Mmamabula boost as Eskom loses power monopoly

Staff Writer | Tuesday December 8, 2009 00:00

The Department of Energy is drawing up the regulations that Eskom and the National Energy Regulator (Nersa) must follow.

South Africa's Energy Minister Dipuo Peters says the department is also creating a new entity, the Independent System Operator (ISO), which will not reside within Eskom.

She explained that the ISO will be responsible for matters such as purchasing electricity from independent power producers, and will make it possible effectively to exploit the potential of independent producers.

This new entity can be up and running within three months and will mean that Eskom no longer acts as both player and referee in the local power environment.

CIC Energy , the promoters of the Mmamabula Energy project have been trying  to seal a power purchase agreement with Eskom which is required for the project to take off, but the power Utility has been stalling the process over funding concerns.

According to  Sake.com, Peters  said that the resource plan provides for up to 1,020MW of power from the private sector in 2011.

Last week CIC President Greg Kinross was quoted as saying the shift in focus towards private power provision in Eskom's latest tariff application was 'positive', but the utility's suggestion that private base-load capacity would only be required by 2018 was 'disappointing'.

 He also warned that it could lead to a significant supply-side deficit by 2014, especially if Eskom's ambitious demand-side management (DSM) programme fails to deliver and/or should demand growth exceed Eskom's current forecast of less than 3,6 percent a year.

The Mmamabula coal-fired power station is arguably the most advanced base-load independent power producer (IPP) project currently under consideration in the region.

Some 75 percent of the power from the $3-billion project would be exported to South Africa, with the Botswana Power Corporation buying the remaining 25 percent.

'That's why we believe that government, through the DoE, needs to make its own forecast of demand, taking into account the possibility of higher demand growth and the very real risk of project delays, which Eskom itself has highlighted,' Kinross concluded.

In March 2009, CIC Energy signed an engineering, procurement and construction contract for the power station with Shanghai Electric Group and in August it announced the appointment of the Bank of China as a mandated lead arranger for a $500-million Chinese commercial bank facility for the Mmamabula project.

Kinross said that its aim was to develop the integrated power station and coal mine project as soon as possible and that it was, therefore, not interested in pursuing a private equity position in Eskom's Kusile project.