South Africa grid troubles not deterring investors

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Richard Heap
March 30, 2015
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This content is from our archive. Some formatting or links may be broken.
South Africa grid troubles not deterring investors

South African state utility Eskom appointed Tshediso Matona as chief executive last August. Now, seven months later, he has been suspended. That’s quite some going.

Now, to be fair to Matona, it isn’t really his fault. Eskom is suffering from a long-term lack of investment in South Africa’s energy infrastructure over the last 20 years, and the system’s over-exposure to coal. Matona is one of four senior executives that have been suspended as the utility conducts an ongoing investigation into the operations of the company, which has been presiding over rolling blackouts, as well as calling for people to use less power.

The situation is forcing companies and public authorities to look at other energy options, including whether they can buy energy from independent power producers.

This is a boost for those in the wind sector because renewables are among the options being considered. This vindicates the strategies of investors that are looking to build wind farms in the country.

However, Eskom is still a hurdle, as it does not have the sufficient spare capital to invest in building the grid links to these wind farms. It has made available the option that developers can build these links themselves, but that also means developers would need to fund the construction of these links. That is a significant extra cost on top of building the wind farm.

And yet, investors who know the market clearly don’t see these troubles as a disincentive.

For example, Mainstream Renewable Power and Actis last year opened the 138MW wind farm Jeffreys Bay on South Africa’s Eastern Cape, and are clearly aware of the issues with the South African market. But this has not put them off. Last month, Mainstream secured financing for three projects in South Africa totalling 360MW — 140MW Khobab, 140MW Loeriesfontain 2, and the 80MW Nouport — and all of which are in the Northern Cape.

And last month Mainstream and Actis formed Lekela Power, which is a $1.9bn pan-African renewable energy platform with plans to build up to 700MW-900MW of wind and solar across Africa by 2018. It isn’t focused on South Africa, but it also shows that the companies’ experiences in the country haven’t put them off Africa.

Meanwhile, this month China’s Longyuan secured financing from Nedbank and IDC to develop the first two phases of the 244MW De Aar wind farm in the Northern Cape. It is working with South Africa’s Mulilo Renewable Energy and a local community company; and construction work is scheduled to start on the project in the second half of the year.

Again, Eskom’s troubles are not putting them off. Far from it. It is the troubles with Eskom that are giving alternative energy sources like wind such a great growth opportunity. Let’s not forget South Africa went from no capacity to 570MW in the last 12 months.

Developers and investors are a canny bunch. Yes, problems with the grid mean it won’t always be easy, but the fact that existing investors have shown a willingness to persist with projects in South Africa shows that they clearly see a long-term opportunity.

South African state utility Eskom appointed Tshediso Matona as chief executive last August. Now, seven months later, he has been suspended. That’s quite some going.

Now, to be fair to Matona, it isn’t really his fault. Eskom is suffering from a long-term lack of investment in South Africa’s energy infrastructure over the last 20 years, and the system’s over-exposure to coal. Matona is one of four senior executives that have been suspended as the utility conducts an ongoing investigation into the operations of the company, which has been presiding over rolling blackouts, as well as calling for people to use less power.

The situation is forcing companies and public authorities to look at other energy options, including whether they can buy energy from independent power producers.

This is a boost for those in the wind sector because renewables are among the options being considered. This vindicates the strategies of investors that are looking to build wind farms in the country.

However, Eskom is still a hurdle, as it does not have the sufficient spare capital to invest in building the grid links to these wind farms. It has made available the option that developers can build these links themselves, but that also means developers would need to fund the construction of these links. That is a significant extra cost on top of building the wind farm.

And yet, investors who know the market clearly don’t see these troubles as a disincentive.

For example, Mainstream Renewable Power and Actis last year opened the 138MW wind farm Jeffreys Bay on South Africa’s Eastern Cape, and are clearly aware of the issues with the South African market. But this has not put them off. Last month, Mainstream secured financing for three projects in South Africa totalling 360MW — 140MW Khobab, 140MW Loeriesfontain 2, and the 80MW Nouport — and all of which are in the Northern Cape.

And last month Mainstream and Actis formed Lekela Power, which is a $1.9bn pan-African renewable energy platform with plans to build up to 700MW-900MW of wind and solar across Africa by 2018. It isn’t focused on South Africa, but it also shows that the companies’ experiences in the country haven’t put them off Africa.

Meanwhile, this month China’s Longyuan secured financing from Nedbank and IDC to develop the first two phases of the 244MW De Aar wind farm in the Northern Cape. It is working with South Africa’s Mulilo Renewable Energy and a local community company; and construction work is scheduled to start on the project in the second half of the year.

Again, Eskom’s troubles are not putting them off. Far from it. It is the troubles with Eskom that are giving alternative energy sources like wind such a great growth opportunity. Let’s not forget South Africa went from no capacity to 570MW in the last 12 months.

Developers and investors are a canny bunch. Yes, problems with the grid mean it won’t always be easy, but the fact that existing investors have shown a willingness to persist with projects in South Africa shows that they clearly see a long-term opportunity.

South African state utility Eskom appointed Tshediso Matona as chief executive last August. Now, seven months later, he has been suspended. That’s quite some going.

Now, to be fair to Matona, it isn’t really his fault. Eskom is suffering from a long-term lack of investment in South Africa’s energy infrastructure over the last 20 years, and the system’s over-exposure to coal. Matona is one of four senior executives that have been suspended as the utility conducts an ongoing investigation into the operations of the company, which has been presiding over rolling blackouts, as well as calling for people to use less power.

The situation is forcing companies and public authorities to look at other energy options, including whether they can buy energy from independent power producers.

This is a boost for those in the wind sector because renewables are among the options being considered. This vindicates the strategies of investors that are looking to build wind farms in the country.

However, Eskom is still a hurdle, as it does not have the sufficient spare capital to invest in building the grid links to these wind farms. It has made available the option that developers can build these links themselves, but that also means developers would need to fund the construction of these links. That is a significant extra cost on top of building the wind farm.

And yet, investors who know the market clearly don’t see these troubles as a disincentive.

For example, Mainstream Renewable Power and Actis last year opened the 138MW wind farm Jeffreys Bay on South Africa’s Eastern Cape, and are clearly aware of the issues with the South African market. But this has not put them off. Last month, Mainstream secured financing for three projects in South Africa totalling 360MW — 140MW Khobab, 140MW Loeriesfontain 2, and the 80MW Nouport — and all of which are in the Northern Cape.

And last month Mainstream and Actis formed Lekela Power, which is a $1.9bn pan-African renewable energy platform with plans to build up to 700MW-900MW of wind and solar across Africa by 2018. It isn’t focused on South Africa, but it also shows that the companies’ experiences in the country haven’t put them off Africa.

Meanwhile, this month China’s Longyuan secured financing from Nedbank and IDC to develop the first two phases of the 244MW De Aar wind farm in the Northern Cape. It is working with South Africa’s Mulilo Renewable Energy and a local community company; and construction work is scheduled to start on the project in the second half of the year.

Again, Eskom’s troubles are not putting them off. Far from it. It is the troubles with Eskom that are giving alternative energy sources like wind such a great growth opportunity. Let’s not forget South Africa went from no capacity to 570MW in the last 12 months.

Developers and investors are a canny bunch. Yes, problems with the grid mean it won’t always be easy, but the fact that existing investors have shown a willingness to persist with projects in South Africa shows that they clearly see a long-term opportunity.

South African state utility Eskom appointed Tshediso Matona as chief executive last August. Now, seven months later, he has been suspended. That’s quite some going.

Now, to be fair to Matona, it isn’t really his fault. Eskom is suffering from a long-term lack of investment in South Africa’s energy infrastructure over the last 20 years, and the system’s over-exposure to coal. Matona is one of four senior executives that have been suspended as the utility conducts an ongoing investigation into the operations of the company, which has been presiding over rolling blackouts, as well as calling for people to use less power.

The situation is forcing companies and public authorities to look at other energy options, including whether they can buy energy from independent power producers.

This is a boost for those in the wind sector because renewables are among the options being considered. This vindicates the strategies of investors that are looking to build wind farms in the country.

However, Eskom is still a hurdle, as it does not have the sufficient spare capital to invest in building the grid links to these wind farms. It has made available the option that developers can build these links themselves, but that also means developers would need to fund the construction of these links. That is a significant extra cost on top of building the wind farm.

And yet, investors who know the market clearly don’t see these troubles as a disincentive.

For example, Mainstream Renewable Power and Actis last year opened the 138MW wind farm Jeffreys Bay on South Africa’s Eastern Cape, and are clearly aware of the issues with the South African market. But this has not put them off. Last month, Mainstream secured financing for three projects in South Africa totalling 360MW — 140MW Khobab, 140MW Loeriesfontain 2, and the 80MW Nouport — and all of which are in the Northern Cape.

And last month Mainstream and Actis formed Lekela Power, which is a $1.9bn pan-African renewable energy platform with plans to build up to 700MW-900MW of wind and solar across Africa by 2018. It isn’t focused on South Africa, but it also shows that the companies’ experiences in the country haven’t put them off Africa.

Meanwhile, this month China’s Longyuan secured financing from Nedbank and IDC to develop the first two phases of the 244MW De Aar wind farm in the Northern Cape. It is working with South Africa’s Mulilo Renewable Energy and a local community company; and construction work is scheduled to start on the project in the second half of the year.

Again, Eskom’s troubles are not putting them off. Far from it. It is the troubles with Eskom that are giving alternative energy sources like wind such a great growth opportunity. Let’s not forget South Africa went from no capacity to 570MW in the last 12 months.

Developers and investors are a canny bunch. Yes, problems with the grid mean it won’t always be easy, but the fact that existing investors have shown a willingness to persist with projects in South Africa shows that they clearly see a long-term opportunity.

South African state utility Eskom appointed Tshediso Matona as chief executive last August. Now, seven months later, he has been suspended. That’s quite some going.

Now, to be fair to Matona, it isn’t really his fault. Eskom is suffering from a long-term lack of investment in South Africa’s energy infrastructure over the last 20 years, and the system’s over-exposure to coal. Matona is one of four senior executives that have been suspended as the utility conducts an ongoing investigation into the operations of the company, which has been presiding over rolling blackouts, as well as calling for people to use less power.

The situation is forcing companies and public authorities to look at other energy options, including whether they can buy energy from independent power producers.

This is a boost for those in the wind sector because renewables are among the options being considered. This vindicates the strategies of investors that are looking to build wind farms in the country.

However, Eskom is still a hurdle, as it does not have the sufficient spare capital to invest in building the grid links to these wind farms. It has made available the option that developers can build these links themselves, but that also means developers would need to fund the construction of these links. That is a significant extra cost on top of building the wind farm.

And yet, investors who know the market clearly don’t see these troubles as a disincentive.

For example, Mainstream Renewable Power and Actis last year opened the 138MW wind farm Jeffreys Bay on South Africa’s Eastern Cape, and are clearly aware of the issues with the South African market. But this has not put them off. Last month, Mainstream secured financing for three projects in South Africa totalling 360MW — 140MW Khobab, 140MW Loeriesfontain 2, and the 80MW Nouport — and all of which are in the Northern Cape.

And last month Mainstream and Actis formed Lekela Power, which is a $1.9bn pan-African renewable energy platform with plans to build up to 700MW-900MW of wind and solar across Africa by 2018. It isn’t focused on South Africa, but it also shows that the companies’ experiences in the country haven’t put them off Africa.

Meanwhile, this month China’s Longyuan secured financing from Nedbank and IDC to develop the first two phases of the 244MW De Aar wind farm in the Northern Cape. It is working with South Africa’s Mulilo Renewable Energy and a local community company; and construction work is scheduled to start on the project in the second half of the year.

Again, Eskom’s troubles are not putting them off. Far from it. It is the troubles with Eskom that are giving alternative energy sources like wind such a great growth opportunity. Let’s not forget South Africa went from no capacity to 570MW in the last 12 months.

Developers and investors are a canny bunch. Yes, problems with the grid mean it won’t always be easy, but the fact that existing investors have shown a willingness to persist with projects in South Africa shows that they clearly see a long-term opportunity.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.