S.Africa agrees to buy 1,043 MW in 2nd stage of clean power plan

PRETORIA Thu May 9, 2013 11:05am EDT

PRETORIA May 9 (Reuters) - South Africa committed to buy 1,043 megawatts of renewable energy from independent developers in the second stage of a programme to boost power supplies and reduce its reliance on coal.

The government and state-owned power utility Eskom signed agreements with power producers on Thursday for 19 projects worth 28 billion rand ($3.1 billion).

This comes on top of the 28 projects already signed off in the first stage of the clean energy drive, whose winners are investing 47 billion rand to build 1,415 MW of clean power.

"It has been really a long, long road," Energy Minister Dipuo Peters said at the signing ceremony.

"The success of this renewable energy procurement process will lay the foundation for the participation of independent power producers in power generation in South Africa."

South Africa hopes to use the programme to help create jobs and economic growth as well as help alleviate chronic power shortages as demand increases from its large platinum, gold, iron ore and coal mining industries.

The signing of the agreements commits Eskom to buy the power at a set price once the plants are built.

Developers must raise financing and build power stations according to specific requirements, including sourcing the materials locally. In the previous round some preferred bidders had struggled to get their projects signed off.

Africa's largest economy depends on coal for 85 percent of its electricity supply of around 41,000 MW, almost all of it generated by Eskom. Two years ago it launched the process to procure cleaner energy to reduce carbon emissions and bolster a strained power supply.

The process of adding more renewable power to the grid and having private players participate in generation has dragged on for years, raising doubts about the government's ability to deliver on its plans.

But progress made over the past year has won wide praise from across the private sector and from bankers. The first megawatts from the programme are expected to be operational in November this year, while other plants are due by 2016.

Most of the projects are relying on financing from banks and private capital, although Soitec, which is participating in the renewable programme, successfully issued a 1 billion rand bond last month to help finance its planned 44 MW solar plant.

The government hopes other developers will follow suit and help create a new pool of energy financing in South Africa.

A third bidding round of the renewable drive is in progress.

($1 = 9.0107 South African rand) (Reporting by Agnieszka Flak; Editing by Ed Stoddard and Jane Baird)

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