7th Sep 2006 08:00
IPSA Group PLC07 September 2006 IPSA Group PLC Expansion Continuing in Southern Africa (1) Construction progressing well at Newcastle, KwaZulu Natal, South Africa's first gas-fired IPP; (2) IPSA looking to increase size of Coega Project to 1,000 MW in initial open cycle phase; (3) Elitheni coal reserves receive satisfactory preliminary geological report; and (4) IPSA to work on emergency power, isolated generation and small CHP projects in the Region. IPSA Group PLC ("IPSA" or "the Company"), the independent power plant developerin southern Africa, today announces a number of important developments for theCompany: • The Company's initial power plant in Newcastle, KwaZulu Natal South Africa -the first gas -fired independent power project ("IPP") in the country - is nowapproximately 70 per cent. complete and is expected to produce first revenues inthe fourth quarter of 2006; • IPSA has been asked by the Department of Minerals and Energy ("the DME") toconsider increasing from 800 MW to 1,600 MW its combined cycle power generationproject in the Coega Industrial Development Zone ("IDZ") with the first phaseproviding 1,000 MW through two 500 MW blocks for fast track developmentinitially in open cycle using liquid fuel. The first capacity is now targetedfor commissioning in early 2008; • The Company's 400 MW Elitheni mine mouth coal-fired project is advancing intothe environmental impact assessment phase following satisfactory preliminarycoal reserve reports; and • IPSA is now actively pursuing other emergency power, isolated generation andsmall combined heat and power (CHP) projects in the region based on third partyfunding Peter Earl, CEO of IPSA, comments "We are very pleased to be on track atNewcastle both with regard to timetable and the revised budget. As anticipatedat the time of our Admission to Aim, we are now growing our portfolio ofprojects on the back of our presence on the ground in the region. We areparticularly excited by the positive reaction we have received from the DME toour initiatives to add capacity on the Coega site, and we strongly believe thatLNG has a future in South Africa for power generation. We now plan to progressthe public participation phase of our environmental impact study with all speed. Lack of power generation reserve capacity in South Africa and neighbouringcountries has continued to cause economic damage throughout 2006 and has led toelectricity black-outs and load-shedding. IPSA is now becoming a significantdeveloper in the region and has been invited by large corporations andgovernments alike to provide fast power generation solutions to alleviate thegrowing problem of power shortages throughout southern Africa. We continue toexpect attractive returns for our shareholders." (1) Power project at Newcastle The Board of IPSA announces that the Karbochem power project at Newcastle,KwaZulu Natal is running to schedule. All of the heavy lift items (boilers, GTframes and the steam turbine) are now in position and ready for installation andthe control building is substantially complete. The Directors estimate that theproject is approximately 70 per cent. complete and envisage that the Newcastleplant will be generating first revenues in the fourth quarter of 2006. As previously reported, IPSA has put in place bridge facilities with StandardBank plc, London, in the amount of US $4 million to take account of any timingdifferences on the anticipated receipt of a grant from the DME towards theconstruction of the project under South Africa's programme to encourage smallcombined heat and power projects for which the IPSA Newcastle project qualifies. The Company has initiated discussions with commercial banks in South Africa toprovide Rand denominated funding for the Newcastle project in order to releaseequity for future developments. The project to date has been funded entirelyfrom equity and it is envisaged that at completion the project will have theability to release further cash for re-investment in other IPSA projects throughdebt drawn-down upon commercial operation. In spite of substantial increases in some of the raw materials over recentmonths, project costs continue to be within the revised budget. (2) Coega, Port Elizabeth Earlier this year IPSA signed a memorandum of understanding for the lease of a20 hectare site at Coega Development Corporation's Industrial Development Zoneat Port Elizabeth, South Africa with the intention of developing a fast trackcombined cycle gas turbine ("CCGT") project of 800 MW. This project was plannedto operate initially in open cycle at 500 MW using liquid fuels. It wasanticipated that the project would convert to being gas fired upon constructionof a proposed third party developed and owned LNG receiving terminal at the IDZ. The IDZ is considered an important element in South Africa's policy of addingvalue to locally mined metals and minerals. A number of energy intensivemetal-processing and smelting companies are considering moving onto the IDZ sitesubject to the availability of reliable, sustainable, regional generation ofelectric power. Since signing its original agreements with the IDZ, IPSA directors have held anumber of meetings with the DME during which IPSA was invited to considerdoubling the size of its proposed Coega project in order to meet growing demandfor electricity in the Eastern and Western Cape regions. As a result of thesediscussions, IPSA has now delivered formal offers to the DME and to Eskom for1,000 MW of open cycle capacity available from early 2008 at prices which Eskomhas described as "attractive". IPSA is now holding in reserve 1,000 MW of gasturbines while it negotiates an appropriate power purchase agreement ("PPA")with either Eskom or the DME itself under The Electricity Regulations Act whichcame into force on 1 August, 2006 and which gives the Government of South Africathe power to sign PPAs outside the framework of a lengthy, formal public tenderprocess providing that there is transparency and providing it can bedemonstrated that the contracted power is the lowest cost solution available forSouth Africa. IPSA believes that it can meet both of these requirements. Under the revisedCoega project concept IPSA proposes to develop two separate 500 MW blocks. Thetotal cost of each of these first phase 500 MW blocks is estimated by IPSA to besome US $150 million. The balance of conversion to CCGT would cost a further US$120 to US $150 million for each unit. IPSA is in discussions with a number ofSouth African financial institutions regarding raising project finance for thetwo initial 500 MW units of the Coega project through the formation of a newIPSA equipment finance subsidiary called KitCo. IPSA has also taken steps toprocure LNG for the combined cycle phase at Coega. (3) Elitheni, East London Earlier this year IPSA signed preliminary agreements which gave it an exclusiveright to develop up to 400 MW of mine-mouth clean coal power capacity at theElitheni coal deposit in East London. The Board has been advised that initial reserve reports have confirmed thatthere are indeed commercially exploitable reserves of coal at Elitheni of aquality and quantity suitable for power generation activities. The coal miningcompany is submitting a formal application to the DME for a mining licence atElitheni and is finalising its mining plan, which anticipates production tocommence within six months. It is understood that further test drilling islikely to confirm that there is sufficient resources to justify a large scalemine mouth plant. IPSA and the Elitheni mining company are also exploring thepossibility of using coal from the reserves for small CHP projects in both theEastern and Western Cape to serve industrial users of power and steam who havefound themselves subject to power restrictions as a result of lack of capacityor following the Cape Town power cuts of 2006. (4) Other Projects IPSA is now actively pursuing other emergency power, isolated generation andsmall combined heat and power projects in the region based on third partyfunding. IPSA intends to act as lead developer for small IPP power plants thatare fully funded by third parties but where IPSA can earn both management feesand carried interests or favourable acquisition rights using its experience asan international developer in regional markets where privately owned powerplants are a new concept and where IPSA's ability to source generation equipmentquickly or on highly competitive terms gives IPSA's development team anadvantage. Accordingly IPSA is currently considering emergency power, isolated generationor small combined heat and power projects serving large corporations or nationalgovernments in Botswana, Kenya, Madagascar, South Africa and Tanzania inaddition to its existing combined heat and power projects in Swaziland and inthe Prospecton Basin of Durban. For further information please contact: Peter Earl, CEO, IPSA Group Plc 020 7793 7676 Liz Shaw, COO, IPSA Group Plc 020 7793 7676 Mark Froggatt, Noble & Company Limited 020 7763 2200 Allan Piper, First City Financial 07736 064982 020 7436 7486 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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