The South African Government is well on its way to introducing private sector participation in the country’s power sector with the recent launch of the request for proposals (RFP) for two new open-cycle gas turbine power plants.

This will establish a framework for future independent power producer (IPP) projects in a region rapidly running out of reserve generation capacity. The high economic growth experienced over the past decade in South Africa has highlighted the need for substantial and sustained investment in new generation capacity in the region--a need that the South African Government recognizes will best be met by a combination of public sector (Eskom) and private sector (IPP) investment. The government has targeted some 30% of the new generation capacity to come from IPPs procured through competitive tendering processes facilitated by the Department of Minerals and Energy (DME).

Back in May 2004 at the start of the process, the DME appointed engineering consultants PB Power as the lead advisor for the project. The advisory team comprises technical, legal, commercial, environmental and project management components to assist DME in all aspects of the project.

The two new peaking power plants are to be located in the Eastern Cape and KwaZulu-Natal provinces and will have a total capacity of about 1000 MW. Eskom, the incumbent national power utility in South Africa, will be the buyer of the electricity under a long-term power purchase agreement. The power plants will operate on fuel oil at an expected capacity To fast track the project, the DME initiated a number of pre-development activities including selecting the sites, carrying out environmental impact assessments, negotiating the land purchase and lease agreements and preparing fully drafted project agreements prior to the launch of the RFP.

The RFP was launched in April this year and it invites five bidders to submit proposals for the design, construction, operation and maintenance, and financing of one or both of two oil-fired, open-cycle gas turbine (OCGT) power plants. The bidders were qualified by the DME during its Request for Qualifications (RFQ) process, conducted during 2005. They are AES Consortium, Inkanyezi Consortium led by Suez, International Power Consortium, Tata-J&J Consortium, and YTL Consortium.

The schedule is for bids to be submitted by the end of September 2006; construction to commence by mid 2007; and commercial operation to begin early in 2009.

PB Power’s project director, Dr Shaheen Ahmed, commented: "The project represents pioneering work for the country and for PB Power in an arena where issues such as sustainability, value for money and resource allocation combine within an underlying developmental framework. As a pilot for future IPP projects, it can greatly contribute to a sustainable and efficient generation sector in the country with benefits felt throughout the region."