Benga Power Plant

The Benga Power Plant is a proposed 2000 megawatt (MW) mine-mouth coal-fired power station associated with the Benga coal mine in Mozambique which is currently under construction. Riversdale Mozambique Limitada, a subsidiary of the Australian coal mining company Riversdale Mining, have 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 is 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 hinges on the development of a transmission line from the power station to markets. In its annual report Riversdale states 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."

Impact of Rio Tinto takeover
In December 2010 Rio Tinto announced that they 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.)

Related SourceWatch articles

 * Mozambique and coal
 * Rio Tinto's coal interests