Mozambique coal miners’ power station projects making ‘visible progress’

Apr 14, 2016

One of the international companies that has developed coal mines in Mozambique’s Tete province, India’s Jindal Africa, a subsidiary of Jindal Steel & Power, has advertised in the Maputo newspaper Notícias for a consultant to serve as a project manager for its planned power plant at its Chirodzi coal mine.

The power plant will burn thermal coal that is produced effectively as a by-product to the metallurgical, or coking, coal that is Chirodzi's main output. Chirodzi is an openpit mine, with a production capacity of three-million tons a year and proven coal reserves of 700-million tons. According to the tender notice, published on March 11, the power plant will have a capacity of 150 MW. Originally, Jindal Africa planned to construct a 42 MW coal-fired power station comprising two 21 MW units to power its Chirodzi mine, to be followed by a 140 MW power plant comprising two 70 MW units. The power from the latter, larger plant would have been sold to national power utility Electricidade de Moçambique (EDM). The tender, however, stated that the output from the now-planned 150 MW capacity plant will be sold to EDM under a 25-year power purchase agreement. (According to the African Economic Outlook 2015, Mozambique's power demand is increasing by 15% a year.)

Technically, the new power plant will be owned by Jindal Investimentos, while the coal mine belongs to JSPL Mozambique Minerais, both subsidiaries of Jindal Africa, responsible for Jindal Steel & Power's operations across the continent. In turn, Jindal Steel & Power is part of the diversified OP Jindal Group. Reportedly, once the project management contract has been awarded, Jindal Investimentos will then issue tenders for the necessary major follow-on contracts. These would be an engineering, procurement and construction contract to build the power plant and an operations and maintenance contract. There will also have to be a contract to create a connection from the power plant to the 220 kV Songo-Matambo transmission line. This actually runs beside Jindal's site. Jindal's is not the only project in Tete aimed at turning thermal coal into electricity.

Ncondezi Energy is developing another. Ncondezi is, in fact, focused entirely on mining thermal coal and burning it to create electricity (to be sold to EDM); it has no desire to mine metallurgical coal and no desire to export any of its production. Ncondezi is currently in exclusive talks with China's Shanghai Electric Power to build the plant, which will have a capacity of 300 MW. The period of exclusivity covering these talks will cease at the end of May. A third such project is under development by ACWA Power of Saudi Arabia. This project will use thermal coal from Brazilian mining group Vale's Moatize mine to power a 300 MW power station.

Of that amount, 80% will be used by Vale to power the Moatize mine and the remaining 20% (60 MW) is planned to be sold to EDM. ACWA holds 56.5% of the power station project, with smaller shareholdings by Mitsui of Japan and Vale, while Mozambican company Whatana Investment Group has 8% and EDM itself owns 5%. South Korean construction company GS has been contracted to build the power plant. Late last month, ACWA Power CEO Paddy Padmanathan told the Zitamar News that the cost of the project would be "just short of $1-billion".

However, finding the finance was "turning out to be quite a challenge" and "a few different configurations on the financing structure" had been considered. Consequently, the company is trying to raise funding from various export credit agencies and multilateral and development financing agencies. The amount required from these sources exceeds $500-million.

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