Stanbic Bank Botswana signs Morupule debt financing agreement

23 May 2011

The Standard Bank Group, through its Corporate and Investment Banking Division, has acted as lead arranger for the Morupule Expansion project. The signing ceremony was held on 20 May 2011 in Palapye, Botswana. The P1.2 billion-loan raised will be part of the contribution in bank and shareholder loans for the P1.7 billion required to expand output at the coal mine.

The funding for the bank loan was provided by Stanbic Bank Botswana (a member of Standard Bank Group), First National Bank of Botswana and Barclays Bank of Botswana. Stanbic Bank Botswana has provided P500 million with First National Bank Botswana participating at a level of P400mn and Barclays Bank Botswana P300mn. The combined size, tenor and fixed rate portion are unprecedented in the Botswana domestic loan markets, and speak to the growing depth and sophistication of the banking markets in the country.

Leina Gabaraane, MD of Stanbic Bank Botswana, says: "Standard Bank Group's role as lead arranger further entrenches the group's involvement in the development of the Morupule power precinct. So far, Standard Bank together with Industrial Commercial Bank of China has arranged loans and bridging finance for US$900mn between Morupule Colliery and Botswana Power Corporation's Morupule B power station."

The loans (another BWP506-million was raised through a shareholder loan) will allow Morupule Colliery to take production capacity from 1-million to 3.2-million tonnes a year.

Botswana's only operating colliery

Morupule is located near Palapye, 260km north-east of the capital, Gaborone. It is currently Botswana's only operating colliery, and its principal customer is the state-owned utility Botswana Power Corporation (BPC). BPC is constructing the 600 megawatt Morupule B power station, which is scheduled to commence commissioning in the third quarter of 2011 and commercial operations in 2012.

By being denominated entirely in the Botswana pula, they make it possible for Morupule Colliery to sell coal to state-owned utility Botswana Power Corporation in pula, without either party taking on foreign currency risk.

This facility will secure the bulk of Botswana's power supply requirements for the foreseeable future, replacing imports from Eskom in South Africa and other utilities in the region. Morupule's expansion will enable it to supply BPC with all of its increased coal requirements for Morupule B under a long-term coal sales agreement, as well as continuing to serve its other existing customers in Botswana and neighbouring countries.

Commenting on the transaction, Albert Milton, GM of Morupule, said: "We are delighted to have concluded this milestone financing, which will enhance the energy security of Botswana, assist in the growth and diversification of the minerals sector in the country, as well as deepening our already well regarded financial markets. We would like to thank our banks, shareholders and advisors for their support and commitment".

The safe construction of the expansion project is well advanced with more than three quarters of a million man hours completed without a lost time incident, and the project remains on schedule.