/ 3 April 2008

Govt cancels R5bn private electricity contract

The Minerals and Energy Department has terminated a R5-billion contract with a consortium led by United States power producer AES to build two open-cycle turbine gas stations, Business Day reported on Thursday.

The contract for the peaking plants was the first awarded to an independent power producer and was announced with much fanfare by Minerals and Energy Minister Buyelwa Sonjica last August.

It was hailed as a boost to the establishment of independent producers in South Africa.

However, it has emerged that AES, with revenue last year of $11,6-billion and one of the larger power companies in the US, could not meet its obligations, and the department had pulled the plug on the contract.

The company was to have posted a bid bond of R20-million by the end of March to secure the contract, but failed to do so.

AES spokesperson Robin Pence said the company had been content for the contract to lapse because the project was no longer viable.

A chief director in the department, Omphi Aphane, confirmed that the deal was off because the consortium ”could not meet its commitments”.

He declined to give further information on the commercial details, saying these were confidential.

The department would seek an alternative operator, Aphane said, but due process had to be followed and delays were likely. — Sapa