Rukwa coal power project to generate 300MW

A STUDY by Edenville Energy’s proposed Rukwa coal-to-power project, suggest a possibility of generating over 300 MW. Under the proposals, the first phase would see the establishment of two 60 MW generation units, while the second phase would see the construction of two 120 MW units.

The London-listed group added in a statement yesterday that there was also an opportunity for rapid scale-up to the second phase in parallel with the increasing energy demand profile in the country.

Elaborating on the proposed first phase, Edenville announced an estimated project cost of $175-million with a modelled plant load factor of 80 per cent and an estimated project payback of between nine and ten years.

The feasibility study found that there were sufficient near-surface coal supplies, at a strip ratio of 1:1, to feed the 120 MW plant for at least 30 years.

“Modelled on a flat tariff for all power produced, otherwise known as the base case, Phase 1 returns an estimated pre-tax net present value (NPV) of $220-million, with an internal rate of return (IRR) of 23.1 per cent,” it noted.

If a commercial power offtake agreement with variable commercial tariffs for 40 per cent of the production was modelled, the project would return an estimated pre-tax NPV of $322-million, with an IRR of 27.8 per cent.

The average earnings before interest, taxes, depreciation and amortisation over the life of the project for the base case and offtake scenario were $58-million a year and $75-million a year respectively.

Based on a review of the available coal resources, the study revealed the possibility to develop a larger project beyond the first phase. “There will likely be a second-phase development as power usage in the area increases over time,” Edenville noted.

It added that Rukwa boasted several “key positives” which assisted development discussions, including a combined capital expenditure of $175-million for the power plant and mine, which equated to $1.45-million per MW.

“A sustainable market for this level of power [also] ties in with official plans for power grid development and private enterprise, allowing the project to grow in parallel with the economic development of Tanzania.

“Moreover, the option for commercial power offtake increases and diversifies the revenue stream, while development of commercial operations near to the project site drives growth and employment opportunities for Tanzania,” said the group.

Edenville noted on Monday that key documents had also been submitted to the Tanzanian authorities to advance the technical and regulatory requirements to enable the project to be placed on the Tanzanian Power Master Plan and to advance technical and commercial discussions.

Delivery to the Tanzanian grid system depended, however, on the construction of the Western Transmission line, which was planned to pass within 12 km of the Edenville project site.

The company said recent information had indicated that this would be completed in 2018, broadly in line with the conceptual development timeframe for the power plant.

“However, our approach is to explore all possibilities to develop the project as rapidly and economically as possible and we are assessing commercial offtake opportunities in parallel with Tanzanian government guidelines and timelines for the transmission line,” it stated.

This process was ongoing and the board said it remained in “close” discussions with the Tanzanian authorities. Commenting on the announcement, CEO Rufus Short noted on Monday that he was “extremely pleased” to have advanced the project to a stage where it could be taken forward on the basis of a “feasible and realistic” business plan.

“The completion of this vitally important work to demonstrate the viability of mining and power generation at our project site is critical to the next phase of development.

The results show a robust case to move forward with further work to advance the project for the benefit of both our shareholders and the people of Tanzania.

“We are now in a position to progress through the next steps of project development through advanced discussions with Tanzanian government organisations, commercial entities seeking a sustainable power supply and potential partners who wish to become involved in the project development,” he commented.

SOURCE: DAILY NEWS

• 377