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Apr 06, 2012

Construction group homes in on SA’s renewables prospects

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Construction group Basil Read has confirmed that, together with partners, it had submitted a solar photovoltaic (PV) bid under the Department of Energy’s second bidding round for the procurement of renewable-energy capacity from independent power producers (IPPs).

The South African government is in the process of procuring 3 725 MW of renew- ables capacity from IPPs, with some 2 309 MW still available for allocation after 28 preferred bidders, collectively representing 1 416 MW of potential capacity, were named in December.

A Basil Read-linked consortium, known as Metrowind, was included among the initial preferred bidders and the project had partici- pated in the National Energy Regulator of South Africa’s recent licensing hearings.

Basil Read had also acquired a 35% interest in Metrowind for R10-million and would be an equity participant in the project.

CEO Marius Heyns said work was well advanced to ensure that the 26 MW project, which was being supported by Old Mutual, reached financial closure by June, which would enable construction to begin during the second half of 2012. The wind farm would be developed in the Nelson Mandela Bay metropolitan area, of the Eastern Cape.

But he also confirmed that the group’s nascent energy unit had submitted a second bid, in conjunction with the BW Energy Corpo- ration, for a 60 MW solar PV development in Beaufort West.

Should the bid prevail, some 760 000 panels, supplied by First Solar, would be installed. Here too, the company had taken a 26% equity stake.

Basil Read Energy’s Ian Curry told Engin- eering News the company had decided to concentrate on a single bid during each round to raise the group’s prospects of success.

However, Basil Read might become even more “adventurous” during the third round, when the price and localisation thresholds were also likely to be increased.

Curry confirmed that the consortium had sharpened its pencil during the second round in order to improve on the price caps set for bidders. Tariffs for wind projects had been capped at below 115c/kWh and at 285c/kWh for solar PV and concentrating solar power. A cap of 107c/kWh had been set for biomass, 80c/kWh for biogas, 60c/kWh for landfill gas and 103c/kWh for mini hydro.

The focus currently was to move the Metrowind project to financial closure so that construction could start from July.

The wind development should result in engineering, procurement and construction workflow of R450-million for the group, while the solar PV projects could yield a R1.5-billion construction contract.

Heyns said that renewable energy was already featuring in the group’s R14-billion order book and was also a key feature in a project pipeline involving projects worth R18-billion.

Energy was also a key pillar in the diversification of Basil Read’s professional services unit, TWP, which had hitherto concentrated primarily on mining.

TWP CEO Digby Glover said energy had been integrated into Basil Read Matomo and was expected to be a material contributor to the unit’s revenue and earnings growth in the coming years.

Besides energy, Heyns expected the group would eventually benefit from South Africa’s R845-billion infrastructure programme. However, he stressed that the group was only expecting a construction sector recovery from 2013.

“There has been a slowdown in infrastructure projects. But, I must say, I feel very positive . . . and it’s clear that a lot of work is going to come out,” Heyns said, indicating that the potential projects spanned the water, transport, energy and town planning milieus.

Nevertheless, the immediate horizon remained challenging, as had been the case during 2011, when operating profit decreased by 24% to R280.9-million, margins fell from 6.9% to 4.5% and headline earnings declined 33.3% to R172.9-million.

Edited by: Martin Zhuwakinyu
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