Bidders Flock to South Africa's 1,000-Megawatt Tender and Look to $16 Billion Power Projects by 2010

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas) More than 90 companies in the power generation sector have registered their interest in the South African tender to build two open-cycle gas turbine power stations. The two peaking units will deliver a total of 1,000 MW of power and are scheduled to be in operation by 2008.

The exact locations for the two power stations have not been announced yet but they will be in the eastern seaboard provinces of KwaZulu-Natal and Eastern Cape. Durban and Port Elizabeth are thought to be the likely sites, as industrial, commercial and domestic demand is growing in both areas.

It is reported that among the international groups interested in the South African government's $1 billion tender for the two power stations are Alstom (PARIS:ALS) (Paris, France), CDC Globeleq (London, U.K.), Tata Power (India:910902), Shell (London, U.K.), Mitsubishi (TSE:7011) and Siemens Power (NYSE:SI) (Munich, Germany). Locally affiliated black economic empowerment companies could include Shanduka Resources and Global African Power. Alliances made by the international companies with local empowerment groups and subcontractors will be a feature as the bidding process develops.

Although the South African government stalled plans to privatize the state utility, Eskom (Johannesburg, South Africa), in 2004, the power monolith has committed to signing a 15-year power purchase agreement with the winning bidder. This type of commitment will create a welcoming base for independent power producers' (IEP) putting up power generation facilities in South Africa. The government has also made a commitment to bear the costs of conducting the environmental impact assessment studies (EIAS) for the new stations. The entry of IPPs into the power market does mark a break with the complete dominance of Eskom over past years.

Eskom will take a leading role in building new power stations to meet growing power shortfalls in the next five years and will deliver 70% of the country's new power generation requirements. Thirty percent, or the balance of power needed, will come from IPPs. It is estimated that the overall investment by Eskom and the private sector combined during the period will be about $16 billion.

At the launch of the country's second national integrated resource plan (NIRP), South Africa's deputy minister of minerals and energy, Lulu Xingwana, said that electricity demand is expected to grow by 1,200 MW every year for the next 20 years, requiring an investment 0f $1.7 billion per year over the period. The minister said that 2,800 MW of additional peak capacity would be needed by 2006, with an increase in base load additions through 2012.

With Eskom’s peak generating capacity currently standing at 35,000 MW and peak demand standing at 34,000 MW, immediate action is needed. The three power stations, mothballed since the early 1990's and now under rehabilitation and recommissioning, will make a welcome 3,700 MW available to the national grid. For related news item see - February 9, 2005 - Eskom Returning 3,700 Megawatts of Power into Operation after Fifteen Years of Power Plant Mothballing.

Thermal power plants using coal feedstock will be the backbone of power generation for the next 20-year planning period. The country has more than 30 years of proven coal reserves and about 100 years of unproven reserves. Currently Eskom generates 71% of electricity from coal-fired power stations.

Minister Xingwana said, "For environmental benefit, it is imperative to continue with efforts to reduce the cost of implementing clean coal technologies and improve the efficiency of coal-fired plants."

Meanwhile, in Jakarta, the Prime Minister of South Africa's neighboring state, Mozambique, was championing the construction of a new 1,400 MW hydropower plant on the Zambezi River, downstream from the Cahora Bassa hydropower station, the largest in sub-Saharan Africa. Mozambique is looking for investments in the power sector to maintain its position as a power exporter and to meet growing demand from new metallurgical projects. Among these is titanium processing plants and additions to existing aluminum smelters.

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