Turkish floating power supplier Karpowership says no formal engagement with government have begin to reduce their 20 years power contract. In an interview with the SABC News, company says it learnt of the government’s intentions to cut its multi-year contract to five-years in the media.
The company is the winning bidder for risk mitigation Independent Power Producer Procurement Programme awarded in 2021.
The National Energy Regulator of South Africa (Nersa) has issued a 20-year generation license to Kapowership in September 2021 and any change to the 20-year power purchase agreement will require the company to submit another application to Nersa for approval.
Kapowership has already spend millions of rand on project preparation based on the current 20-year project in South Africa.
In terms of the contract, the company will offer three floating powerships to generate 1 200 megawatts for electricity on the coast at three different ports.
Kapowership commercial director, Mehmet Katmer says, “The cost that needs to be spend in those sites are very basic we need to build transmission lines to reach those substation lines. We need to build short gas pipeline and do some reworks that is the extend of the cost that we need to spend.”
Here in the Brazilian coastal area of Rio de Janeiro, Kapowership has been running two floating ships with a total capacity of 560 kilowatts for over a year now. It’s a massive and expensive exercise.
South Africa will need double this capacity to produce 1200 megawatts. It can cost between R2,50 and R3 to generate power using Liquified Natural Gas.
This is a fraction compared to the cost of around R1 for renewable energy.
Kapowerships says its project is not the panacea to the country’s energy crisis but should rather be viewed as measure to stabilise the grid during emergencies. The company says its natural gas is much cheaper and cleaner compared to diesel.
“Currently Eskom is spending R30 billion a year for diesel. Out project will cost half to one-third of that depending on the gas price. I think out project will improve the environment and create savings,” Katmer explains.
Electricity Minister, Kgosientsho Ramokgopa, has repeated his stance that the 20-year powership agreement must be cut to a maximum of five years. This means that the company will have to recover its investment cost over a shorter period. This could push up the cost. Karpowership says no formal engagements have taken place over the issue.
“This is a government process open tender which term selected for 20 years including us. We also heard from the media that there are discussions to reduce the term. From the business model perspective we are happy to accommodate whatever the needs of SA government, we have not started the formal engagements but we are happy to do that and discuss the shorter terms of the project.”
The company has confirmed that the composition of its local funders may change. This after some local banks indicated that they no longer want to be associated with the project.
“There are already funders that are named during the bids there might be changes to those lenders, we are in constant communications with all SA lenders. Dome lenders have already lended money to Karpowership, I believe that since we are close to final close we will be engaging with those lenders.”
In the meantime, the company is in the process to conclude its environmental impact assessment studies, obtain all regulatory requirements before the project could commence.
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