Ipsa, an AltX-listed company, said yesterday it had reached an agreement with the Central Energy Fund (CEF) to install gas turbines, guaranteeing uninterrupted power to the Coega Industrial Development Zone.

With capacity of 1 600MW at completion, these will be large enough to power the smelter with 250MW to spare.

The project is the first public-private partnership in SA for an integrated liquefied natural gas (LNG) to electricity project, which uses heat from gas turbines to produce electricity with low carbon dioxide emissions. Ipsa will provide the turbines, iGas the gas and PetroSA the diesel.

The project’s power will be sold to Eskom. With Eskom having entered into a contract with Alcan for the preferential supply of electricity it is likely that the R20bn smelter — the biggest foreign direct investment in SA to date — would be prioritised .

An analyst, who asked not to be named, pointed out that the gas turbines would run on diesel in the first phase of the project. For the capacity to increase to the targeted 1600MW, the turbines would need LNG.

“That in itself requires an investment commitment from the state partners and I don’t see that happening quickly,” the analyst said. The project would “run at a big loss to Eskom” while powered by diesel.

Ipsa CE Peter Earl said the first 1000MW was expected to be available within 18 months.

“In terms of the deal between the government and Alcan, someone will need to put up interrupted power. Our project will reinforce Eskom’s grid and we will be on site to provide power for Alcan.

“Even if we are a bit more expensive, money will be saved on transportation costs. Power from the plant will reinforce not only the grid but reinforce power to Port Elizabeth and other industries in the area,” he said. An

Eskom spokesman confirmed yesterday that Eskom would be the sole buyer of the power, but could not confirm whether the power from Ipsa’s gas turbines would be earmarked for the Alcan smelter.

However, the smelter project’s Robert Valdmanis said yesterday Eskom had given assurances that it would heed the supply agreement. The reassurances were made after reports that the project might have to be postponed because of Eskom’s tight reserve margins.

The project has been in the pipeline for more than a year. Ipsa said yesterday that a memorandum of co-operation had finally been signed with the CEF. The announcement saw Ipsa shares spike almost 40%, and close 33% higher at 870c.

The first stage of the project with capacity of 521 MW will take between 12 and 15 months to complete at a cost of $120m to $130m. A second phase, to be developed over three months will cost $150m and add another 500MW.

The final stage, expected to be completed after 2010 at a cost of between $150m and $200m, involves the installation of LNG regasification terminal by iGas, which will generate an extra 600MW of electricity.

Earl said he did not foresee any delays in the project. “IPSA had been working on the project for over a year and has already bought the turbines which will speed up the implementation of the project, because there is a two year delay now for turbines.”

Eskom had considered taking a partnership in the agreement but withdrew because it lacked in-house experience for a gas turbine project. Gas turbines can be installed relatively quickly, compared to a coal plant which takes six to seven years.