Exxaro, GDF SUEZ to develop 600 MW coal power plant

Source:Exxaro Resources

Diversified South African-based mining group Exxaro Resources Limited (JSE: EXX) (Exxaro) and France’s GDF SUEZ, global leader in Independent Power Production, are pleased to announce that they concluded a project development agreement and a coal supply term sheet for a 600 MW coal-fired power plant in Limpopo province.

Following a selection process, Exxaro selected GDF SUEZ in mid-2012 for the development of a 600 MegaWatt (“MW”) coal-fired power station in the Waterberg region, Limpopo province. The proposed development site, 17 km north-west of Lephalale, is located adjacent to Exxaro’s Grootegeluk coal mine. The fuel for this 600MW baseload coal-fired power station will be supplied from Exxaro’s Thabametsi mine, a prospective opencast greenfields mine, via a surface conveyor belt. The mine will supply up to 3.8 million tonnes per annum of run-of-mine coal to the power plant post ramp-up. A conventional truck and shovel method of operation will be utilised for the mining operations.

The period of the coal supply will be determined by the duration of the power purchase agreement, but is anticipated to be up to 25 years. Coal will continue to be a significant part of South Africa’s energy mix even though the Department of Energy’s (“DoE”) Integrated Resource Plan for Electricity 2010 to 2030 (“IRP”) sees renewable energy making up 42% of all new electricity generation capacities in South Africa over the next 20 years.

The total capacity of the plant could be expanded to circa 1,200 MW, depending on the availability of water and on grid integration constraints. South Africa urgently requires the installation of additional electricity generation capacity in the near future due to the combination of a low reserve margin and growing electricity demand. GDF SUEZ and Exxaro are global leaders in their respective industries and are pleased to be able to combine their strengths to positively impact the baseload power generation capacity, with the aim of assisting in alleviating South Africa’s power supply challenges.

In December 2012, the South African Minister for the DoE issued a Determination including an allocation of 2,500 MW of coal baseload power, which is in accordance with the capacity that the IRP allocated to coal ‘New build’ between 2014 and 2024. In line with this, the DoE issued a Request for Registration and Information seeking feedback from interested independent power producers by 12 July 2013, which was duly submitted by GDF SUEZ. As with the DoE’s Renewable Energy Independent Power Producer Procurement Programme, the DoE will be the procurer, while State-owned power utility Eskom will be the buyer and will sign the power purchase agreements. 

Shankar Krishnamoorthy, CEO and President of GDF SUEZ Energy South Asia, Middle East & Africa, commented: “GDF SUEZ’s partnership with South Africa is gaining momentum, with several agreements successfully concluded during the second quarter of 2013. That is not only good news for us, but also for the country. Successful public-private partnerships in the power sector will contribute to the adequacy and efficiency of South Africa’s electricity industry, which is key to the country’s economic development. The South African government is taking the right steps and GDF SUEZ takes pride in working with its local partner Exxaro to help improve the country’s energy supply security.”

Sipho Nkosi, Chief Executive Officer of Exxaro Resources said: “This is an exciting milestone for Exxaro in the development of this initiative to contribute towards power availability and supply in South Africa. As a major player in the coal mining sector, we are integrated in the power (and energy) production value chain. We have taken advantage of the opportunities provided from current regulatory developments in South Africa’s mineral and energy sectors to develop a coal mine that can supply new power generating capacity. We have played to our strength of coal production and partnered with a competent entity such as GDF SUEZ for the development of the power plant and electricity production. We anticipate working closer with all the regulatory authorities to making this project a success for the benefit of all in South Africa.”

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