Brian Benza
13 November 2009
Promoters of the Mmamabula Energy Project (MEP), CIC Energy, say they are still confident their 1200mw project will go ahead as planned despite the chaos currently prevailing at South African power utility, Eskom.
In a statement released by the company on Wednesday, CIC says it does not believe the current uncertainty regarding the leadership situation at Eskom will directly impact the evaluation and approval process for the Mmamabula Energy Project."Like many others interested in the electricity sector in South Africa, as well as the public in general, we have been following with interest the recent stories in the press in relation to the leadership situation at Eskom," says Greg Kinross, the President of CIC Energy.
Eskom has been marred by leadership problems over the past two weeks that saw Chairman Bobby Godsell resign on Monday after a fall-out with CEO Jacob Maroga. For MEP to start rolling, it requires a commitment in the form of a Power Purchasing Agreement (PPA) from South Africa, which is earmarked to consume 75 percent of the power generated from the project.However, in his statement, Kinross says he now believes the fate of Independent Power Producers and the signing of a PPA lies more with the government than Eskom.
"We think that it is important, however, that stakeholders in the Mmamabula Energy Project consider these events in the context of the recently published Electricity
Regulations on New Generation Capacity," says Kinross.
"While the practical application of these regulations is still being developed, the company's understanding is that Government, and not Eskom, is now the decision-maker with respect to the Mmamabula Energy Project."CIC Energy has an ongoing process of direct engagement with relevant stakeholders in the South African government in the context of which the CIC has commenced discussions regarding the evaluation and approval process for the Mmamabula Energy Project under the regulations.The Electricity Regulations on New Generation Capacity were published by the
Department of Energy of South Africa on August 5, 2009. The regulations provide that the Minister of the Department of Energy shall make determinations on the procurement of generation capacity with the concurrence of the Minister of Finance in the case of procurement of generation capacity through an independent power producer.In addition, the regulations provide that the buyer who will enter into a power purchase agreement with an independent power producer will also be determined by the Minister of the Department of Energy. After initial delays in early 2008 due to what CIC Energy CIC termed overwhelming demand for power and engineering resource constraints, the project was further delayed in July this year as CIC could not pin Eskom down on a PPA because of tariff differences.
The tariffs proposed by CIC Energy were said to be materially higher than the price sanctioned by Nersa.CIC had planned to bring the first generating set at its proposed 1,200MW Mmamabula power station on line during 2013; but to meet that target, it would have to have signed a PPA with Eskom by the end of September this year.
The continued delays are likely to affect Botswana's power plans which had factored in supply from the project in efforts to satisfy local demand following gradual supply reductions from Eskom since January 2008.
Botswana was to consume 25 percent of the 1200MW to be produced from the initial phase of MEP. According to the plans, construction of the plant should have begun in the last quarter of last year while commercial operations were to commence in late 2012.
In the short-term, Botswana has resorted to importing more power from Mozambique and Zimbabwe.
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