Nicholas Newman AfrOil – Africa Oil & Gas Issue 650 02 August 2016 Week 30 Pages 4 – 5
Progress is being made with plans for LNG imports to South Africa, but challenges remain, particularly regarding links with Eskom, writes Nicholas Newman
South Africa’s Department of Energy has invited expressions of interest (EoIs) from private investors and independent power producers (IPPs) to deliver 3,126 MW of gas-to-power projects at an estimated total investment of 64 billion Rand (US$4.5 billion) covering port LNG import facilities, pipeline, power generation and transmission infrastructure development.
To attract investment in independent power plants will require a detailed business plan for
the supply of and demand for electricity. Market research detailing the size and characteristics of
the potential customer base will need to be augmented with a“ bankable” power purchase agreement
(PPA), featuring a fixed cost-reflective tariff per kWh sufficient to cover operating costs, service debt and provide a reasonable return on equity. Investors will also require provisions to reduce the dispatch risk either by a “take or pay” contract, where the off-taker pays a fixed tariff or pays a penalty, or “take and pay”, where the offtaker must take and pay a fixed tariff for all the energy that is delivered.