Aggreko wins a $250m power supply contract in South Africa

City A.M. Reporter
BRITAIN’S Aggreko and its local joint-venture partner Shanduka Group will supply 107 megawatts of gas-fired power to Mozambique and South Africa, in a deal worth an estimated $250m (£161.5m).

Countries in southern Africa have been struggling to meet fast-rising demand for power, with the next two years seen as particularly tight until new power plants start coming online.

South Africa’s national grid nearly collapsed in 2008, forcing mines and smelters to shut for days.

The crisis cost Africa’s biggest economy billions of dollars in lost output and hit its neighbours who depend on South Africa for power.

FTSE 100-listed Aggreko, the world’s biggest temporary power provider, has signed power purchase deals with South African power utility Eskom and Mozambique’s Electricidade de Mocambique (EDM) to supply electricity from the third quarter of this year until July 2014. Eskom will buy 92MW and EDM the remaining 15MW. City law firm Linklaters advised Aggreko on the deal.

Rupert Soames, Aggreko’s chief executive, said he saw opportunities to replicate the project in the region. Aggreko could sell power to utilities or directly to private customers, including mines.

As part of the Eskom/EDM deal, valued at $250m over two years, Aggreko will build gas interconnections, a substation and a 275 kV transmission line. Part of the infrastructure will go to EDM at the end of the contract.

The gas used in the plant, to be based at the Ressano Garcia border between South Africa and Mozambique, is part of gas given to Mozambique as a royalty by petrochemicals group Sasol, which is operating the onshore Pande/Temane gas fields.

Soames said the gas-fired power was more expensive than electricity generated by Eskom’s own coal-fired power plants, but declined to give details. Aggreko supplied power to the 2008 Beijing Olympics, while it won a contract to supply Japan after its earthquake and tsunami.