Power group sees light in policy gloom

The company that built a power station, only to have Eskom refuse to buy its electricity at the height of the load-shedding fiasco, sees light at the end of the tunnel.

AltX and AIM-listed Independent Power Southern Africa (Ipsa) chairman Richard Linnell said in the company's March interim results announcement on Friday: ''Now at last we seem to be sensing the first signs of an integrated energy policy for South Africa, which includes independent power producers (IPPs) at its heart."

Ipsa's first project was a co-generation plant at a chemical factory in Newcastle, in KwaZulu-Natal. These are popular around the world because they convert otherwise environmentally damaging heat into electricity, helping industrial plants gain carbon credits and sell power.

Co-generation in South Africa has hit the snag as the government bizarrely made Eskom the gatekeeper for private-sector entrants, and Eskom has come up with a string of excuses to refuse anyone entry.

''Ipsa was the first company in South Africa to build a new IPP power plant, yet in spite of that accolade, the gas-fired power at Newcastle remained idle for the whole of the reporting period, with its staff on standby to generate in the event that Eskom finalised the Medium Term Power Purchase Programme (MTPPP) tender process which began in September 2008.

''As at March 31 2010, no contracts under the MTPPP had been awarded and none have been announced to date.

''In the meantime, Ipsa's plant did not run but continued to incur both direct costs of employing staff, as well as rent, rates and gas supply liabilities of a normal, fully constructed power plant," Linnell said.

To fund itself while Eskom forced it to waste its seed capital, Ipsa put up for sale four turbines meant for the power station that was to be a key component of government's Coega industrial development zone. With many countries battling to generate enough power, these turbines are highly sought after, and the waiting period is long.

It is not clear if Eskom's barrier to private-sector competition has blighted any hopes of saving Coega from being a white elephant.

Linnell said: ''Early in April 2010, Ipsa was informed by the Coega Development Corporation, owner of the IDZ, that it had qualified for a new tender at Coega to supply a combined cycle power plant serving the IDZ. A request for proposals will be issued shortly."