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Investment in South Africa’s baseload capacity remains a necessity, energy minister Tina Joemat-Pettersson emphasised during the announcement on Monday.

Energy ministry. pic credit: ESI Africa
(Left): Allan Taylor, energy ministry, (Middle): energy minister Tina Joemat-Pettersson, (Right): Maduna Ngobeni, IPP Office

Addressing members of the media, Joemat-Pettersson announced Thabametsi and Khanyisa as the preferred bidders for round one of the country’s first Coal baseload Independent Power Producer (CIPP) programme.

Attending the briefing, ESI Africa learned that both power stations will collectively add 863.3MW to the national electricity grid within the next five years.

According to the minister, Khanyisa, which will be based in the Mpumalanga region, is forecast to begin commercial operation in December 2020 followed closely by Limpopo-based Thabametsi in March 2021.

Drivers behind coal baseload IPP selection

With efforts to bolster local industries, Joemat-Pettersson explained that this round required bidders to have a minimum South African entity participation of 51%, black ownership of 30%, and a weighted B-BBEE contributor status of level five in respect of locally based shareholders.

In addition to having the above, the selected bidders had to submit prices below the stipulated qualification price of 82c/kWh.

According to Maduna Ngobeni, principal energy officer from the IPP Office, which reviewed and evaluated all bid submissions, Khanyisa submitted a price of 80c/kWh and Thabametsi came in lower with 79c/kWh.

Ngobeni noted that the tariff would increase to R1.1c once cost of connection is included.

Project partners

The two Coal IPPs will open up investment opportunities for much needed infrastructure and stimulate local procurement. The minister highlighted that "while the over ZAR40,164 million [$2.8 million] of debt and equity funding committed to the projects demonstrates what the investors see in the coal programme space, the jobs created both during construction (6,613) and operations (13,524) will have a positive impact on surrounding communities."

The minister said that Khanyisa is headed up by a consortium including Acwa Power, Pele Green, Thebe Investments, Paris Group, Masi Capital and the IDC. The financiers and lenders include the DBSA, ABSA, Nedbank and Standard Bank. The EPC contractor is General Electric and AngloAmerican has been selected to be the fuel and water supplier.

Thabametsi involves a consortium led by Marubeni corporations a partner with the Japanese, Korea Electric Power Corporation, PIC, Royal Bafokeng Holding and KPI Holding. The financiers and lenders include ABSA, Nedbank, Standard Bank, Rand Merchant Bank and the DBSA.

Noting that the above players are credible within the sector, the minister wants to encourage the further development of SMMEs and other BEE partners  to avoid a monopoly of the sector by a few well-developed BEEs.

Coal a much needed resource

The minister noted that the department of energy requires an additional 16,838MW of coal power to be added within its current planning horizon to 2030.

"To meet the additional requirement of coal baseload generation capacity, in December 2012, the then minister of energy announced a determination for 2,500MW to be procured through a coal baseload Independent Power Producers Programme," the minister explained.

Joemat-Pettersson concluded: "While South Africa’s energy build plan still incorporates the development of fossil fuel assets in the foreseeable future, the department is committed to transition to a low-carbon economy, with priority to be given to clean energy alternatives, subject to current technological and cost constraints.

“We are already seeking ways and new technologies to use fossil fuels with minimal carbon emissions - the RFP for the second coal bid window is being reviewed to give consideration to the inclusion of clean coal technologies."

The minister said that she would be taking the RFP to the Cabinet committee this Wednesday and to Cabinet the following Wednesday for permission to release for comment and not for approval.

View the CIPP fact sheet here.

1 COMMENT

  1. The entrance of new coal IPPs is welcomed development in South Africa as it provides alternative generation of electricity other than the existing one. However it must be noted that we are giving correct information on bidders qualification criteria for the phase PPA in the job opportunities to be created by Project 2 or in the Mpumalanga province taking into consideration those that will be created during construction (1450) and during operation (4341) adds up to 5791 employment opportunities and not the 13098 as reflected under project 2 PPA total employment opportunities. This is therefore needed to corrected not to give false hope that there will more jobs created than the project can afford.