Saudi power firm ACWA eyes South African projects despite currency concerns
Saudi-based ACWA Power expects to win further business in South Africa this year as the power plant developer rides out concerns about the country’s currency to tap into its need for more electricity, the firm’s chief executive told Reuters.
South Africa’s economy has been hit hard by a significant fall in the rand’s value against the dollar, while businesses have also faced power shortages as state utility Eskom was forced to cut some supplies almost daily earlier this year.
For developers such as ACWA the South African government’s plans to improve power supplies provides significant opportunities, although there are also challenges due to the currency, according to Chief Executive Paddy Padmanathan.
These include increased construction costs as materials are brought in from abroad, being paid for the electricity produced in rand, and the potential future risks over being able to freely convert rand into dollars.
However, with power plants being long-term investments and the continuing availability of funding from local banks to back projects, Padmanathan remains optimistic on South Africa.
“There’s no point in getting excited about the rand getting devalued today or doing this yesterday, or (President Jacob) Zuma said this the day before yesterday, we have to look at it for the medium to long term and ride out the cycles,” he said.
“We are providing electricity and, where we do, water, two principle commodities which are fundamental to life, not just economic development, so they are the last thing which people are going to pull the plug on.”
ACWA aims to close financing for the 100 megawatt Redstone Concentrating Solar Power (CSP) thermal plant in July, the same month as it expects to be awarded two further build contracts: for the 300 MW Khanyisa coal-fired power plant in Mpumalanga province, and the 125 MW Solis 1 thermal solar plant in Northern Cape province, where it is partnered with BrightSource Energy .
Should they be awarded to ACWA, the firm hopes to close the financing to back the $1 billion Solis 1 plant by the end of the year, while the Khanyisa plant would cost around $600 million.
ACWA is also interested in a gas-fired power plant-building programme, which Padmanathan expects to be announced later this year.
The increasing interest in renewables from Middle Eastern and African governments, which make up the majority of the 13 countries in which ACWA operates, means that around half of all ACWA’s business is now in “clean” energy.
Padmanathan was “very optimistic” about Saudi Arabia’s plans for generating 9,500 MW of renewable energy under its Vision 2030 economic plan, while he was also “very excited” by Dubai’s announcement for 1,000 MW of CSP capacity.
The firm has already bid for the 800 MW third phase of the Sheikh Mohammed bin Rashid al-Maktoum Solar Park, with a decision on the winner from operator Dubai Electricity and Water Authority likely in just over a month in his view.
Meanwhile the closing of the financing for the 120 MW Khalladi wind farm in Morocco was expected this week, Padmanathan added.