum's Zambian copper subsidiaries for 100 MW. [/ihc-hide-content]

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Zambian Investor Pulls Out of Sese Coal-fired Project

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