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Projects and Energy Weekly Snippets

31 July 2015

From old energy to new order
"Beyond the temporary annoyance of load shedding lies a more fundamental shift in the energy sector that would, in any case, have forced executives to confront their electricity usage patterns," says Grant Pattison. The former CEO of Sandton-headquartered retail group Massmart is now CEO and chairman of NRG Renew Africa, a subsidiary of US-based NRG.

"CEOs need to be aware of their business’s energy consumption, current and future costs of energy, and what effect their energy consumption is having on the environment," Pattison says.

Having considered the energy effect, the solution and the market, CEOs face the most difficult decision of all: whether the company should own and run its own power generation, or get another company to do it. Power-purchase agreements are a new field for South African CEOs and they can learn from other countries if they deal with an international company. It is also a new environment from a regulatory and economic point of view.

Like Eskom, NRG pays to build the plant and takes the risk of running it. In the US, NRG owns about 55 GW of power generation, including nuclear. That’s more power than Eskom produces. NRG Renew Africa is participating in the accelerated round of the Department of Energy’s Renewable Energy Independent Producer Programme call for bids. It is NRG’s first bid under the programme. "The skills and environment for renewable energy in SA has developed to the point that we can build and operate a plant for the same price as Eskom power," Pattison says.

Business Day, 28 July 2015

Eskom may import power from Mozambique
Eskom could import some electricity from Mozambique to fill a supply gap in Africa’s most advanced economy, a coal conference heard on Tuesday. Willem Theron, business development manager of Eskom’s southern Africa transmission group, said the state-run utility planned that an extra 6 250 MW of power could be added to two new coal-fired plants, Medupi and Kusile.

“It is assumed that some of the power can be through imports,” Mr Theron told the conference in the Mozambican capital Maputo. Mr Theron said one possibility for electricity imports was Mozambique, which has enough supplies to build coal-based power stations, as well as Botswana.

Eskom is battling to keep the lights on in SA and frequently has to resort to implementing power cuts to prevent the grid from being overwhelmed.

Reuters, Business Day, 28 July 2015

Revealed: real price of nuclear energy
The price of electricity generated by nuclear power is expected to be higher than that from any other technology except for gas and diesel‚ two separate and independent analyses have found‚ the newspaper reported. The government is pressing ahead with a politically driven plan to procure 9 600 MW of nuclear power‚ but has not revealed what it will cost or provided detailed information of the effect it can be expected to have on the electricity price path.

In the absence of official information‚ the expert analyses provide the first real evidence of the effect nuclear energy will have on the price consumers are likely to pay for electricity. The analyses illustrate that nuclear electricity could be more expensive than that generated by new coal plants‚ solar photovoltaic panels or wind. The studies differ slightly but both project a long-run or levellised cost of electricity for each technology‚ inclusive of capital‚ finance‚ maintenance and fuel costs.

In the first‚ Council for Scientific and Industrial Research (CSIR) energy centre manager Tobias Bischof-Niemz projects the levellised cost of electricity from nuclear power to be ZAR1/kWh‚ from new coal ZAR0.80/kWh‚ solar photovoltaic ZAR0.80/kWh and wind ZAR0.60/kWh in today’s prices.

Engineering News, 29 July 2015

Sunbird gets buyout offer from South African power infrastructure firm
South Africa-focused Sunbird Energy on Wednesday confirmed that it had received a takeover offer from South African power infrastructure company Glendal Power. The company told shareholders that a trading halt had been necessitated on 27 July, after the company received an indicative nonbinding proposal from Glendal offering A$0.18 a share for Sunbird’s shares, valuing the company at some A$25-million. The offer price represented a 44% premium on Sunbird’s spot price, and a 53% premium to the 60-day weighted average price of the company’s shares.

Sunbird noted that while there was no guarantee that a firm takeover bid would be made by Glendal, the Sunbird board was considering the proposal and was engaging with Glendal to clarify the terms of the indicative offer, assist the suitor in completing its due diligence investigations and to determine whether to enter into and negotiate terms for a binding implementation agreement.

Sunbird was currently developing its Ibhubesi natural gas project offshore of the Western Cape, and had already executed a term sheet with power utility Eskom to deliver up to 30 billion cubic feet a year of gas to the Ankerlig power station, near Cape Town, for a period of up to 15 years.

Engineering News, 29 July 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.

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