Projects and Energy Weekly Snippets

Cookhouse wind farm operation handover
The 138.6 MW Cookhouse wind farm, situated in the Eastern Cape has reached its commercial operation date after all performance tests and grid compliance were completed. The project was selected following the first bid window under South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) and, while not the first to achieve COD, was the first to connect to Eskom’s transmission network.

Suzlon Energy, the construction team, will remain on site for most of 2015, will train 15 technical staff recruited from the Eastern Cape, who will form the long-term operations and management team. The other shareholders include Old Mutual’s Infrastructural, Developmental and Environmental Assets Managed Fund, AFPOC, the African Infrastructure Investment Fund 2 and Nederlandse Financierings Maatschappij voor Ontwikkelingslanden, through its investment in Apollo Investment Partnership II.
5 December 2014 - Engineering News

Finance proposal made by Rosatom
Rosatom regional vice president, Viktor Polikarpov, confirmed that Rosatom is considering various funding models as part of its offer for the construction of new nuclear power plants (NPP). However, Russia and South Africa were likely to conclude an intergovernmental agreement outlining how a state loan could be extended in the event that Rosatom was selected to build South Africa’s proposed NPP fleet.
The IRP, which was published in 2011, was widely held to be out of date. Nevertheless, the Department of Energy indicated in a recent parliamentary reply that it was implementing the nuclear new build programme in line with the Cabinet-approved IRP, as a draft IRP Update (which proposed that the NPP roll-out be delayed, curtailed or even abandoned unless specific cost thresholds were met) had not been officially approved. The department continued to stress, however, that the nuclear procurement process had not yet started and that no decision had been taken on the procurement model to be pursued. Polikarpov indicated that the Russian offer would seek to ensure that South Africa was able to pay off the NPPs in 15 to 20 years – thereafter they would become a cash cow for future generations and not a burden, much like Koeberg.
5 December 2014 - Engineering News

$6billion Mozambique to South Africa oil and gas pipeline
Independent oil producer SacOil, the Public Investment Corporation and Mozambique state-owned firm the Instituto de Gestão das Participações do Estado (IGEPE) have signed a joint development agreement to determine the technical and commercial practicality of a transnational terrestrial gas pipeline and distribution facility that will carry natural gas from Mozambique’s Rovuma fields to South Africa, with possible off-takes to other neighbouring SADC countries.
The project would be designed to make energy affordable for a greater proportion of the population, promote clean energy, reduce oil import bills, lower the region’s carbon footprint and reduce carbon tax. SacOil added that the gas market in South Africa was driven by demand from the Saldanha industrial development zone, the Mossel Bay gas-to-liquid plant, the Mossel Bay and Atlantis diesel-fired power stations, an array of ageing coal-fired power stations, as well as possible new power stations in Coega and Richards Bay.
9 December 2014 - Engineering News

Diesel shortages for Eskom
Due to numerous plant breakdowns at Eskom since 2009, there has been an increased demand and consumption for diesel, having burnt approximately 140 million litres in November alone. Eskom has spent ZAR10.5 billion on diesel fuel in 2013/14 to operate the Ankerlig plant in Atlantis, which consumes 425 000 l/h and the Gourikwa facility, in Mossel Bay, which burns 236 000 l/h. Together the plants produced 3 621 GWh, translating to a load factor of over 19.3% last year. CEO Tshediso Matona has indicated that the group is likely to spend a similar amount in 2014/15. However, he has also indicated that the group is at risk of breaching its budgetary allocation for diesel in early 2015, which is partly why the utility is currently forecasting a high risk of load shedding in February and March.
Matona says the power system will be severely constrained and will only begin to ease once at least two units at Medupi and one unit at Kusile are running. As previously mentioned in earlier weekly snippets, the synchronisation of Medupi Unit 6 is now expected only in the second week of January, which will be followed by ramp up to full commercial operations over the subsequent six months.
9 December 2014 - Engineering News

French power utility expensive to connect renewable energy to its grid
Paris-based energy utility Électricité de France business development manager Olatunde Kolade has said that the expenses involved in connecting renewable energy sources to their national grid have been underestimated and should be factored in all the projects prior to implementation.
In addition to the grid costs, the cost of developing transmission lines and connection points to often geographically isolated renewable-energy projects, such as wind farms, is high. According to Kolade, once renewable energy sources start to generate electricity, their running costs reduce to “nearly zero”, and traditional energy sources, which are required to provide back-up power, have become unable to compete economically as they are required to buy costly fuel for generation. As such, renewable energy project developers may be required to pay so-called “capacity payments” to ensure that energy is available to the grid when renewables are unable to generate power.
The power system’s capability of incorporating sources of renewable energy without additional costs is limited, because some of them only supply intermittent energy, especially wind, photovoltaic and run-of-river projects. This also increases the uncertainty of planning activities and reduces the overall stability of the system.
10 December 2014 - Engineering News 

Review of SA's power situation
Majority of the households across the country have been without electricity for approximately 4-5 hours a day since Friday 5 December 2014 when state utility Eskom lost up to a third of its 42 000 MW capacity as plants shut down for emergency maintenance. Since the end of apartheid 20 years ago, most of the population has been connected to the grid, although around 15% of the poorest are still without electricity, and investment in new power plants has not kept up with the growing demand.

Eskom, which supplies almost all the country's electricity, says it will have a funding shortfall of ZAR225 billion over the next four years and will have to increase electricity tariffs. In October, the ruling African National Congress (ANC) said it would inject ZAR20bn ($1.8bn) of cash into the struggling utility and it could also convert its existing ZAR60bn subordinated loan to state-owned equity.
Many restaurants, shops and offices simply close their doors when the blackouts hit, although some, including large shopping malls, have invested in generators to stay open. Drivers on Johannesburg's busy streets blast their horns and jerk their cars forward in risky dashes for the other side of heaving junctions where traffic lights have gone dark. Crime is already a major concern for most South Africans and with no power going to electric fences or security gates and streets pitch black at night, criminals have new opportunities.

PPC and Afrisam merger
Pretoria Portland Cement Company (PPC) has confirmed that it received a conditional non-binding offer from materials group Afrisam to merge the two entities. A PPC spokesperson stated that the board was considering the proposal and will make an announcement regarding its decision. The merger comes as a result of PPC CEO Ketso Gordhan resigning in September when the board refused to support his decision to fire a senior executive.
11 December 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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