Aug 03, 2007
Eskom in serious talks on Botswana power projectBack
Construction|Africa|Botswana|Building|CoAL|Engineering|Eskom|Gas|Industrial|Namibia|Nuclear|Power|PROJECT|Projects|Resources|Africa|Democratic Republic Of Congo|Energy
© Reuse this
The utility has taken a strategic decision not to rely on imports for more than its ‘optimal’ reserve margin of 15% – its reserve margin is likely to remain in the 8% to 10% band until new base-load capacity is added from 2011 through to 2013. Nevertheless, 15% of nearly 80 000 MW is material, standing at almost 12 000 MW, and could unlock a number of regional projects that potentially require offtake agreements with Eskom to proceed to financial closure.
Maroga reports that it is engaged in serious power- purchase agreement (PPA) negotiations with the initiators of the $9-billion Mmamabula coal mine and power station project, in Botswana, and that a deal could be struck within months.
The project, which is being pursued by CIC Energy, of Canada, through its wholly owned Botswana sub- sidiary, Meepong, could involve a 2 250-MW power station (three units of 750 MW each), just across the border from South Africa. It is also only likely to be perceived as a ‘bankable’ project if it is able to secure a material offtake agreement with Eskom, given Botswana’s relatively modest domestic requirements.
Maroga tells Engineering News exclusively that the negotiations should be finalised “in months rather than years”. He says that the talks are being conducted with full cognisance of the fact that the cost of building new power plants has risen significantly and are, therefore, not entirely constrained by the current tariff dispensation.
Indeed, Eskom itself has requested that the three-year multiyear tariff determination, or MYTD, round be reopened to enable a material 18% price increase as from next year, as opposed to the prescribed inflation plus 1%, followed by the inflation plus 2% determination, as set by the National Energy Regulator of South Africa (Nersa) for 2008 and 2009.
TARGET DATE FOR START OF MMAMABULA CONSTRUCTION IS Q2 2008
However, Maroga stresses that the PPA has to be competitive with Eskom’s forward cost curve, adding that its own R200-billion-plus build programme is giving it a good handle on what realistic costs are. This, he adds, is providing the utility with an accurate benchmark for the PPA negotiations with CIC and potentially with other independent power producers (IPPs) at home and in the region.
CIC Energy head of investor relations and media Erica Belling confirms with Engineering News that the talks are under way and should be concluded “this year”. She also confirms that their conclusion is indeed essential for the conclusion of a ‘bankable’ study.
“CIC Energy and Eskom signed a memorandum of understanding (MoU) in May 2006 . . . Eskom also signed a MoU with Botswana Power Corporation regarding transmission of power generated by the Mmamabula energy project in November 2006,” Belling says, adding that CIC hopes to begin construction during the second quarter of 2008.
Belling adds that the company is currently negotiating with engineering, procurement and construction contractors on construction costs.
But what about other regional power projects?
Here, too, Maroga is cautiously optimistic. “We are aware of every serious project in the region, because anybody that wants to make a significant investment knows that we are the biggest candidate for PPAs. Most of these large projects can only really be bankable on the basis that they have a PPA with Eskom,” Maroga says, listing some of these projects as the Western Corridor project linking South Africa to the hydro potential of the Democratic Republic of Congo, the Kudu gas project in Namibia, and the North Bank Cahora Bassa expansion and Mpanda Ncua, in Mozambique.
‘WE WELCOME ALL VIABLE IPPS’
Maroga dismisses the perception that Eskom is resisting IPPs. “We welcome IPPs on the basis that they draw in new skills, new supplier relationships and, potentially, even new technologies. The demand is big and growing and, therefore, any project that is commercially viable, an IPP or our own, we will welcome.”
In a recent study, the company projected the IPP market in South Africa to be worth as much as $13,25-billion in 2013, “but only if electricity prices more accurately reflect the cost of production”. Energy and power research analyst Jeannot Boussougouth says that if tariffs are kept low, it will continue to limit the prospects for IPPs.
In its representations to Nersa, Eskom is likely to echo the assertion that South Africa’s tariffs are out of line with global trends. Indeed, Maroga reports that not only does South Africa remain the cheapest producer of industrial power, but also that the gap between it and its nearest rival, Canada, now stands at 74%, according to a report by power consultancy NUS. He says the gap between its nearest rival (Australia) in 2006, had been 30%.
Eskom has submitted a ‘reopener’ proposal to Nersa for a CPIX plus 13,5% (or 18%) increase next year, followed by a CPIX plus 12,5% increase in the following year. Nersa is considering the application and a final decision will be made on December 20.
Edited by: Creamer Media Reporter© Reuse this
To subscribe email firstname.lastname@example.org or click here
To advertise email email@example.com or click here
Other Electricity News
Article contains comments
Recent Research Reports
Construction 2016: A review of South Africa's construction industry (PDF Report)
Creamer Media’s Construction 2016 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; key participants; local demand; geographic diversification; corporate activity; black economic...
Energy Roundup – February 2016 (PDF Report)
The February 2016 roundup covers activities across South Africa for December 2015 and January 2016 and includes details of a Government Gazette notice that confirms Cabinet’s decision to move ahead with the 9 600 MW nuclear procurement programme; State-owned power...
Energy Roundup - December 2015 (PDF Report)
The December 2015 roundup includes details of State-owned utility Eskom’s application to claw back R22.8-billion; South Africa’s ranking as an investment destination for renewable energy; and a nuclear expert’s thoughts on reactor designs for South Africa’s nuclear...
Water 2015: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2015 Report considers the aforementioned issues, not only in the South African context but also in the African and global context in terms of supply and demand, water stress and insecurity, and access to water and sanitation, besides others.
Input Sector Review: Pumps 2015 (PDF Report)
Creamer Media’s 2015 Input Sector Review on Pumps provides an overview of South Africa’s pumps industry with particular focus on pump manufacture and supply, aftermarket services, marketing strategies, local and export demand, imports, sector support, investment...
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
This Week's Magazine
Lifting, transporting, installing and ballasting solutions provider Ale has expanded its global fleet of trailers and invested in the latest range of widening trailers that can be mechanically widened from 3 m to the desired width for any project. Ale ordered 48 axle...
The market for the BMW 7 Series in South Africa differs quite significantly from the rest of the world. China, the US and the Middle East almost exclusively buy the long-wheel-base version, using the German manufacturer’s luxury high-end sedan as a chaffeur-driven...
January new-vehicle sales fell by 6.9%, to 48 615 units, compared with the same month last year. Statistics released by the Department of Trade and Industry show that the domestic new passenger-car market declined by 6.1%, to 34 936 units, compared with 12 months ago.
Information technology (IT) equipment and infrastructure multinational Dell is providing open infrastructure systems for clients so that they can use any systems, including innovative new systems, that suit their business needs, says Dell Europe, Middle East and...
South Africa’s State-owned defence industrial group, Denel, has set up another international partnership, based in Hong Kong. This new subsidiary is Denel Asia and it is a joint venture (JV) with South African private sector company VR Laser.