UPDATE 1-Botswana power project costs could top $10 bln-AfDB

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CAPE TOWN, June 4 (Reuters) - The African Development Bank said on Wednesday that the cost of Botswana's giant Mmamabula energy project could rise way above $10 billion from a previous estimate of $9.5 billion.

"The project costs have been going in one direction and that is upwards and so I personally won't be surprised if it ends up being higher than $10 billion," Tim Turner, director of private sector and microfinance development at the AfDB, told delegates at the World Economic Forum conference in Cape Town.

The project, which includes a coal mine and two 2,500 megawatt power stations, is situated in southeast Botswana on the border with South Africa and was initially slated to cost in the region of $6 billion.

The project is being developed jointly by Canada's CIC Energy Corp (ELC.TO: Quote, Profile, Research), International Power Plc (IPR.L: Quote, Profile, Research) from Britain and Japan's Sumitomo.

Uncertainty over the final costs were fuelling the funding crunch, said Turner, adding that the equipment supply market for the energy sector was "extraordinarly tight" given a global power shortage.

Turner said the AfDB, which has suggested that the Mmamabula scheme form part of the banking group's new African Financing Partnership, was hopeful it could commit funding in the near future.

"The challenge on this particular project is just now how to mobilise that amount of financing given the global credit crisis," said Turner of the project which would provide 75 percent of its power generated to South Africa and the remaining 25 pct to Botswana.

South Africa, one of Africa's strongest economies, is in the midst of an energy crisis which has scared investors and hit the mining sector amid regular blackouts.