1. POWER & THE ECONOMY
Keith Jefferis
March 19, 2008

2. Structure of Presentation
Consumption Trends – Short and Long-Term
The Mining Sector
Supply & Demand Forecasts
Conclusions

3. Short & Long-Term Consumption
Trends

4. Electricity Consumption & Economic
Growth (Non-mining)
10% 16% Chart compares annual growth
rates of non-mining electricity
9% 14% consumption and non-mineral GDP
8% Both are cyclical (boom &
12% recession)
7%
10% Track each other very closely –
Electricity
6%
electricity consumption closely
GDP
5% 8% related to growth
4% 6% 1% increase in non-mining GDP
associated with 1.6% increase in
3% non-mining power consumption
4%
2% Makes electricity consumption a
1% 2% useful leading indicator of
economic activity
0% 0%
Sharp fall in power supplies in Q1
2008 will lead to negative GDP
impact unless power consumption
efficiency increased
NMGDP Electricity

5. Long-term Consumption trends
Monthly Consumption Very rapid growth in
(MWh ‘000) power consumption
300 1998: avg 134,000
250 MWh/m
200 2007: avg 268,000
MWh/m
150
doubled in 9 years
100
Average annual growth
50 1998-2007
0 Total: 7.8% a year
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Mining: 5.3%/yr
Non-mining: 9.8%/yr
Mines Non-mining

6. Power Intensity of GDP
200 GDP growth avg. 5.8%
Power consumption has
180 grown faster than GDP
Index (1997/98 = 100)
(except 2006/7)
160
Hence units of power
140
consumed per unit of
GDP produced has
120
increased
Increased dependence
100 upon electricity
e.g. increased household
80 electrification
GDP Power

7. Monthly Pattern of Power Consumption
(Peak Demand, 1997-2007)
8% Regular pattern of peak
power demand
Deviation from average (trend)
6%
Lowest in summer (Jan-
4% Mar)
consumption
2%
Highest in winter (Jun-Jul)
System stress is most
0% intense in peak periods
-2% Maintenance planned
for summer period, but
-4%
can be caught out by
-6% unexpected events (rain,
cold)

8. Mining Sector

9. Mining Power Consumption
Mining sector is major Mupani
Gold
power consumer 3%
41% of total in 2007 Tati
BOTASH
down from 47% in 1998 1% Nickel Orapa/
12% Let’kane
Major consumers: 28%
BCL – copper/nickel
smelter (Selibe-Phikwe) –
36%
BCL Jwanen
Debswana – 36% g
Orapa/Letlhakane – 20%
28%
Debswana - Jwaneng
20%

10. Mining in the Economy - GDP
Soc. & Per. Trade, Mining dominates GDP
Serv hotels etc.
4% 11% 42% of total in
2006/07
Govt
16% Share of power
consumption in line with
Mining
Fin. & bus. 42% contribution of mining to
Serv
11% the economy
Transp.
& comms Trade
4% 11%
Constr. Water Manuf
4% & elec 4%
2%

11. Exports (2007)
Minerals comprise 82% of
exports
Diamonds dominate at 63%
Soda (but lower than in recent past)
Nickel/co ash
1% Nickel & copper second
pper
17% largest
Gold
1% Gold & soda ash relatively
minor mineral exports
Importance of minerals in
Other exports means that power
Diamonds 18%
63%
supplies to mining sector are
a priority

12. Major Mining Projects
Major mining developments BPC Projections
under way Project Current 5 years
BMR Activox refinery (Tati)
Tati Nickel 39 113
Tati Nickel expansion (Selkirk)
Debswana – Orapa & BCL 65 65
Jwaneng expansions Orapa 44 93
Mowana copper mine (Dukwe) Jwaneng 41 77
Lerala diamond mine Mowana 7 ??
(Diamonex)
AK6 diamond mine (Orapa) Lerala/AK6 ?? ??
(African Diamonds) TOTAL 216 390
Gope diamond mine (CKGR)
80% increase in power
demand projected over next
5 years

13. Supply & Demand Forecasts

14. Sources of Supply
300
3 main sources:
250
Morupule
200
‘000 MWh/month
Eskom
150
Other imports
100
(ZESA/HCB/EDM)
50
Shares in 2007
Morupule 20%
0
Eskom 72%
Morupule Imports - Eskom Imports - other Other 8%

15. Power Supply Issues
Emerging Supply Deficit Peak demand increasing at
800 around 11% p.a. 2008-2011
700 Non-mining 9.8%
600 Mining as per BPC ests.
Peak demand (MW)
500 Over 750MW in 2011
400 Eskom firm supply reducing
300 from 2008-2011
200 2008,9: 350MW
100 2010: 250MW
0 2011: 150MW
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Eskom can cut up to 10% if
Morupule Eskom Deficit load shedding in SA

16. Power Supply Deficit
800 60% Anticipated shortfall
700
50% on existing trends:
Peak Demand (MW)
% of peak demand
600 2008: 0 MW
40%
500 2009: 70MW
400 30% 2010: 239MW
300
20%
2011: 412MW
200 Remember:
10%
100 peak demand is in
0 0% winter!
2008 2009 2010 2011 Eskom may be unable to
supply contracted
Eskom/BPC HCB/ZESA
amounts
Deficit % of demand

17. Supply Options
Short-term Medium-term
Mozambique (via Zimbabwe) Diesel
HCB – 60MW contracted in 2008 Available, flexible – but
2009 - ? expensive
EDM - ? Coal-bed methane
SA (Eskom), Malawi, Tanzania Not yet exploited
chasing the same power Needs substantial investment in
Zimbabwe (ZESA) extraction
Send Botswana coal to Bulawayo Solar (PV/steam)
and share power 50-50 (45MW) Resources plentiful (sunlight)
Large-scale generation still
experimental internationally
With current technology, not
competitive with coal for grid
power
Competitive for remote/off-grid
settlements
Technology changing fast

18. Supply Options
BPC tender for 240MW from Medium/Long-term
IPP by 2009 Morupule B (expansion, BPC)
At tender review stage: 600MW
Coal-bed methane (1) Tender award stage
Diesel (3 proposals) BPC timelines appear highly
optimistic
Mmamabula (CIC/IP)
2100-2400MW, 2013?
BPC entitled to 25% offtake
Bogged down in tariff
negotiations with Eskom
Morupule C
A further 600MW - 2015?
Aviva, others

19. Price Impact
Current BPC retail tariff Cost per kWh of different
40t/kWh options (new capacity, US c)
Approx 6 USc/kWh Hydro
Average Eskom tariff 2–4c
Approx. 18 c/kWh (2.5 US Coal
c/kWh) 6–8c
Steep price rises Small-scale Diesel
programmed, to fund new 25 – 35 c
investment Solar
Will still be cheap by 15c?
international standards Major tariff increases
inevitable
Short-term capacity
(diesel/gas) likely to need
large government subsidies

20. Conclusions

21. Concluding Points
2008 supplies should (just) balance Solutions:
demand, assuming no major Eskom Supply Side Enhancement
problems, but winter (June-July) will Expedite Morupule B (“national
be tight emergency!”)
2009 – 2011 supply/demand Businesses - invest in expensive standby
generators
balance worsens sharply, both in
Botswana and in SA Actively encourage IPPs
Short-term solutions (Diesel generators)
Supply to diamond mines must be Demand Side Management (DSM)
fully maintained
Defer major projects?
Power cuts have major negative Mothball BCL smelter (Selebi-Phikwe)?
impact on: Rationing of industrial/
productivity commercial/residential consumers
business confidence Time-based metering/tariffs
Energy-saving awareness
investment climate & new investment
economic growth Significant price increases inevitable:
funding expensive new capacity, both
long-term and short-term
encourage more efficient consumption

22. Long-term Prospects
Much more positive outlook BUT
for Botswana & region Global warming/ climate
Mmamabula change issues may impact on
Other major coal-fired coal-fired generation
generation projects Obligatory carbon pricing /
Botswana and SA have major sequestration would add to
unexploited coal reserves costs of coal-fired power
Rehabilitation of capacity in Would make hydro, solar (&
Zimbabwe, Zambia, DRC nuclear) much more attractive
Grand Inga hydro (DRC)/ Economics of power
Westcor (30 000+MW) generation in flux!
In ten years could have
surplus of cheap power again
– unexploited hydro and coal
resources

23. Thank You