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Government is making way for the private sector
to save the grid
On Friday 25 September 2020 Minister of Minerals and Energy, Gwede Mantashe gazetted the government’s intent to procure 11,800MW of electricity from independent power producers.
This will be set out as follows:
• 6,800 megawatts from renewable wind and solar sources
• 3,000 megawatts from gas
• 1,500 megawatts from coal
• 513 megawatts from storage
NERSA has already given the green light on procurement of 2,000MW which falls under the Risk Mitigation Procurement Programme. This should be done, with electricity being added to the grid in the next 3-12 months.
The remaining portion of the above additional capacity will likely take between 2 and 4 years to come online.
Self-generation projects could come online even sooner
There are a string of private companies going the self-generation route.
This has been difficult because licensing had to be obtained for these projects – but government has now at least taken away the licensing requirement for projects under 1MW.
But right now there are already 156 self-generation facilities with a capacity of 72MW registered.
Hyprop for instance is doing a number of these 1MW projects at its malls, Atterbury Value Centre, Woodlands Mall, The Glen, Rosebank Mall centres and a smaller installation at Hyde Park Corner.
For facilities that can generate above one megawatt, the National Energy Regulator of SA (Nersa) is improving its licensing processes to improve turnaround time. Five such facilities, with total installed capacity of 25MWs, have already been licensed. Further work is being undertaken to reform the regulatory environment to ensure we make fuller use of the great potential for self-generation among commercial and industrial users.
The mining sector is seriously considering solar power as well
On 30 January 2020 the Minerals Council of South Africa reported that it had urged government to allow mining companies to install their own energy projects.
This came as both Sibanye Stillwater and Vedanta planned 200MW solar parks to get off the grid.
At the time Bloomberg reported that, several mining companies operating in South Africa are currently planning to build their own power plants relying on PV with a combined capacity of 585 MW. These include a 200 MW solar plant under development by gold provider Sibanye-Stillwater, a 75 MW facility planned by Anglo American Platinum, a 40 MW solar park by Goldfields, and a 200 MW PV plant by Indian mining company Vedanta. The list also includes a 30 MW project by Harmony, a 38 MW plant by Orion and a smaller 3 MW facility by Exxaro.
In the meantime Pan African Resources approved a 10MW solar facility to produce 30% of the power it requires at its Elikhulu plant. Sasol has announced two 10MW projects as a first phase to producing green energy – with its plans to expand its solar footprint to 600MW in the longer run.
It’s unclear how Covid-19 and its after affects might influence the timelines on some of these projects. But companies like Pan Af in the gold sector for instance are making record profits, so I doubt that capex projects as crucial as this will be delayed.
Solar PV is the least costly and fastest to commercial operation of all energy sources. Utility-scale solar PV projects (75MW-plus) take between 18 and 24 months from signing the agreement to commercial operation. This could be done in as little as 12 months – if the conditions are right.
Smaller scale (less than 10MW) projects can be completed in anywhere between 6 and 12 months.
So given great policy certainty, and improved government cooperation – load shedding could be greatly reduced in 6-12 months’ time, and major projects coming online in 2 years’ time could make the real difference. And this scenario means we no longer need dependence on Eskom…
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You can invest directly in renewable energy through
the JSE today
Gaia Infrastructure Capital is an investment company that backs renewable energy projects and infrastructure development, and currently a stock that I find very attractive.
Gaia Infrastructure released results for the year ending 29 February 2020 on 29 July.
The company reported a 3% increase in its Tangible Net Asset Value per Share at R10.70.
Compared to its current share price of only 480c, the share price trades at a whopping 55.14% discount.
Headline earnings per share jumped 28% from 56.1cps to 71.6cps. This means the share is on a PE of only 6.83 compared to the JSE average of 18.36.
The company had an interim dividend of 25cps in August 2019, and now it declared a 15cps final dividend bringing the full year dividend to 40cps, or a 7.9% dividend yield.
Gaia’s dividend yield puts it among the highest dividend paying companies on the JSE.
Here’s to unleashing real value
Editor, Red Hot Penny Shares