South Africa needs to reform its power purchase agreements, said head of the South African National Energy Association.

Managing director Brian Day was among other industry players at a trade seminar in Johannesburg last week that called for greater private-sector participation in selling electricity in southern Africa and in the Southern African Power Pool (SAPP), reports Business Day Live.

Private-sector power generation

Boss of engineering company Basil Read Energy Ian Curry said that to enable scarce capital to be leveraged, the mandate of state power companies should be limited to transmission and distribution, and the private sector should invest in generation capacity and offer power at the best price.

Making electricity commercial

Eric Le Grange, director of South African law firm ENSAfrica, said the issue constraining more private power generation was not legal but commercial. It was expensive to wheel power across the network.

Mr Le Grange said there had to be a commercial way to enable private power producers to sell energy on a commercial basis to more than one off-taker.

Energy security also required a properly developed and maintained transmission grid across the region. Mr Day said more private power generators should be admitted to membership of the SAPP.

Mr le Grange said the advantage of the power pool was that it removed the risk of “stranded assets” in power generation, where costly power generation facilities are underutilised because there is not enough demand.

Financing power projects

Lord Mayor of London Fiona Woolf told the seminar that financial, legal and technical experts in the City of London were seeking opportunities to advise southern African countries as they addressed issues such as extending electricity access, affordability, security of supply and using low-carbon technologies.

She said new financing models were being developed in London to replace the traditional long-term financing of energy projects by a syndicate of banks.

New models included Islamic instruments such as sukuks, a bond underpinned by an asset which provides a cash flow, and other, hybrid products.

In June the UK issued its first sukuk for £200 million and last month SA’s Treasury said it had appointed advisers to arrange SA’s first sukuk for at least US$500 million.