31 October 2012 – Karoo Sustainable Energy (KSE) is the first, and thus far only, independent power producer (IPP) appointed by the Botswana Power Corporation to date. Based on its recent analysis of the power generation market, Frost&Sullivan has awarded KSE with the 2012 Africa Competitive Strategy Leadership.

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KSE was formed in 2008 to develop, own and operate a 270 MW coal bed methane fired power station in Botswana that would sell capacity and energy to the Botswana Power Corporation under long term off-take agreements.KSE and its sponsors have extensive experience in developing thermal IPPs from conceptualisation through to commercial operation, including the mobilisation, hiring and training of operations and maintenance staff.

KSE is owned 50% each by Kalahari Energy (KE) and Tuma Energy&Environment, a Cyprus company that is the international business vehicle for Tuten Ltd. KE has been a pioneer of coal bed methane (CBM) development in Botswana since 2000 and can be credited for conducting successful initial CBM exploration that created the current CBM enthusiasm in that country. KE is also the only Botswana based group with the capability of providing well completion services for CBM gas production. Tuten is a boutique power project development company based in Istanbul.

“KSE has exhibited a competitive edge over other entities operating in the same environment, as reflected by its pioneering position of first IPP in Botswana,” notes Frost&Sullivan’s energy and power research analyst, Celine Paton. “Furthermore, the company has managed to negotiate the first power purchase agreement (PPA) with Botswana Power Corporation (BPC), which constitutes a primary step towards structuring the financing of its 180 MW power generation project.”

In 2008, KSE was awarded a tender, issued by the BPC, for the development of 270 MW emergency power plant. Due to the global economic crisis of 2008 and 2009, the project was restructured into 90 MW dual fuel (gas and diesel) and 180 MW gas power plants. The 90 MW became a fast track project, jointly developed with BPC and Debswana diamond mining company.

Companies entering a market affected by shortages generally aim to provide innovative interim solutions. The same principle has been applied by KSE through the development of the Orapa 90 MW emergency power plant in partnership with BPC and Debswana. In addition to its initial role as developer, KSE eventually became asset manager of the power station in recognition of its skill and experience in IPP markets.

The Orapa 90 MW power plant was commissioned in August 2011. “The power plant will be used for peak load and will run with diesel in a first stage,” Paton says. “The power plant can alternatively run with gas (sourced from coal bed methane) thanks to the technology used (dual-fuel GE turbines), which should provide substantial operating savings.”

The Orapa 90 MW power plant will help alleviate the power deficit that Botswana is facing during peak hours. This will benefit the country’s economic growth as it will reduce the risk of implementing load shedding measures.

A second power plant of 180 MW (Mmashoro 180 MW) is also planned for development in the medium term. This project will be built, owned and operated by KSE. The related PPA with BPC has been fully negotiated and submitted for approval and final signature by the relevant ministries.

Drilling of the first ever horizontal CBM wells in Africa has commenced for the Mmashoro 180 MW power station, and the first set of wells will enter production in the 4thquarter of 2012.

When implemented, the Mmashoro 180 MW power plant will significantly increase the country’s power supply. It will further offer the possibility to provide base and peak load power, thanks to its affordable operating costs (expected to be lower than those of coal-fired power plants).

“Currently, KSE has a small market share in power generation as the Orapa power plant is only to be used for peak load,” Paton says. “However, as soon as Mmashoro power plant comes on stream, it will become a significant player.”

KSE will be the first vertically-integrated IPP in Botswana once it is able to use its gas, sourced from its coal bed methane resources.