http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.89Change: -0.09
R/$ = 12.68Change: -0.17
Au 1086.29 $/ozChange: -9.20
Pt 986.00 $/ozChange: 1.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
May 31, 2012

Energy group praises SA’s renewables programme, but notes challenges

Back
Cape Town|Construction|Africa|Projects|Renewable Energy|Renewable-Energy|Road|Roads|Africa|South Africa|United States|MW Facility|Energy|Equipment|Power Producers|Renewable Energy|Service|Wind Energy|Wind Energy Projects|Eastern Cape|Jeffreys Bay|Northern Cape|Jonathan Hoffman|Power|Eastern Cape
Construction|Africa|Projects|Renewable Energy|Renewable-Energy|Road|Roads|Africa|||Energy|Equipment|Service|Wind Energy|||Power|
cape-town|construction|africa-company|projects|renewable-energy|renewable-energy-company|road|roads|africa|south-africa|united-states|mw-facility|energy|equipment|power-producers|renewable-energy-industry-term|service|wind-energy|wind-energy-projects|eastern-cape|jeffreys-bay|northern-cape|jonathan-hoffman|power|eastern-cape-province-or-state
© Reuse this



While independent power producers (IPPs) in South Africa face many challenges not seen in other countries, the Renewable Energy Independent Power Producer Programme (REIPPP) is certainly moving in the right direction and the South African government is up to the challenge, Jonathan Hoffman, senior business develop- ment director at Globeleq has said.

Speaking to South African National Energy Association members in Cape Town ahead of the June financial close deadline for the REIPPP’s first-round bidders, Hoffman asserted: “The readiness of everyone is improving and we have a very high level of confidence in government.”

Globeleq is involved in the development of four first-round REIPPP projects, including the two largest wind energy projects (the 138 MW facility in Jeffreys Bay and 139 MW Cookhouse wind farms, in the Eastern Cape), as well as the 50 MW De Aar and 50 MW Droogfontein solar PV farms in the Northern Cape. The company is involved internationally as a power owner and operator and works exclusively in emerging markets.

The first key challenge, accord- ing, to Hoffman, is the tariff. “It’s a common thread that runs through all the challenges. Essentially, the way we look at risk is, typically, how it translates into our return; in another way, if we say we are going to keep our return the same, how does it translate into a move in the tariff?”

From an international perspective, the tariffs paid for renewable energy in South Africa are high, says Hoffman, but the rate of return for the IPP can be lower than in other countries, where there are mechanisms which support the tariff rather than inflate it, such as tax incentives and, as found in the US, capital expenditure reductions in the form of grants which tend to act as catalysts for renewable-energy projects.

In South Africa, however, rather than mechanisms to support the tariff, costs such as the National Treasury fee (a 1% fee due at financial close) and socioeconomic and enterprise development obligations, besides others, result in an increase in the tariff. While, in Hoffman’s view, these are not necessarily negative initiatives, they do, however, impact on revenue return and need to be factored in as a risk by the IPP.

Other risks which IPPs also face that affect the rate of return are the exposure to the exchange rate through the volatility of the South African rand (especially for international investors), the volatility in equipment costs and potential grid unavailability.

With four South African banks providing the bulk of the debt funding for the first-round REIPPP projects, Hoffman believes there is also “a bottleneck on the road to debt” as there are not enough lenders to successfully service the market and a lack of capacity within those lenders resulting in the slow review of financial documents.

“We’re doing our best to work together with the South African lenders to come to terms so that, hopefully, we can close by June 30, because, if we don’t close by June 30, we lose our power purchase agreement – so there’s a lot at stake,” said Hoffman.

He added that some practical challenges ahead are likely to be related to the electrical grid, with the cost and complexities of interconnection being unknown factors at this stage. Further, logistical issues, such as land- owners not fully appreciating the construction impact and the effect of transporting large equipment on the roads, resulting in traffic congestion, will have to be faced.

Even with many unique challenges facing an IPP in South Africa, Hoffman said that, in Globeleq’s experience, “this has been a Sunday at the beach”, compared with other projects in Africa the company has been involved in.

“Across four projects, we are going to be investing $140-million of equity . . . so we are going to be deep in South Africa [and] so we are very confident about our long-term presence here. “We want to build not just four projects; we want to build many more projects and build a business around them,” concluded Hoffman.

Edited by: Martin Zhuwakinyu
Creamer Media Senior Deputy Editor
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other News This Week News
Meyerton-based steel tank manufacturer Structa Technology is currently rolling out a water infrastructure build programme that supports local municipalities, water utilities, schools, hospitals and clinics.
Alternative funding models could be expected to begin coming to the fore in South Africa’s renewable-energy sector as the market becomes more competitive and domestic development finance institutions (DFIs) begin scaling back their direct involvement in projects....
DIMITRI MARKOULIDES An innovation champion must involve employees in innovation projects and keep them updated to enable them to support and drive innovation and create the future of the business
An innovation champion course that trains executives to manage innovation in their organisations aims to help companies grow revenue streams and tap new markets, says business change management consultancy BMGI South Africa innovation practice lead Dimitri...
More
 
 
Latest News
Telkom CEO Sipho Maseko
Updated 12 minutes ago Group chief executive officer of Telkom, Sipho Maseko, has said smaller fibre providers are placing “relentless pressure” on the company’s wholesale and networks unit. This is according to an excerpt from Maseko’s strategic review in Telkom’s integrated report for...
Thabo Mbeki
Updated 20 minutes ago One of the major tasks which faced universities was advocacy to convince the political class in Africa that institutions of learning are “indeed situated at the centre of the African development agenda” and therefore need new significant investment to improve their...
Updated 24 minutes ago South Africa’s Solar Water Heating Manufacturers Cluster of South Africa (SWH-Mancosa) is taking active steps to reinvigorate the solar-geyser sector, which has been left in a “precarious” position following the termination of the Eskom rebate programme in April and...
More
 
 
Recent Research Reports
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
Real Economy Insight: Automotive 2015 (PDF Report)
Creamer Media’s Real Economy Year Book comprises separate reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, gold, iron-ore and platinum sectors.
Real Economy Insight: Water 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Construction 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Electricity 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Road and Rail 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
 
 
 
 
 
This Week's Magazine
Meyerton-based steel tank manufacturer Structa Technology is currently rolling out a water infrastructure build programme that supports local municipalities, water utilities, schools, hospitals and clinics.
Alternative funding models could be expected to begin coming to the fore in South Africa’s renewable-energy sector as the market becomes more competitive and domestic development finance institutions (DFIs) begin scaling back their direct involvement in projects....
DIMITRI MARKOULIDES An innovation champion must involve employees in innovation projects and keep them updated to enable them to support and drive innovation and create the future of the business
An innovation champion course that trains executives to manage innovation in their organisations aims to help companies grow revenue streams and tap new markets, says business change management consultancy BMGI South Africa innovation practice lead Dimitri...
Future digital workplaces will require employees to continuously learn new “literacies”, including new media, information and technical skills, to help their company thrive and spur personal growth. Information technology (IT) research firm Gartner, thus, suggests...
Only 25% of large construction projects surveyed in KPMG’s Global Construction Project Owner’s Survey, released in June, were concluded on time and within budget over the last three years. “Every project owner wants predictability when it comes to large projects, and...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96