The South African government, and not Eskom, was the ultimate decision maker with respect to the Mmamabula energy project, in Botswana, CIC Energy president Greg Kinross said on Wednesday, adding that leadership situation at the South African utility would, therefore, not directly impact on the project's evaluation and approval processes.

He argued that such authority was enshrined in the recently published electricity regulations on new generation capacity, which were published on August 5, 2009.

The TSX-listed company was pursuing the development of a $3-billion coal-fired power station, and expected that South Africa would procure 75% of the plant's 1 200-MW capacity, with the Botswana Power Corporation buying the remaining 25%.

It had been in discussions with Eskom over the finalisation of a power purchase agreement (PPA) for well over a year. But the utility had placed all such agreements on ice pending the finalisation of a funding plan, which hinged materially on an application for tariff increases of 45% a year for three years.

This has led to a high degree of uncertainty and frustration among potential independent power producers (IPPs) and cogenerators, which see Eskom's role as "player and referee" as unacceptable.

Commentators believe that at least 3 500 MW of private power could be brought on stream over the next 36 months if only PPAs for such projects could be secured.

Kinross indicated that there was an ongoing process of "direct engagement" with the South African government, and reported that the company had "commenced discussions regarding the evaluation and approval process" for Mmamabula under the new regulations.

The regulations, CIC averred, gave the Energy Minister, in concurrence of the Finance Minister, the authority to make determinations on the procurement of generation capacity from IPPs. The regulations also stated that the Energy Minister could determine the buyer of such power.

There is a strong push for the creation of an independent system operator, backed by government guarantees. Such a body, should it be established, could sign PPAs with non-Eskom suppliers so as to overcome the conflicts of interests that were likely to occur if such procurement was conducted through Eskom's so-called single buyers office.