Investors in the Coal Petroleum project are fuming after President Mokgweetsi Masisi told the nation on Monday during his State of The Nation Address (SONA) that government is exploring options to improve fuel supply security by developing a coal to liquids project which is at the feasibility stage and expected to be completed in 2021.
On the supply of petroleum products, Masisi said the recent fuel shortages which occurred in Botswana as a result of supply chain challenges occasioned by COVID-19, have highlighted overdependence on fuel imports on a single source of supply. In this regard, Government has identified alternative sources of supply which will significantly increase the security of fuel supply to the country, he said. “Government is also exploring other options to improve fuel supply security by developing a Coal to Liquids (CTL) project which is at feasibility stage and is expected to be completed during the course of 2021. To further ensure national security of fuel supply, additional strategic fuel storage facilities are being developed through Botswana Oil Limited (BOL) in Ghanzi, Francistown and Tshele Hill in the Kgatleng district,” said Masisi.
It has since emerged that developments on the project, which remains privately owned, have stalled after Coal Petroleum pulled out a deal they had entered into with Shumba Energy. The Patriot on Sunday is in possession of documents showing that majority shareholders of Coal Petroleum (Pty) Ltd had signed an agreement to sell 80% shares of Coal Petroleum to Shumba Energy last year in July, with each majority shareholder owning 45 % each of the company. The shareholders were promised a lump sum pay out of USD 5.4 million for sale of 45% of the shares, while another USD 4.2m was to be paid for the remaining 35% of the shares.
One of the shareholders told The Patriot on Sunday that they have cancelled the deal with Shumba Energy because the latter had failed to meet the conditions of the contract they had signed last year, which also included a P50 million loan facility that would in turn pay the shareholders the value for their shares, be used for payments for work already completed and ongoing at the time of the transaction. The amounts and the responsibility of the shareholders remain outstanding because the loan facility has still not been made available months later even though shareholders were made to believe it would be available three (3) days after they had met their side of the conditions of the agreement.
“The president is not being properly briefed. The role of Botswana Oil is only facilitation and not investments. This is not a government project,” said one of the project owners, who did not want to be named for fear of being victimized.
The shareholder further noted his astonishment at Masisi publicly announcing that the project would be completed in the year 2021, an estimate he deemed misinformed and misleading to the nation as a lot was still to be done from technology selection, engineering design and coal testing among others.
“Everything being equal to taking that project to bankable feasibly, we estimated 36 months. 2021 is misleading and not an appropriate estimate,” the stakeholder alluded.
In a communiqué addressed to Botswana Oil CEO (Ag) Gamu Mpofu dated April 20th 2020, majority shareholders informed the BOL of its decision to withdraw from their initial agreement of selling their shares to Shumba Energy. Part of the letter reads: “In summary, we believe that we were misled and as the P50m loan facility was a deal breaker for us, we believe the sale of the shares to be null and void and therefore not bound by the agreements signed.”
Shareholders believe that the misrepresentation by Shumba Energy was in a bid to get them to transfer their shares of Coal Petroleum even though they had not secured funds. Amongst other obligations that were to be met by Shumba Energy, a monthly fee of R100 000 and P50 000 being out of pocket expenses and service level payments for the two partners was to be paid. Though they acknowledge the monthly payments were up to date, they had only been paid after the agreed contractual dates in most cases.
Asked whether they intend on continuing with the project in hindsight of canceling the contract between them and Shumba Energy, the businessman explained that they always had a plan of execution, starting with power production as a subsidiary that would feed the plant. He further noted that studies were at an advanced stage including grid studies adding that they would continue as planed though they are likely to make adjustments in view of environmental concerns on funding coal.
“This project as we conceived it does not require government funding. Government has in place a good framework for private sector to run this project without it being involved,” the investor said.