Name and Location
Khanyisa power project, Mpumalanga, South Africa.

Client
Anglo American Thermal Coal.

Project Description
Anglo American’s Thermal Coal business unit is investigating the feasibility of building a power generation plant that will operate using low-quality discarded coal as fuel.

Coal discard dumps, comprising an estimated 137-million tons, are currently situated in the South African Coal Estates complex and the mines making up this complex – the Greenside, Kleinkopje and Landau collieries – produce a further 4-million to 4.5-million tons a year of ‘as arising’ discard. A 450 MW modular plant is being considered. It is expected that the power will be generated by three 150 MW circulating fluidised-bed boiler units.

The proposed site for the project is on Anglo American-owned land, located near the Kleinkopje colliery.

The plant will be third-party-owned and -operated, with Anglo entering into fuel supply and power purchase agreements (PPAs) with the developer.

Anglo maintains that it will not enter the power generation industry and plans to buy all the power generated by the proposed plant for its own consumption. Anglo is confident about using the national power grid at an acceptable cost through a transmission agreement with State-owned power utility Eskom and the National Energy Regulator of South Africa (Nersa).

This transmission agreement will enable Anglo to use the grid to wheel power from the plant to its operations in the country.

Value
The project is estimated to cost about $1-billion.

Duration
The project has been deferred; the initial targeted operational date for the Khanyisa power station was mid-2015.

Latest Developments
Approval for the Khanyisa power project, which Anglo American Thermal Coal has been facilitating for an independent power producer (IPP) in Mpumalanga, has been deferred.

The plan was for Anglo American subsidiary Anglo American Platinum (Amplats), as the sole offtaker of all the electricity from the proposed 450 MW power project, to carry the power purchase agreement (PPA) on its balance sheet as a $1-billion finance lease.

However, given the platinum sector’s current circumstances, the level of commitment to Amplats’ balance sheet was considered inappropriate at that time.

This view may still change. Anglo American Thermal Coal plans to approach its investment committee again this month, its regional head of strategy Ian Hall replied in an emailed response to questions from Mining Weekly.

Having finalised all the transaction documents with the preferred IPP, the engineering, procurement and construction process was due to start in the first quarter of this year, reach financial close by the end of 2013 and achieve commercial operation of the first unit during 2015.

The IPP was to access international financing on the back of a 25-year PPA and secure supplementary supply agreements from Eskom for the ‘wheeling’ of electricity to platinum mines in Rustenburg.
Water was to be made available from Anglo’s eMalahleni water reclamation plant, which treats effluent from underground collieries in the area, including BHP Billiton’s closed South Witbank mine.

Owing to the relatively high sulphur content of the 50%-ash discard coal, which is typically in the range of 10 GJ/t to 15 GJ/t, the plan to partially beneficiate the coal and for the technology to produce lower sulphur oxide and nitrogen oxide emissions relative to other coal-fired generators.

With the schedule now being postponed, the employment of up to 1 200 people during construction and 100 people during operation is also being delayed.

While Anglo has no intention of entering the business of power generation itself, the proposed IPP facilitation offered the group improved security of power supply and a way of mitigating an environmental liability through turning dumped coal into positive account.

Self-generation was seen as providing additional stay-in-business and expansion potential for a group that requires 1 600 MW of electricity for its own needs, at a time when South Africa’s electricity reserve margin is under pressure.

Key Contracts and Suppliers
Mott MacDonald South Africa (technical adviser); Standard Bank (transaction adviser); Edward Nathan Sonnenbergs (legal adviser); Aurecon South Africa (environmental consultant) and ACWA/Huadian, AES, China Guodian, GDF Suez, JSW Energy, Kepco and Marubeni (prequalified bidders).

On Budget and on Time?
Too early to state.

Contact Details for Project Information
Anglo American South Africa media specialist Hulisani Rasivhaga, tel +27 11 638 4401 or
email hrasivhaga@angloamerican.co.za.