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GDF Suez to develop Exxaro coal power project

17 July 2013 – South African mining group Exxaro Resources and France’s GDF Suez have announced a project development agreement and a coal supply term sheet for a 600 MW coal-fired power plant in South Africa’s Limpopo province.

Following a selection process, Exxaro chose GDF Suez in mid-2012 for the development of the independent power producer (IPP) coal fired power station in the Waterberg region. The proposed development site, 17 km northwest of Lephalale, is located adjacent to Exxaro’s Grootegeluk coal mine.

The fuel for this 600 MW baseload coal-fired power station will be supplied from Exxaro’s Thabametsi mine, a prospective opencast greenfields mine, via a surface conveyor belt. The mine will supply up to 3.8 million tonnes a year of run-of-mine coal to the power plant post ramp-up. A conventional truck and shovel method of operation will be utilised for the mining operations.

The period of the coal supply will be determined by the duration of the power purchase agreement, but is anticipated to be up to 25 years. Coal will continue to be a significant part of South Africa’s energy mix even though the country’s department of energy’s Integrated Resource Plan for Electricity 2010 to 2030 (IRP) sees renewable energy making up 42% of all new electricity generation capacities in South Africa over the next 20 years.

The total capacity of the plant could be expanded to circa 1,200 MW, depending on the availability of water and on grid integration constraints. South Africa urgently requires the installation of additional electricity generation capacity in the near future due to the combination of a low reserve margin and growing electricity demand.

In December 2012, the South African minister for the department of energy issued a determination including an allocation of 2,500 MW of coal baseload power, which is in accordance with the capacity that the IRP allocated to coal new build between 2014 and 2024. In line with this, the department of energy issued a Request for Registration and
Information seeking feedback from interested independent power producers by 12 July 2013, which was duly submitted by GDF Suez. As with the department of energy’s Renewable Energy Independent Power Producer Procurement Programme, the department will be the procurer, while state-owned power utility Eskom will be the buyer and will sign the power purchase agreements.

Shankar Krishnamoorthy, CEO and president of GDF Suez Energy South Asia, Middle East & Africa, says, “GDF Suez’s partnership with South Africa is gaining momentum, with several agreements successfully concluded during the second quarter of 2013. That is not only good news for us, but also for the country. Successful public-private partnerships in the power sector will contribute to the adequacy and efficiency of South Africa’s electricity industry, which is key to the country’s economic development. The South African government is taking the right steps and GDF Suez takes pride in working with its local partner Exxaro to help improve the country’s energy supply security.”

Sipho Nkosi, CEO of Exxaro Resources says, “This is an exciting milestone for Exxaro in the development of this initiative to contribute towards power availability and supply in South Africa. As a major player in the coal mining sector, we are integrated in the power (and energy) production value chain. We have taken advantage of the opportunities provided from current regulatory developments in South Africa’s mineral and energy sectors to develop a coal mine that can supply new power generating capacity. We have played to our strength of coal production and partnered with a competent entity such as GDF Suez for the development of the power plant and electricity production. We anticipate working closely with all the regulatory authorities to making this project a success for the benefit of all in South Africa.”