In what could be a boost for the Mmamabula Energy Project (MEP), South Africa's Minster of Public Enterprises says Eskom is keen to close agreements with independent power producers (IPPs).

According to a report in Miningmx, Minister Barbara Hogan says she is concerned by delays in signing Power Purchase Agreement(PPAs) with IPPs and that she will seek an audience with the ministry responsible for energy matters.

Promoters of MEP, CIC Energy and other IPPs like BSE-listed Aviva, have been trying to pin Eskom down on PPAs for over a year, but the South African utility has placed all such agreements on ice pending finalisation of a funding plan which hinges materially on an application for tariff increases of 45 percent a year for three years.

However, Hogan says the signing of the PPA can only be achieved in "an enabling environment" where long-term power purchase agreements are possible. In a written reply to Democratic Alliance spokesman Manie van Dyk circulated on Tuesday, Hogan makes it clear that the delays in securing power from IPPs are to be laid at the door of her cabinet colleague, Energy Minister Dipuo Peters.

"In order to enable deals with IPPS, there must be confirmation of an integrated resource plan by the energy department indicating what capacity could be allocated to IPPs," she says.

The resource plan must also provide the approval of an appropriate cost recovery mechanism by the National Energy Regulator (Nersa). This would give assurance to the procurer of energy, currently Eskom, and the IPP that the costs associated with the power purchase agreement would be recoverable from the tariff for the life of the agreement.

"In the last financial year, Eskom did not enter into any power purchase agreements because the cost recovery mechanisms were uncertain," Hogan says, adding that the names of the 23 short-listed bidders could not be released owing to the confidentiality of the commercial process.

They were, however, pre-qualified and an additional four bidders were conditionally qualified in the fourth quarter of 2008. But CIC recently issued a statement saying the South African government, and not Eskom, was the ultimate decision maker with respect to Mmamabula.

CIC Energy president Greg Kinross argues that such authority is enshrined in the recently published electricity regulations on new generation capacity, which were published on August 5.

This has led to a high degree of uncertainty and frustration among potential independent power producers (IPPs) and co-generators, which see Eskom's role as "player and referee" unacceptable.

Commentators believe that at least 3,500MW of private power could be brought on stream over the next 36 months if PPAs for such projects were secured. Kinross indicated that there was an ongoing process of "direct engagement" with the South African government, and reported that the company had "commenced discussions regarding the evaluation and approval process" for Mmamabula under the new regulations.

The regulations, CIC averred, gave the energy minister, in concurrence with the finance minister, the authority to make determinations on the procurement of generation capacity from IPPs.