CIC dismisses hostile takeover claims

BG reporter TSX and Botswana Stock Exchange (BSE)–listed CIC Energy has reaffirmed its commitment to Mmamabula Energy project with its president dismissing comments that the company was selling its crucial project to an Indian energy company. “There is this misconception that we were selling the project. We were contacted by JSW. We considered it and we agreed,” CIC Energy president, Gregory Kinross said Tuesday in Gaborone. In June 2011, Kinross bowed to intense political pressure and withdrew CIC Energy planned bid to engage in a US$418 million all-cash-offer from Indian power utility giant, JSW Energy. When government declined to sign crucial acquisition documents allowing a hostile takeover, the Bombay Stock Exchange-listed energy giant pulled out of the deal. On Tuesday, Kinross could not explain the decision to abandon an 8-month pursuit by JSW, but reiterated his commitment to the 300-mega watts (MW) coal-fired energy project in eastern Botswana. “The deal fell through,” he said on the sidelines of a one-day coal conference, which sought to update investors on the latest developments on coal mining and exploration in Botswana. Analysts say the decision to abandon the P10 billion Mmamabula coal-fired energy project was motivated by South Africa’s decision to opt out of energy import from Botswana. This forced CIC Energy to restrain its ambitions to export 1200 MW power to South Africa, following developments in May 2011 that a second Integrated Resource Plan in South Africa did not provide any opportunity to supply power to South Africa. This saw the company almost putting the ambitious Mmamabula Energy project on hold. In 2008 the Toronto-based energy giant completed a feasibility study on the proposed 1600 kilometre railway project to transport coal to a seaport. Coordinator of the Transport Hub, Thapelo Leareng, explained that the P60 billion coal transport project intends to involve the private sector in the development of both the railway and the port. With over 210 billion tonnes of coal reserves, government is keenly eyeing an opportunity to export 90 million tonnes of coal annually mostly to satisfy Asia’s insatiable appetite for energy. “During the first year, we want to transport 25 million tonnes, rising to 65 million in five years to make the project feasible,” he explained. Government expects to achieve its 90 million tonnes target in the next 10 years. Leareng explained challenges associated with transporting millions of tonnes of coal to a seaport. The government has an option of using the Trans-Kalahari railway route dubbed the Mmamabula-Gobabis-Walvis Bay route, which is estimated to cost over P67 billion (or US$11.16 billion). Leareng is aware of the many conservation and environmental challenges associated with constructing a 1600 km railway line. Government has also signed three Memoranda of Understanding with Mozambique and Zimbabwe regarding the proposed Porta Techobanine Project in Mozambique. To Kinross, the main point is about ensuring that coal reaches its intended destination. He explains that CIC Energy is prepared to assist government. “We don’t care which route, we are ready. We completed pre-feasibility study in 2008. We are very committed to the project.” Coal prices remain stable despite high demand from Asia, especially from China.