KHANYISA POWER PROJECT
4th EU-SA Clean Coal Working Group Meeting, November 5, 2012
Julian Eslait, Project Manager, Thermal Coal Project Services
CONTEXT AND RATIONALE – THE OPPORTUNITY
•
South Africa’s reserve margin is expected to remain under pressure for several years. This may affect Anglo American’s
ability to develop new projects in South Africa and could impact on existing operations. Anglo American’s power footprint in
SA is around 1,600MW
•
Anglo American has access to more than 137Mt of discard coal on dumps in the Emalahleni area. Its Thermal Coal
operations continue to generate discard coal, which are added to these dumps
•
This presented the opportunity to utilize this waste coal to assist with alleviating South Africa’s electricity shortage and
improving security of supply
•
The following business models were investigated:
•
–
Direct ownership. Anglo American would own the plant in its entirety, but outsource the operation to a service partner
–
Tolling agreement with a power-plant developer. Anglo American would pay a tolling fee that covers the capex and
opex of the tolling partner. Anglo American would decide when the plant runs and whether to consume or trade the
power produced
–
An IPP model. Anglo American would enter into a contract with an IPP to sell discard coal and buy power. It would fix
a long-term agreement on the prices of fuel and power
A 450MW IPP model was selected
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PROJECT COMMERCIAL STRUCTURE
ANGLO AMERICAN
COAL DUMPS
ANGLO AMERICAN
COAL BENEFICIATION
THIRD PARTY-OWNED
KHANYISA INDEPENDENT
POWER PROJECT: IPP
Dump 1
(Klippan)
Coal
Supplier
Dump 3
(Greenside)
Anglo American Entity/Agreement
IPP
Anglo
American:
water supply
agreement
(WSA)
ESKOM NETWORK
Limestone
supply
agreement
O&M
agreement
Dump 2
(Blaauwkrans)
ANGLO AMERICAN
BUYER/OFFTAKER
PPA
ANGLO AMERICAN
LOADS
Load # 1
Anglo
American
Platinum
ESA
Addendum
Agreement
(Eskom)
Load # 2
Transmission
Agreement
(Eskom)
Load #3
Non-Anglo American Entity/Agreement
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PROJECT LOCATION AND
DESCRIPTION
EWRP
• Khanyisa Project is a 450MW IPP project for own
use of electricity by Anglo American Platinum
(AAP) using discard coal as fuel, supplied by
Anglo American Thermal Coal
• Selected site is on Kleinkopje Colliery (KK) and is
suitable for a 3 X 150MW (450MW) project
• Site selection restricted due to undermining of the
area, a risk which cannot be passed to the
developer
Existing KK potable water
pipeline
Tx connection to grid
New KK
potable
water
pipeline
Proposed IPP layout
• The energy generated will be purchased
exclusively by AAP via a 25 year power purchase
agreement (PPA) with the IPP
KK
Klippan
Dump
• The PPA is based on a two part tariff structure for
(1) capacity and (2) energy produced (not take or
pay)
• Anglo American has already begun the EIA on
behalf of the IPP
IPP laydown area
Eskom
Substation
• Ash disposal is envisaged to be on a rehabilitated
previous opencast site on Kleinkopje Colliery
• Thermal Coal will aggregate and supply coal to
the IPP
New road alignment
Ash
Dump
Area
Conveyor
Coal
washplant
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PROJECT CHALLENGES: TECHNICAL
•
Site issues: Undermining - Emalahleni area has been mined for over 100 years!
–
Identifying a non-undermined, stable site big enough for the power station and close enough to the fuel and water
sources was a challenge
–
Provincial road traverses only suitable site in the area: a road deviation is required
–
Relocation of two families who live in the area of the proposed site will be done in accordance to the highest
standards (i.e. World Bank/IFC standards)
–
118 graves are located inside the servitude of Eskom 400kV power line, on the southern boundary of the site:
developer will fence off this area and leave it undisturbed
–
Two 22kV power lines also traverse the site on the southern boundary as well as a fresh water pipeline that supplies
water to Kleinkopje colliery: they will need to be diverted
–
Identifying an ash site close to the power station and not undermined was also a challenge. An old open-cast pit,
near the power station site, that has been backfilled and rehabilitated has been identified
•
IPP outlives life (and probable Anglo American ownership) of coal mines: in order to secure access to fuel sources
mining rights will be retained over Klippan dump after mine closure
•
Fuel (discard coal): washing vs no washing?
–
•
Given the relatively high sulphur content in discard coal and high cost of limestone (needed to absorb sulphur in the
boiler), a study determined that by partially washing the discard coal an optimal economic benefit would be achieved
Capacity and unit size: determined by AAP’s base load consumption, land available and reliability
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PROJECT CHALLENGES: COMMERCIAL
•
Commercial Structure: Anglo American ownership vs Tolling vs IPP
–
•
•
•
•
The IPP option provided the best alignment with Anglo American’s strategy
IPP Tariff includes a “Capacity Charge”: Bankable PPA
–
To enable the IPP to raise finance, all its costs must be passed through via the tariff – keeps the IPP whole
–
Capital will be repaid via the capacity charge, payable on plant availability
–
Initially the capacity charge will make up around 70% of the tariff
Finance lease: is equal the total cost of the IPP (about US$1Bn)
–
Anglo American Platinum will be the only offtaker from Khanyisa, making it liable to pay for all the electricity
generated (including the capacity charge), which in turn, translates into a liability on AAP’s balance sheet
–
Key covenants will be maintained (gearing and EBIDTA interest cover) over the life of the project
Carbon footprint:
–
Khanyisa will potentially increase Anglo American’s footprint over time vs Eskom electricity purchases
–
Different options are being evaluated to partially offset carbon emissions
BEE: no energy charter?
–
Mining Charter: states that goods and services are to be procured from suppliers that are “empowered entities”
–
IPP is required to meet a minimum empowered-entity ownership of 25.1% at project company level
–
Additional requirements have been specified regarding transformation (e.g. local procurement and employment
equity)
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PROJECT CHALLENGES: REGULATORY
•
•
•
•
Integrated Resource Plan (IRP): SA’s generation mix for the next 25 years
–
Khanyisa was presented at the public consultation meetings for the IRP in order to include it in the proposed future
generation mix and into the carbon footprint mitigation plan
–
By being included in the IRP, Khanyisa should be eligible to obtain a generation license
NERSA approvals required
–
Generation and Trading license
–
Use of Network costs
Eskom:
–
Connection to the national grid: This must be a firm commitment (with a definite date) in order to secure financial
close
–
Two agreements to be negotiated with Eskom: transmission agreement with the IPP and own generation and use of
system agreement with Anglo Platinum – must be concluded to enable project approval
Environmental Impact Assessment (EIA): in terms of NEMA and IWULA
–
In the interest of time Anglo American has begun the process on behalf of the IPP developer
–
The application was expected to take 18-24 months to obtain Environmental Authorisation: currently delayed
–
In order to complete the application, given that the IPP has not yet been appointed, several design specifics were
provided by the project team: ash transport system, design of the ash liner, emissions standards (according to the
IFC), a zero-effluent plant and air-cooled condensers
SUPPORT IS REQUIRED FROM SEVERAL REGULATORY BODIES!
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BENEFITS TO SOUTH AFRICA
1 Affordability - Infrastructure
• An additional 450MW of power generation
capacity, relieving Eskom’s capacity constraints at
no additional cost to Eskom, National Treasury or
SA’s consumers & enabling other National growth
projects
• Conversion of a waste product to electricity,
maximising resource utilisation
- Promoting local beneficiation of waste coal to
energy
• Lower capital cost than current Eskom new build
4 Reduction of Environmental impact
• Reducing environmental impact of discard coal
dumps
• Lower SOx & NOx emissions than existing SA
coal-fired power stations
• Water reclaimed from underground mine workings
2 Job Creation
• Direct & indirect job creation & capacity building
– ~900-1200 direct people during construction
– ~100 direct people during operation
• Significant labour requirements during construction
• No impact on public sector jobs
• Enabling further mining growth projects in SA
6 Localisation Benefit
• Contributing to local development / community /
skills transfer, as well as secondary industries (e.g.
limestone)
• CSR investments
• Tax revenues, royalties
3 Regional Development
• Significant FDI (Foreign Direct Investment Capex around US$1Bn)
• Development of a primary private electricity market
5 Water usage
• Zero effluent power station
• Dry cooling, reduced water consumption
7 New technology to South Africa
• CFB (Circulating Fluidised Bed) is a proven
technology but not yet implemented in South Africa
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THANK YOU