IPSA cancels construction of South African coal power plant, coal agreement at Elitheni

Source: IPSA Group

The Board of IPSA Group PLC has authorized the termination of the coal agreement between IPSA's wholly owned subsidiary, Indwe Power Limited (IPPL), and Elitheni Coal Limited, a subsidiary of Strategic Natural Resources PLC. 

The original agreement, which was announced on October 28, 2008, envisaged that IPPL would purchase approximately 1,000,000 tonnes of coal per annum for a period of 20 years (20 million tonnes) for use at its power projects under development in the Eastern Cape. There have, however, been significant delays in Eskom's Multi-site Baseload IPP Programme, which in turn have led to delays in achieving off-take contracts for power from IPSA's proposed mine mouth power plant at Indwe. Accordingly, the Board of IPSA has decided that IPPL cannot proceed with the current coal contract.

IPSA continues to hold an option over a mine mouth site for a coal-fired power plant at Indwe and intends to pursue power plant development based on clean coal in the Eastern Cape. Such developments will, however, have to be backed by bankable off-take agreements. In the meantime IPSA's decision leaves Elitheni free to explore other options for the sale of coal for power generation. 

Elitheni Coal Project, Indwe, Eastern Cape of South Africa

The Elitheni project was supposed to develop up to a 500 MW mine mouth coal-fired project using state of the art clean coal technology using coal from the Elitheni mine. It is one of the first such plants planned by the private sector for South Africa and it was originally envisaged as a single 400 MW project, but was increased to 500 MW split between several sites due to favourable coal reserve reports.

The plants was to be built at Indwe, situated in the Eastern Cape north of both Port Elizabeth and East London, site of one of the earliest coal deposits brought into production in South Africa. The Coal Supply Agreement entitles IPSA to an annual amount of 17.5 million gigajoules of coal per annum, which will be approximately 1 million metric tons per annum for the duration of the Coal Supply Agreement, which is 25 years.

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