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Johannesburg – Finance is not an issue for gas to power projects in South Africa, however delayed policy may prove to be an obstacle which risks driving away investment, say industry players.
During a panel discussion on the opportunities in South Africa’s gas to power programme, at the fifth annual Africa Power Roundtable held at Webber Wentzel's Sandton headquarters on Wednesday, industry players highlighted the crucial role policymakers have in driving these projects.
“Gas is energy and energy policy is about nothing else than public policy,” said one of the panelists, Khwezi Tiya, executive of oil and gas at Standard Bank.
He added that policymakers drive the process and that investment decisions would flow from the policy that has been set.
Timing is generally an issue when it comes to these projects.
“Everyone thinks we have enough time,” said Tiya.
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He illustrated a scenario in which the Department of Energy (DoE) would issue Request for Proposals (RFPs) by 2018. By the end of 2020, there would be financial flows for the project. By 2021, at least one or two projects would be in development and the earliest time gas would be generated would be by 2022 or 2023.
Tiya explained that certain factors can change in a number of years.
In 2002 Eskom, won the award for global power company of the year and six years later the country had an energy crisis.
Although the country currently has excess energy, Tiya said that foreign investors were concerned about energy security and made investment decisions based on that.
“We have excess capacity now but we must think about building flexibility for the future.”
He added that bankers consider the risk of the country having an energy crisis and the implications for their clients.
Yousuf Haffajee, vice president and head of business development at Japanese integrated trading and investment business Marubeni, added that the updated Integrated Resource Plan (IRP) was long overdue. The delay in the gas procurement process will have an impact on developers.
He explained that government’s decision on a coal bid took two years, and there were only two bidders to review.
“It’s been a tough journey for me to convince the Japanese that there is a lot of bureaucracy in South Africa. We need to add a year or two to timelines… you need patience to participate in South Africa,” said Haffajee.
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Haffajee added that it was frustrating for the private sector which has to set up teams and gear them towards procurement processes which are not yet defined.
“We accept there is policy that needs to be done. There is apolitical influence and decisions to be made, we just want those to be expedited quicker and to honour the timelines that come with it.”
Tiago Almeida, senior transactor for investment banking at RMB, added that although there is investment potential in South Africa, investors were waiting on government to provide certainty on the plans going forward.
“There is enough rands. The four big South African banks have a lot of rands,” he said.
Erik Wandrag, senior investment director for energy at Harith Fund Managers, added that there was no lack in equity to invest in projects in South Africa. The investment pool was large and players included the African Development Bank, however the concern with rand based equity would be cover against dollar exposure.
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