Benga power station (ICVL)

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The Benga power station (ICVL) was a proposed 500 megawatt (MW) mine-mouth coal-fired power station associated with the Benga coal mine in Mozambique. An additional 1500 MW expansion was also proposed, contingent on the development of new transmission infrastructure. The project was cancelled in the wake of a multi-billion dollar write-off of Rio Tinto's Mozambique assets.

However, in 2014 India-based International Coal Ventures said it would revive plans for a coal plant in the region, after purchasing the Benga coal assets from Rio Tinto.

A separate proposal in Benga is the Benga power station (Kibo Energy).

Location

The map below shows the Tete province, the approximate location where the plant would be built.

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Background

Riversdale Mozambique Limitada, a subsidiary of the Australian coal mining company Riversdale Mining, proposed that stage one of the project would be 500 MW power station with a later expansion. The project received approval from the Mozambique government in January 2010.

In a July 2010 investor presentation, Riversdale Mining outlined that the initial market for the power station would be mine supply, local demand from EDM and regional demand from Eskom "and others". The Stage II expansion would be contingent on the development of new transmission infrastructure. The company stated that a "Framework Agreement" had been signed, access to the existing transmission line had been confirmed and the environmental impact statement approved. However, the company noted that a "suitable" Power Purchase Agreement "for offtake" was "required" and that investors in the project were still being courted.

Power project details

In its 2010 annual report the company stated that it expected Stage 1 "to be completed during 2013 using existing transmission assets. Stage 2 involves an upgrade to a capacity of 2,000MW depending upon installation of the proposed transmission backbone and other transmission capacity. The BPP will help meet regional demand in Mozambique (EDM) and South Africa (Eskom) as well as supply the Benga Mine. As a power project, it is expected to have a competitive cost structure given its proximity to the mine and Zambezi River. During the year, Riversdale advanced a number of important milestones in relation to the project. Riversdale received the approval from MICOA for the BPP to proceed based on the Environmental Impact Study (’EIS’)."

However, the company was coy about who would purchase power from the proposed plant stating in its annual report only that "discussions with potential off-takers have progressed and a nonbinding MoU was agreed with a regional industrial group which is expected to be a purchaser of power from the BPP."

Aside from finding power purchasers, the viability of Riversdale's proposed project hinged on the development of a transmission line from the power station to markets. In its annual report Riversdale stated that "the BPP and EDM signed an MoU that governs the process for the development of a transmission agreement between the parties. The process leading to definitive agreements outlined in these memoranda is expected to be advanced in the second half of 2010."

According to a 2014 IEA report, initial 2008 plans for commissioning were targeting 2013, but mine expansion plans and transportation infrastructure for the coal export business were lagging, and so the power plants were delayed. In 2012, Rio Tinto issued a call for expressions of interests for potential developers and operators of its Benga power plant. The Benga facility would have an initial capacity of between 400 and 600 MW, while environmental sanction is secured for a 2000 MW facility. If developed, the plant will deliver power to Rio’s coal-mining operations in the territory as well as to regional off takers, including the State-owned Electricidade de Mozambique (EDM).

Impact of Rio Tinto takeover

In December 2010 Rio Tinto announced that it had offered $16 cash for each share in Riversdale Mining. In a media release the company stated that "acquisition provides Rio Tinto with a substantial tier one coking coal development pipeline in the emerging Moatize Basin in Mozambique, in line with Rio Tinto's strategy of developing large, long-life, low operating cost assets to grow shareholder value."

In the announcement, Riversdale stated that "the Benga coal project is expected to commence production of coal in September 2011 and is expected to reach full capacity in 2013, while production from the Zambeze coal project will not commence before 2014. The development of both projects will require a substantial commitment of time, resources and capital including for the development of the rail, port and barging infrastructure which is needed to take the coal to market. The Recommending Directors consider a fixed cash amount of A$16.00 now to be an attractive alternative for Riversdale shareholders. Rio Tinto is a world class mining house with a very strong track record in development and production and has access to the funding and the project management skills and expertise which are required for projects of the size and calibre of Benga and Zambeze. Rio Tinto is well placed to support Riversdale through to the development stage of these exciting projects."

Neither company's statement mentioned the Benga Power Plant proposal. However, Rio Tinto's corporate strategy is focussed on its role as a mining company not as an independent power producer. (The company's power station interests extend only as far as projects supplying company aluminium smelters and remote mineral processing plants.)

Massive write-down on Benga Mine causes plant to be dropped

In January 2013, Rio Tinto took a US$3 billion write-down on its Mozambique assets after being denied permission by the government to ship coal for export down the Zambezi River by barge. While the ostensible reason for the rejection of barge transport was its environmental impacts, analysts attributed the actual reason to the influence of Rio Tinto's competitors in Mozambique (especially Brazil's Vale) and to the competing plans to use the Zambezi for hydroelectric power. In the wake of the rejection of Benga's barge plans, it appears that the coal plant has been quietly cancelled. The project is not mentioned in Rio Tinto's discussion of Mozambique in its 2013 report.

ICVL revives plans

In October 2014 India-based International Coal Ventures (ICVL) bought Rio Tinto’s 65 percent stake in the Benga coal mine, along with its undeveloped coal assets at Zambeze and Tete East. The company said it plans to build a power plant in the Benga region “very soon” using “some of the thermal coal and waste product to generate power locally." ICVL comprises state-owned steel producers Steel Authority of India and Rashtriya Ispat Nigam, iron-ore miner NMDC, power generator NTPC and coal producer Coal India.

In January 2015 ICVL solicited an Expression of Interest (EOI) "from prospective investors for setting up an independent coal to chemical project or a thermal power plant or any other plant to utilize the thermal coal produced from the existing Benga mine."

In February 2015 ICVL said it planned to invest US$1.9 billion to construct a 300 MW thermal power station at the mine, increase Benga’s output to 13-million tonnes by 2017, and set up a coal-to-liquids (CTL) plant. The mining expansion is dependent on improvement of rail infrastructure, as the rail system of Mozambique has the capacity to handle about six million tonnes a year.

In April 2015 ICVL said it had received two EOIs for a chemicals plant and two for a coal-fired power station, but said the EOIs for the power station are complicated by a lack of transmission infrastructure in the area.

In February 2016 ICVL released an EOI for the construction and operation of a coal plant at the Benga mine with an initial capacity of 200 MW. The company said it "also has a project to develop the methane gas potential of its coal deposits which could in the future also be used for power generation." According to ICVL, "While there is an existing Environment License for the construction and operation of the Power Plant, depending on the actual design, construction and operation proposed by the successful proponent, Mozambican environmental regulations may require amendments to the licence."

In September 2017 it was reported that ICVL planned to resume coal mining operations at Tete province. Tenders were floated for a thermal power plant in Mozambique to buy the coal, but did not materialize in the absence of a grid.

As of December 2019, there have been no further updates on the ICVL proposal.

Potential restructuring of ICVL complicates plant plans

CIL decided to withdraw from ICVL in February 2015, after which NTPC requested of the India Ministry of Power that it be allowed to leave the ICVL consortium as well. ICVL was incorporated in 2009 with an objective of acquiring coal assets with equity participation from SAIL, CIL, RINL, NMDC and NTPC in the ratio of 2:2:1:1:1. However, CIL and NTPC stopped contributions after initial payments of R2.8 crore and R1.4 crore, and NTPC has only 0.54% holding in the venture, and CIL had 0.27%. NTPC and CIL do not have board representation on ICVL either. The two companies believe that ICVL is focused on coking coal for steelmaking, whereas their interest is in thermal coal. According to Further Africa: "But it is precisely their focus on thermal coal and their expertise in coal-fired power generation that make them essential partners if the Benga power station plan is to go ahead. So, both companies have been requested to reconsider their decisions to exit ICVL."

Project Details

• Sponsor: International Coal Ventures Limited (ICVL)
• Parent company: Steel Authority of India (SAIL) 49.59%, Rashtriya Ispat Nigam (RINL) 24.8%, NMDC 24.8%, NTPC 0.54%, CIL 0.27%
• Location: Songo District, Mozambique
• Coordinates: -15.5, 32.5 (approximate)
• Status: Phase I: Shelved; Phase II: Cancelled
• Gross Capacity: Phase I: 200 MW; Phase II: 1500 MW
• Type:
• Projected in service:
• Coal Type:
• Coal Source: Benga coal mine, Mozambique
• Source of financing:

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• Mozambique and coal
• Rio Tinto's coal interests

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