Projects and Energy Weekly Snippets

Power remains Africa’s biggest infrastructure challenge, report asserts

Power represents Africa’s largest infrastructure challenge, a new thought-leader report argues. Titled Foundations for Growth - Infrastructure Investment in Emerging Markets, the report has been drafted by Llewellyn Consulting on behalf of commodity trading and logistics group, Trafigura.

Co-author Russell Jones says that while the infrastructure gaps relating to water and transport are also “colossal”, the electricity backlog remains the highest priority, as without power many of the other infrastructure challenges cannot be dealt with. The 48 countries of sub-Saharan Africa (SSA), which have a combined population of 936 million, generate less electricity than France, with a population of 65 million.

The overall damage to gross domestic product (GDP) as a result of inadequate and poorly maintained infrastructure has been estimates at two percentage points a year. Jones estimates that $2 trillion would need to be spent by 2020, before maintenance capital, to cover the shortfall. To address the funding shortfall, Jones believes that public-private partnerships (PPPs) will need to be pursued on a larger scale. “The only way to make any decent inroads into that shortfall is to see the public sector working much more closely with the private sector.”

Engineering News, 17 April 2015

Nuclear training: DoE sends 50 power plant trainees to China

On 17 April, the Department of Energy (DoE) announced that 50 South African trainees from the nuclear industry will be going to Shamnghai Jiao Tong and Tsinghua Universities in China to participate in a four-month nuclear power plant operations training programme. The training, which forms part of the first phase of the nuclear new build programme, follows the signing of a skills development cooperation agreement between the Nuclear Energy Corporation of South Africa and Chinese State Nuclear Power Technology Company.

“This training opportunity marks the first phase of a scope that aims to cover capability and technology in areas of nuclear power plant engineering, procurement, manufacturing, construction, commissioning, operation and maintenance and project management,” said the DoE in a statement.

The DoE concluded that “this first phase is a trial phase, which will be followed by a much more intensive training programme that will cover on the job training at nuclear power plant construction sites, bachelor’s degrees in all engineering, natural and social sciences, financial and project management programmes as well as post graduate courses and research collaboration between South Africa and the major developed countries that will include: France, Russia, China, USA, South Korea, Japan, Canada, UK and Germany”.

ESI Africa, 20 April 2015

Molefe says 100 MW Eskom wind farm now fully operational

Electricity utility Eskom announced on 20 April that its 100 MW Sere wind farm, near Vredendal in the Western Cape, had entered full commercial operations at the end of March, with all 46 wind turbines having been erected and the construction of the Skaapvlei substation and a 44 km 132 kV distribution line completed.

Acting CEO Brian Molefe, who was seconded to the embattled state-owned company from Transnet on 17 April, described Sere as the group’s first large-scale renewable energy project. He added that it would produce 298 000 MWh yearly, enough energy to supply around 124 000 standard homes.

The announcement of Sere’s completion followed Energy Minister Tina Joemat-Pettersson’s recent confirmation that a further 13 renewables projects had been selected under the country’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).  Eskom projects were not able to compete for the allocation, which Joemat-Pettersson aimed to increase by a further 6 300 MW. However, the utility was the buyer of all the energy produced by the REIPPPP projects and was also responsible for connecting the projects to the grid.

Engineering News, 20 April 2015

South Africa's move to expand private-energy sector “game changing”

Boutique advisory company EDPlatform has described recent announcements on the expansion and acceleration of the country’s IPP programmes as “game changing”. EDPlatform cofounder and CEO Steven Hawes stated that the announcement would increase the attractiveness of South Africa as an IPP investment destination, and would add momentum to the already highly regarded Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

Once all the facilities enter commercial operation, South Africa’s renewables capacity would rise to over 5 200 MW, with the first four bid windows having attracted private investment of ZAR168 billion. However, Hawes is equally excited by the Minister’s confirmation that the first bid window for an allocation of up to 2 500 MW of coal baseload capacity would commence during the course of 2015, and that processes were being put in place for the procurement of more than 3 100 MW of gas-to-power capacity and at least 800 MW of cogeneration capacity.

The announcement, Hawes added, had materially extended the investment horizon for IPP developers and had provided much needed visibility for the future IPP pipeline. For EDPlatform, the announcement also offered scope for continued growth to economic development components such as job creation, local content, skills development, community ownership and upliftment, localisation and black economic empowerment. He said that, over the 20-year life of renewable-energy projects, billions of rands would flow back into the mostly rural communities that were now hosts of some of the largest renewable-energy projects globally.

Engineering News, 22 April 2015

Renewable-energy forum to unpack sector prospects, risks

On the heels of Energy Minister Tina Joemat-Pettersson’s recent announcement of the preferred bidders under the fourth bidding round of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), renewable-energy specialists, energy policymakers and successful bidders will next month gather to discuss key developments in South Africa's nascent energy sector.

The Renewable Energy Forum South Africa (Refsa), which takes place in Johannesburg on 5 May, will bring together some of the biggest winners under the REIPPPP’s most recent window, including Norwegian solar power producer Scatec Solar. Also in attendance would be Department of Energy (DoE) independent power producer (IPP) unit head Karen Breytenbach and DoE acting director-general Dr Wolsey Barnard, who would deliver an address on the various departmental programmes geared at addressing energy security in South Africa.

While the event is traditionally focused on renewables, Refsa founder Linda Mabhena-Olagunju added that emphasis also needed to be placed on the progress made and challenges faced by energy producers in other sectors, such as nuclear, coal and gas.

The event would also focus on funding for black developers, following on a key policy decisions by the DoE to increase the participation of black developers, particularly under the coal IPP programme, which required at least 30% black ownership.
Engineering News, 22 April 2015

“Enormous” investment potential in “risky” South Africa – Goldman Sachs

Speaking at the Gordon Institute of Business Science (GIBS) in Johannesburg, Goldman Sachs chairperson and CEO Lloyd Blankfein said that he was generally bullish about South Africa as a favourable investment destination, but that it was appropriate to scale such investments to country risk. “If you’re investing in South Africa, you’re taking a lot of risk and there’s enormous potential. And so…we’re open for investment, but we must scale it so that we don’t become so committed that the P&L [profit and loss] of an investment determines our view of the opportunities in the country.”

He postulated that troubled South African state-owned enterprises might also consider taking a cue from China’s hybrid system, where huge state-owned enterprises (SOEs), vitally important to the development of China, remained controlled by the central government, and in most cases 80% majority owned – but with a 20% float on stock exchanges, which subjected them to stock exchange discipline and transparency.

On his rating of the Johannesburg Stock Exchange (JSE), Blankfein was complimentary. “I’m not that close in terms of its operation, but it’s big and it’s liquid and it punches far above its expectations for the size of the economy that it supports,” he said of the JSE.

He told the GIBS audience that although South Africa was doing better than some other emerging markets, it was not meeting its expectations. He emphasised the importance of a country’s standard of education, which had a great bearing on where companies like Goldman Sachs invested.

Engineering News, 22 April 2015

Molefe aims to end blackouts by year end

Eskom acting CEO Brian Molefe on 22 April set out an ambitious agenda, saying he hoped to rid SA of load shedding by year end. Previous estimates, including one last week by Public Enterprises Minister Lynne Brown, were that load shedding was here for at least the next two years.

On an average day, the shortfall between supply and demand was 3 000 MW and Eskom had now turned its attention to obtaining additional power to close the gap, Mr Molefe said. Eskom’s acting head of technology and commercial, Edwin Mabelane, said options that could bring 4 800 MW to the grid over the next two years were being explored and included the possibility of procuring power barges and of bringing power from the Zambian side of Kariba Dam to SA.

The 3 000 MW gap arose out of a combination of shutdowns for planned maintenance and unplanned maintenance or breakdowns. Eskom has a total installed capacity of 42 300 MW and needs 32 000 MW to meet peak demand on a week day. Mr Molefe said load shedding could be avoided if planned maintenance was not done, but sticking to the maintenance programme was non-negotiable.

It was his view that all SA should be switched to prepaid electricity, Mr Molefe added. Prepaid electricity would solve the problem of municipal debt as well as improve Eskom’s financial situation. Mr Molefe said if all customers had to pre-pay their electricity, that ZAR25 billion would be part of Eskom’s working capital.

He emphatically denied that load shedding was as bad as had been made out. Briefing the portfolio committee on Eskom’s financial position, Mr Molefe further said this was not as bad as was imagined. "Eskom made profits of ZAR21 billion last year; the gearing (borrowing ratio) is high at 65% but it has been stable over the past four to five years; and with regard to the cash position, Eskom has substantial facilities that it has negotiated which it has not drawn down; and the Treasury has committed ZAR23 billion. So, I do not think Eskom is about to go bankrupt."

Business Day, 23 April 2015

The above reflects a summary of certain news articles published during the preceding week. It is not an expression of opinion in respect of each matter, nor may it be considered as a disclosure of advice by any employee of Hogan Lovells.

Download PDF Share Back To Listing
Loading data