General overview of the energy industry in SA.

South Africa has benefited from consistent high economic growth over the past decade – and understandably – with that increase in growth, there has been a huge demand on the electricity supply chain.

Responding to the significant challenges encountered, Eskom (South Africa’s energy regulator) has – through increases in electricity tariffs and better management of energy resources – ensured South Africa is still in a position to guarantee one of the least expensive electricity in the world.

However, it has become apparent that non-renewable energy sources are already in the process of being over exploited. It is estimated that at the present rate of energy consumption, the reserve for fossil fuels may be exhausted within the next 50-100 years. Ultimately, the impending scarcity of energy resources and the increased demand due to economic growth will undoubtedly also raise the costs of non-renewable energy sources.

South Africa, especially the northern areas, has been identified as being in one of the most favourable belts for solar power, while the coastal regions of the country have been identified as having good potential for wind generation.

Abundant sunshine and a coastline of colossal length are natural assets that will provide incentive and great support to investors – eager to develop industry in South Africa.

The status of the energy at the Coega IDZ.

Plans are underway to develop two power stations at the Coega IDZ - a 2 400MW Combined Cycle Gas Turbine powered station and a 300MW Department of Minerals and Energy peaking power plant – ensuring that energy is always readily available to investors, includes:

• High voltage backbone: Four 132 kV substations.
• Distribution: Twenty 11 kV indoor.
• 400 k V supply possible.
• Initial power supply will be a 200 MW dual circuit line.
• Phased build-up to approximately 4,500 MW by 2015.

The 2400 MW CCGT Power Station.

The Power Station is one element of the complete energy to power chain project which is under development. PetroSA (The Petroleum, Oil and Gas Corporation ofSouth Africa) is responsible for sourcing and supplying Liquefied Natural Gas, while iGas is responsible for the landside infrastructure – comprised of a LNG terminal and re-gasification facilities.

The project will receive piped natural gas and will provide electrical power to the national grid. A minimum of 800MW is currently being considered with options to increase the capacity in phases to 1 600MW or 2 400MW.

The key factors are:

• Consistent long term supplies of natural gas in terms of cost, quantity and quality.
• CCGT sets of appropriate size (preferred 500-800MW units) depending on cost and availability from international market.
• Phased implementation with first set being commercially operational by 2011.
• Consideration for the provision of an associated desalination plant.
• Sea water cooling system which could be associated with other demands for sea water usage.
• Outgoing switch yard and 400kV o/h transmission lines to Eskom’s Dedisa injection sub-station.

The plant is expected to operate mostly during peak electricity demand and may also be called into operation during periods when other power plants are under maintenance or when grid security of supply is threatened. The Peaking Power Plant will be set up in Zone 13 of the Coega IDZ.

The Department of Minerals and Energy has embarked on a project to procure approximately 1 000 MW of new peaking generation capacity. The proposed Coega plant net output is expected to be close to 300 MW.

Independent power producers.

Developments in the power sector are continuing to be driven by Eskom’s expansion plans in response to severe power shortages in early 2008 and years of under-investment.

The company has been working to raise financing for its projects and in May signed an agreement with seven European banks for EUR530m. A portion of this loan will be put towards the 4,800MW coal-fired Medupi power plant, which is currently under construction with the first units due to come online from 2012.

The cancelled initial plan for a second nuclear power plant in South Africa had new life breathed into it in May 2009 when a plan for the environmental impact assessment was released to the public. The plan includes a time frame for the 4,000 MW plant – due to be completed in 2018 – and proposed locations.

Electrawinds.

Electrawinds announced in September that it is finalising the feasibility in setting up a commercial wind farm which will be located in the Coega Industrial Development Zone (IDZ). This investment will see Electrawinds invest R1.2billion (Euro110Million) into a Coega Wind Farm Project producing green renewable energy.

This project will result in 25 wind turbines of 2.3 MW each being built in the Coega IDZ and is anticipated to be fully operation by 2011.

For further investor information as well as current projects and testimonials please contact our sector head: Luvuyo Mkontwana

Business Development Manager Energy Sector

Email: luvuyo.mkontwana@coega.co.za

Telephone: +27 41 403 0400
Fax: + 27 41 403 0401