28th Oct 2008 08:30
28 October 2008
IPSA Group PLC
("IPSA" or "the Company")
IPSA CLEAN COAL PROJECT EXPANSION ADVANCES WITH AGREEMENT TO USE SNR's ELITHENI COAL
IPSA Group PLC ("IPSA") today announces that it has reached formal agreement with Elitheni Coal (Pty) Ltd ("Elitheni"), a subsidiary of Strategic Natural Resources PLC ("SNR"), for the coal supply to approximately 250 MW of its initial power projects in South Africa's Eastern Cape. At the same time, the basis of a framework agreement has also been put in place giving IPSA the right of first refusal for further coal supplies from Elitheni to serve the 1,000 MW of clean coal power plant capacity which IPSA intends to develop throughout the Eastern Cape between East London and Port Elizabeth. IPSA has also been pre-qualified to participate in Eskom's Multi-site Baseload IPP Programme.
Under the terms of the contract which has been signed between Elitheni and Indwe Power (Pty) Ltd ("IPPL"), an indirect subsidiary of IPSA, IPPL will purchase approximately 1,000,000 tonnes of coal per annum for a period of 20 years (20 million tonnes) for use at its power projects under development in the Eastern Cape. As further coal is proved up by Elitheni, IPPL intends to increase coal-fired capacity under development in subsequent later phases. However, given the greater than anticipated mineable coal resource figures announced by Elitheni, which gives it the ability to sell more coal for power generation into the Eastern Cape, IPSA has agreed to broaden its development programme and is currently looking to enter into binding power purchase agreements with large South African users of power who are keen to replace electricity demand reduced under Eskom's current load-shedding and demand side management programmes. These programmes have seen large mining houses forced to reduce metals processing output during 2008 with resultant, costly production losses. Furthermore, the recently publicised fines for failure to comply with energy conservation measures are expected to take effect from the first quarter of 2009 is now placing a verifiable price on unsatisfied demand. Announcements late last week indicate that users who fail to honour the cutbacks in demand will pay an aggregate cost of ZAR 3 and ZAR 9 per kWh in respect of each unit of electricity that exceeds their allocation. Current average electricity prices to industry are reported to be ZAR 0.25 per kWh. As a result of the power supply crisis in South Africa, IPSA has received approaches from private sector purchasers of power from its proposed new clean coal capacity.
IPSA is the owner/operator of South Africa's first independent gas-fired power plant (IPP), in Newcastle, KwaZulu Natal. IPSA is also one of the pre-qualified bidders participating in Eskom's Multi-site Baseload IPP Programme. On 24th October IPSA announced it has entered into discussions to sell its 501D gas turbines. The announcement of further coal-fired expansion using state of the art circulating fluidised bed (CFB) technology has been taken against a background of worsening power shortages in South Africa in 2008.
For further information contact:
Peter Earl, CEO, IPSA Group PLC: +44 (0)20 7793 5615
Elizabeth Shaw, COO, IPSA Group PLC: +44 (0)20 7793 5615
Nick Naylor / Jamie Boyd, Noble & Company Ltd: +44 (0)20 7763 2200
(Nominated Adviser and Joint Broker)
Sean Lunn, Hichens, Harrison (South Africa) Ltd: +27 21 950 2711
(Joint Broker)
Allan Piper, Tavistock Communications (UK PR Advisers): +44 (0)20 7920 3150
Dino Theodorou / Melissa Harris, PSG Capital (Pty.) Limited +27 11 797 8400
(South African Sponsors)
Jacques de Bie, College Hill (South African PR Advisers) +27 11 447 3030
Or visit IPSA's website: www.ipsagroup.co.uk
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