African Energy Resources (ASX: AFR) is moving towards potentially supplying energy to the South African electricity grid, with the company successfully submitting a Request for Registration and Information to country's Department of Energy for the development of a 300MW power station and captive coal mine.
The project is to be at African Energy's Sese coal project, with coal supply from Block‐C. Sese is a low-cost thermal coal project and is capable of producing large volumes of export coal and power station fuel.
South Africa needs to increase power production, as steady economic growth, industrialisation and the goal of taking power to rural areas has dramatically increased demand - with this demand expected to double within the next two decades.
With little investment going into the country's power infrastructure, this has placed the state-owned company Eskom in the position that demand is increasing fasting than can be generated and distributed.
The key aspects of African Energy's submission include:
- In December 2012, in support of its Integrated Resource Plan for Electricity 2010-2030, RSA added
close to 11,000MW of new generating capacity to its forward procurement program.
- Of this, 2500MW has been reserved for base‐load coal‐fired generation, including domestic and
imported energy from Independent Power Producers.
- AFR has registered its interest in supplying 300MW in conjunction with a South African BEE partner.
- The project is to be located at AFR's Sese coal project, with coal supply from Block‐C.
- The off‐take party would be South African utility Eskom.
Separately, Botswana recently released a Request for Pre‐Qualification (RFPQ) for a 300MW independent power project to be built at the existing Morupule power complex (Brownfield IPP). It is anticipated that an RFRQ for an additional 300MW power plant to be developed at an alternative site in Botswana will be issued shortly (Greenfield IPP).
AFR intends to lodge a submission for the Greenfield IPP in conjunction with its project partners, with whom advanced negotiations regarding the terms of such joint development are nearing completion.
With the completion of the deal, African Energy has secured the rights to a total of 3.8 billion tonnes of coal in Botswana.
The company already owns the Sese coal mine, which is poised to be one of the largest and lowest cost coal producers in Africa, with ready access to transport infrastructure.
Studies indicate that the geometry and low strip‐ratio of the Sese Block‐C coal resource will result in mining costs towards the bottom of the southern African cost curve.
This permits the development of power projects with very competitive tariffs for sale to regional utilities and private companies.
Measured resources defined at Sese Block‐C alone contain enough coal to support an estimated 2,400MW of generating capacity for over 25 years, thereby providing substantial expansion opportunities.
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