Thursday, November 5, 2009

Irish Company Mainstream committed to wind farm project

November 5, 2009 - By INGI SALGADO

Mainstream Renewable Power, the Irish developer that plans to spend €850 million (R9.9bn) building 18 wind farms in South Africa over five years, is on track to build its first facility at Jeffreys Bay next year, according to the chief executive, Eddie O'Connor.

"It seems to me like we might be able to go ahead next year with construction," he said last week, indicating the group expected to start generation in 2011. "That's our schedule and that remains our schedule. We won't change it unless we are forced to."

The group expected to arrive at financial close on the Jeffreys Bay wind farm next year, he said. Mainstream and its South African joint venture partner, Genesis Eco-Energy, are likely to put in 20 percent equity and secure debt funding for the remaining 80 percent.

"Funders are not going to be a problem. That's what a renewable energy feed-in tariff does - it manages the risk for the developer," he said, indicating that talks were ongoing with Standard Bank, Absa, Nedbank and Rand Merchant Bank.

In March, the National Energy Regulator of SA (Nersa) set the tariff for wind at R1.25 a kilowatt-hour.

O'Connor was bullish about prospects for independent power producers (IPPs) locally. "We will deploy a lot of money in South Africa if we can see that the money is not going to be wasted. South Africa has a very good regulator, and (the country) needs the power dramatically.

"I believe there are problems, but there are always problems - this is not unique to South Africa. Every country that opens up their electricity market has to go through this," he said.

Mainstream was also eyeing solar opportunities in South Africa, particularly on-grid concentrating solar power - for which Nersa had announced "good" feed-in tariffs, he said.

O'Connor was less concerned at a single buyer's office for IPPs being located temporarily within Eskom - which has been strongly criticised by IPPs who fear the utility being both a player and a referee - than with delays in connecting IPPs to the national electricity grid.

"I've seen it done around the world in many different ways," O'Connor said of the single buyer's office. "It could reside within Eskom provided there's an overseeing body that ensures Eskom does its job, like the regulator of the government.

"They must not be seen to be manipulating or interfering with the market. That would be the worst situation of all."

O'Connor's more immediate worry was ensuring grid connection. Eskom had previously said connectivity problems were out of its hands as it took a long time to get the necessary approvals for transmission grid extensions, particularly in urban and peri-urban areas.

But O'Connor did not buy this argument. "They (the utility) have the grid so it has to be within their control. If it's not within their control, whose is it?"

Securing the necessary environmental approvals for grid extension should not be an excuse for doing nothing.

"You just get on with it and do it. The object is to start as early as you can." In any event, he understood there was spare capacity on the Jeffreys Bay power line.