R9.7bn peaker projects enter construction as financial close is confirmed

28th August 2013

By: Terence Creamer

Creamer Media Editor

  

Font size: - +

Construction has started on the R9.7-billion peaker power projects being developed in KwaZulu-Natal and the Eastern Cape, with Investec Corporate and Institutional Banking confirming on Wednesday that the two open-cycle gas-turbine plants, which will have a combined capacity of 1 005 MW, had reached financial closure.

The build, own and operate package was awarded by the Department of Energy (DoE) to a consortium led by international energy group GDF SUEZ. Investec acted as the coordinating mandated lead arranger and sole documentation bank providing senior debt facilities in a syndicate of six financial institutions.

The 670 MW Avon facility being built in KwaZulu-Natal will comprise four units, while the 335 MW Dedisa plant, in the Eastern Cape, will incorporate two units.

Each facility will also have on-site fuel and water storage for a continuous 45-hours of full-load operations. Commercial operation is expected at Dedisa in 2015 and at Avon in 2016.

GDF SUEZ has indicated that it will establish an operations and maintenance company for the two plants, while the turnkey engineering, procurement and construction contractors are Ansaldo Energia and Fata, of Italy.

The peaker projects have been subjected to several delays, with the DoE having initially selected an AES-led consortium as the preferred bidder, before terminating talks in April 2008. Negotiations were subsequently launched with the GDF SUEZ-led consortium.

The DoE eventually awarded the contract to a consortium comprising GDF SUEZ (38%); Legend Power Solutions (27%), of South Africa; Mitsui (25%), of Japan; and The Peaker Trust (10%), representing black economic-empowerment and community interests.

In June, the consortium signed 15-year power purchase agreements (PPAs) with Eskom.

GDF SUEZ chairperson and CEO Gérard Mestrallet said earlier this year that the two plants represented a major step forward for the group’s activities in Africa and demonstrated the group’s ambitions in fast-growing markets.

The group was also developing further projects in South Africa, having signed the PPA for West Coast One, a 94 MW wind project, in the Western Cape. It was also moving ahead with plans for a 600 MW captive-coal plant in Limpopo province.

Investec Project and Infrastructure Finance’s Robert Gecelter described the projects as the first major non-renewable independent power projects (IPPs) to be financed in the South African market.

“The participation of some of South Africa’s leading financial institutions illustrates the market’s appetite to support this vital expansion of the national grid,” he added.

The confirmation of financial close came as the South African government showed signs that it was making serious preparations to procure electricity capacity from other IPPs in line with determinations issued by then Energy Minister Dipuo Peters on December 19, 2012.

A tender was published on August 27 for the appointment of transaction advisers, as well as programme and project managers for the “design, development and implementation” of an IPP procurement programme for baseload and mid-merit projects.

The invitation seeks bids from service providers and has been issued by the Development Bank of Southern Africa, which has been mandated by the DoE and the National Treasury to oversee the tender.

The determinations included IPP baseload allocations and allocations arising from the Medium-Term Risk Mitigation (MTRM) plan – both of which have been catered for under the current version of the Integrated Resource Plan, which is in the process of being revised.

Under the MTRM determination, the DoE is seeking to procure 800 MW of near-term cogeneration capacity, which could arise from biomass, industrial waste and combined heat and power sources. It is also aiming to secure 474 MW from natural gas projects.

Through the baseload determination, 2 500 MW has been allocated to coal-fired IPP projects, 2 652 MW to baseload or mid-merit natural gas capacity and 2 609 MW to domestic and imported hydro-electricity prospects.

The IPP capacity would need to be introduced into the South African electricity system by March 2019.

Edited by Creamer Media Reporter

Comments

The content you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION