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> September 19, 2005 |
Expansion Continuing in Southern Africa
IPSA Group PLC ("IPSA" or "the Company"), the independent power plant developer in southern Africa , today announces a number of important developments for the Company:
Lack of power generation reserve capacity in South Africa and neighbouring countries has continued to cause economic damage throughout 2006 and has led to electricity black-outs and load-shedding. IPSA is now becoming a significant developer in the region and has been invited by large corporations and governments alike to provide fast power generation solutions to alleviate the growing problem of power shortages throughout southern Africa . We continue to expect attractive returns for our shareholders."
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, GT frames and the steam turbine) are now in position and ready for installation and the control building is substantially complete. The Directors estimate that the project is approximately 70 per cent. complete and envisage that the Newcastle plant will be generating first revenues in the fourth quarter of 2006. As previously reported, IPSA has put in place bridge facilities with Standard Bank plc, London, in the amount of US $4 million to take account of any timing differences on the anticipated receipt of a grant from the DME towards the construction of the project under South Africa's programme to encourage small combined heat and power projects for which the IPSA Newcastle project qualifies. The Company has initiated discussions with commercial banks in South Africa to provide Rand denominated funding for the Newcastle project in order to release equity for future developments. The project to date has been funded entirely from equity and it is envisaged that at completion the project will have the ability to release further cash for re-investment in other IPSA projects through debt drawn-down upon commercial operation. In spite of substantial increases in some of the raw materials over recent months, project costs continue to be within the revised budget.
Earlier this year IPSA signed a memorandum of understanding for the lease of a 20 hectare site at Coega Development Corporation's Industrial Development Zone at Port Elizabeth , South Africa with the intention of developing a fast track combined cycle gas turbine ("CCGT") project of 800 MW. This project was planned to operate initially in open cycle at 500 MW using liquid fuels. It was anticipated that the project would convert to being gas fired upon construction of 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 adding value to locally mined metals and minerals. A number of energy intensive metal-processing and smelting companies are considering moving onto the IDZ site subject to the availability of reliable, sustainable, regional generation of electric power. Since signing its original agreements with the IDZ, IPSA directors have held a number of meetings with the DME during which IPSA was invited to consider doubling the size of its proposed Coega project in order to meet growing demand for electricity in the Eastern and Western Cape regions. As a result of these discussions, IPSA has now delivered formal offers to the DME and to Eskom for 1,000 MW of open cycle capacity available from early 2008 at prices which Eskom has described as "attractive". IPSA is now holding in reserve 1,000 MW of gas turbines while it negotiates an appropriate power purchase agreement ("PPA") with either Eskom or the DME itself under the The Electricity Regulations Act which came into force on 1 August, 2006 and which gives the Government of South Africa the power to sign PPAs outside the framework of a lengthy, formal public tender process providing that there is transparency and providing it can be demonstrated that the contracted power is the lowest cost solution available for South Africa. IPSA believes that it can meet both of these requirements. Under the revised Coega project concept IPSA proposes to develop two separate 500 MW blocks. The total cost of each of these first phase 500 MW blocks is estimated by IPSA to be some 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 of South African financial institutions regarding raising project finance for the two initial 500 MW units of the Coega project through the formation of a new IPSA equipment finance subsidiary called KitCo. IPSA has also taken steps to procure LNG for the combined cycle phase at Coega.
Earlier this year IPSA signed preliminary agreements which gave it an exclusive right to develop up to 400 MW of mine-mouth clean coal power capacity at the Elitheni coal deposit in East London .
(4) Other Projects IPSA is now actively pursuing other emergency power, isolated generation and small combined heat and power projects in the region based on third party funding. IPSA intends to act as lead developer for small IPP power plants that are fully funded by third parties but where IPSA can earn both management fees and carried interests or favourable acquisition rights using its experience as an international developer in regional markets where privately owned power plants are a new concept and where IPSA's ability to source generation equipment quickly or on highly competitive terms gives IPSA's development team an advantage. Accordingly IPSA is currently considering emergency power, isolated generation or small combined heat and power projects serving large corporations or national governments in Botswana , Kenya , Madagascar , South Africa and Tanzania in addition to its existing combined heat and power projects in Swaziland and in the Prospecton Basin of Durban.
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