CIC Energy Corp. announced an update on the Company’s discussions with Eskom Holdings Limited (“Eskom”) regarding its proposed Power Purchase Agreement (“PPA”) for the Mmamabula Energy Project (“MEP”) in Botswana, Africa.
Eskom has advised CIC Energy that Eskom’s discussions with the Government of South Africa regarding a sustainable funding model for Eskom are still ongoing, and that while Eskom supports the role of independent power producers (“IPPs”) such as CIC Energy, until such time as the funding model has been agreed with the appropriate stakeholders, Eskom cannot commit to the purchase of electricity from an IPP. For this reason Eskom has indicated that, at this time, it can neither accept nor reject the offer submitted by CIC Energy’s subsidiary Meepong Energy.
This is consistent with recent statements made by Eskom that it needed to finalize its funding model before it would be in a position to submit its upcoming multiyear price determination to the National Energy Regulator of South Africa (“NERSA”). Eskom is engaging with the relevant stakeholders to resolve the funding model and anticipates that the discussions will be completed prior to the end of its financial year (March 2010). In the interim, Eskom and CIC will continue to work together in anticipation of a positive outcome of the funding model.
This development follows the Company’s announcement of July 2, 2009 that CIC Energy’s offer had been submitted for evaluation by Eskom’s formal governance process.
“We are hopeful that the discussions between the Government of South Africa and Eskom to establish a sustainable funding model will soon be finalized in light of the urgent need for private sector electricity providers to complement Eskom’s new build programme,” said Mr. Greg Kinross, President of CIC Energy. “This is especially relevant for the MEP because all other project development and financing activities are progressing very well.”
In light of this development, CIC Energy is reviewing its planned program of project development activities on the MEP. This review includes direct engagement by the Company with the Government of South Africa and NERSA, a process that was initiated by the Company following the submission of the offer to Eskom and Botswana Power Corporation earlier this year.
“We do not believe that any of the project fundamentals and compelling advantages of the MEP have changed as a result of this development other than the additional time that is likely to be required to reach conclusion, which we are currently evaluating,” added Mr. Kinross.