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Projects and Energy Weekly Snippets

10 October 2014

Another electricity price increase
Following the 8% electricity price hike earlier this year, NERSA announced on Friday 3 October that they had approved the implementation plan of the Regulatory Clearing Account to assist Eskom in its ZAR7.8 billion financial crisis. This will result in an average tariff increase of 12.69% for the 2015/2016 financial year. Until such time that the tariff is employed, Eskom will be forced to implement managed blackouts as it struggles to sustain the current electricity demand.

Eskom uses coal for approximately 80% of generation, which should mean that the electricity is at least a third cheaper than the rest of the world. Unfortunately through poor planning, unforeseen costs and ongoing litigation, Eskom has not been able to meet the demands of the country.
 
6 October 2014 - Business Day and Engineering News

South African markets breathe a sigh of relief
On Monday 6 October, President Zuma appointed Lesetja Kganyago as the new governor of the South African Reserve Bank after the resignation of Gill Marcus last month. Mr Kganyago emphasised that he would pursue his mandate without fear, favour or prejudice. He said: "I do not have to reinvent anything. I just have to carry on from the work she (Marcus) has done. Like an African matriarch she has led the Reserve Bank steadfastly, she has guided us through the dangerous forest that is the global economy, she (Marcus) knows where the drinking holes are."

Mr Kganyago is an economist who was the director-general of the Treasury before he joined the Bank as a deputy governor in 2011. He will be taking office at an extremely difficult time for the Bank, which is struggling to find equilibrium in monetary policy and stubborn inflation.

7 October 2014 - Business Day

Transnet faces ZAR30bn maintenance backlog
On Wednesday Public Enterprises Minister Lynne Brown stated in her response to a written parliamentary question that Transnet has an infrastructure maintenance backlog of ZAR30 billion, with most of it on signalling systems and rail tracks. The parastatal needs to spend ZAR13.9 billion on rail tracks and ZAR11.7 billion on signalling systems. It also faces outstanding upkeep of ZAR2.4 billion on rail yards, ZAR907 million on freight rail rolling stock, ZAR349 million on port terminals, ZAR5 million on pipelines and ZAR37 million on communications systems. The Democratic Alliance said "the figures were at odds with the government's oft-stated commitment to infrastructure expansion". Furthermore, "any further deterioration of Transnet's infrastructure could severely affect South Africa's ability to create jobs and grow the economy". This comes weeks after the national power utility, Eskom, warned of more power outages as the summer season approaches due to 32 of its 87 coal-fired generating units being in need of "major surgery". This is in addition to four already being in a “critical condition”. This was followed by an announcement by the national treasury of Cabinet's approval of a ZAR50 billion "support-package" to assist in alleviating pressure on consumers as Eskom seeks to raise money to help in resolving the current supply-demand balance crisis. The consequence of Cabinet’s decision is projected to be tariff hikes expected to take effect on 1 April 2015, over and above the already sanctioned 8%.

8 October 2014 - Engineering News

Eskom-Westinghouse in the spotlight
On Tuesday 7 October, US Ambassador to South Africa Patrick Gaspard expressed concern about alleged irregularities in the recent Eskom tender for the replacement of steam generators at the Koeberg nuclear power station in Cape Town. In September, the ZAR4.3 billion contract was awarded to Areva of France. However, Westinghouse Electric Company subsequently launched an urgent review application in the South Gauteng High Court challenging the tender process.

Speaking at a business forum hosted jointly by the Nepad Business Foundation and Nedbank, Gaspard said he was committed to ensuring that US companies were treated fairly under South African law for tendering and procurement opportunities. "We are concerned, for example, when a major foreign investor like Westinghouse brings legal action on a tender that recently happened on the awarding of a contract by Eskom to upgrade the Koeberg nuclear power plant. It’s just not the kind of message, the kind of image that any of us want in this partnership right now. "

9 October 2014 - Engineering News

TNPA to re-issue Cape Town cruise terminal RFP
The Transnet National Ports Authority (TNPA) announced on Thursday October 9 that there were no successful bidders in response to the request for proposals (RFP) for a tender to develop a cruise terminal at the Cape Town port. An extensive procurement process had led TNPA to decide not to award the tender to any of the bidders. The TNPA said in a statement that "owing to the strategic importance of the facility for the country, province and the city of Cape Town, it will re-issue the RFP by way of public notice, to allow interested parties to participate in the process".

9 October 2014 - Engineering News

Bokpoort CSP plant to be completed by end of 2015
On Friday 10 October, ACWA Power announced that the 50 MW Bokpoort concentrated solar power (CSP) plant in the Northern Cape, which is being built as part of the Renewable Energy Independent Power Producer Procurement Programme, was over 50% complete and was anticipated to be completed by December 2015. The Minister of Trade and Industry, Dr Rob Davies, visited the plant owned by ACWA Power during the course of the week. The plant is said to be equipped with the largest thermal storage ever adopted for a solar power plant of this class to date with a capacity of 9.3 hours. This would enable the plant to generate record-high energy during the day and night, producing in excess of 230 GWh a year. The construction phase of the project had created 1 000 jobs, while 50 permanent employment opportunities were expected to be created during the operational life of the power facility. ACWA Power Southern Africa business director Chris Ehlers stated that Southern Africa is well placed to become a regional CSP powerhouse over the long-term. Besides its CSP project, ACWA Power had started development of three other major projects in Southern Africa representing a total capacity of over 1 000 MW.

10 October 2014 - Engineering News

First gas burner fired up at Medupi’s Unit 6
State-owned power utility Eskom fired-up the first gas burner of the Medupi power station’s Unit 6 this week. The unit was scheduled to be synchronised at the end of this year. Eskom explained that the firing of the gas burner, which followed the filling of the liquefied petroleum gas (LPG) tank and the safety clearance of the distribution piping from the LPG tank to the LPG burner skids, supported the ignition of oil combustion for the first oil fire. Eskom assured in a construction update that “Medupi is now well on its way towards the first oil fire”. Furthermore, the joint oversight portfolio committees on public enterprises and energy that visited the Medupi project to assess the progress that had been made gave “positive feedback and this demonstrated appreciation for the progress achieved at Medupi given the magnitude of the project".

10 October 2014 - Engineering News

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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