Bloomberg News

South Africa Approves $8.8 Billion Clean Energy Plan

May 21, 2012

South Africa approved 19 wind, solar and hydropower proposals in a second bidding round, increasing the cost of renewable-energy projects given the go-ahead to 73 billion rand ($8.8 billion) as the nation boosts cleaner energy.

The Department of Energy got 79 bids for 3,255 megawatts in the round and 51 met the qualification criteria, Minister Dipuo Peters said in Pretoria today. Among the winners were Tata Power Co. and Exxaro Resources Ltd. (EXX)’s Cennergi venture, as well as a group including Acciona SA and Aveng Ltd.

Total capacity on offer in the round was 1,275 megawatts, Peters said. That on top of the 1,416 megawatts, costing 45 billion rand, approved in the first round in December.

South Africa said in August it would add 3,725 megawatts by the end of 2016. It is expanding capacity after state-run Eskom Holdings SOC Ltd., which generates most of its power from coal, suffered shortages in 2008, leading to mines closing. The whole program will cost an estimated 100 billion rand, Peters said.

Sishen Solar, Solar Capital De Aar 3, Dreunberg, Gouda Wind, West Coast 1 and Grassridge are also among the winners.

Proposed costs in the second-round fell and the proportion of equipment and services sourced locally rose as bids became more competitive, Energy Department Director-General Nelisiwe Magubane said. The average cost for solar photovoltaic plants slid to 1,645 rand a megawatt-hour from 2,758 rand, a copy of a presentation handed to reporters in Pretoria showed.

Average Cost

“The cost of electricity from all of these projects will feed into the average cost of generation of electricity in the country,” said Alastair Campbell, head of power financing at Standard Bank Ltd., funder of about 31 percent of the megawatts awarded in the second bidding round. “So, if the tariffs bid are able to come in lower, then ultimately it will have a positive bearing on the overall average electricity costs.”

Standard Bank will commit to as much as 6 billion rand of lending in the second round, adding to 8.1 billion rand in the first, he said by phone from Johannesburg. Nedbank Capital is funding 39 percent of the second-round projects by capacity, the Johannesburg-based company said in an e-mailed statement today.

Some first-round winners will find it difficult to complete funding arrangements by the June 30 deadline, Department of Energy Deputy Director-General Ompi Aphane said. A third round will be opened at a date yet to be decided, Magubane said.

To contact the reporter on this story: Carli Cooke in Johannesburg at clourens@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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