25MW biomass power plant in South Africa

http://www.insideafricalaw.com/publications/25mw-biomass-power-plant-in-south-africa-project-profile

October 08, 2015

Our client

Ngodwana Energy – a ring-fenced special purpose vehicle created to develop and operate the 25MWe nett biomass power plant to be constructed at Sappi Southern Africa’s Ngodwana Mill, and to sell energy to South African national utility Eskom under the Renewable Energy IPP Procurement (REIPPP) Programme.

Project location

Mpumalanga, South Africa.

Project description

Under the South African REIPPP Programme, South Africa has a target of 10,000 GWh of power generation from renewable energy sources. The first phase of procurement under the REIPPP programme has comprised four bidding rounds to date, for the procurement of an aggregate of 5243MW across all renewable energy technologies – onshore wind, solar PV, concentrated solar power, biogas, biomass, and hydropower.

The Ngodwana energy project was awarded preferred bidder status in the REIPPP programme on 10 April, 2015, as one of thirteen successful projects in the fourth round of the procurement, and the only successful biomass project in that round.

Under the project, a 25MWe nett biomass power plant is to be constructed at the Sappi Ngodwana mill in Mpumalanga, South Africa. This location is ideal for the development of a biomass power plant, being situated centrally within a dense forestry area.

The land required for the power plant will be leased from Sappi, which will also supply the fuel to the power plant, principally from biomass residue (toppings, branches and bark) recovered from surrounding plantations, and screened waste material from the mill production process.

All forest biomass will be processed through a chipper/hogger located at the mill’s existing woodyard, to ensure the fuel is shredded to a size that meet the requirements of the boiler fuel specification. All foreign material will be removed from the biomass during this process. The processed biomass will then be conveyed to the furnace/boiler via a new conveying system. The biomass will be stockpiled in an undercover storage facility located near the feed of the boiler. There will also be an open storage area for additional stockpiling at the boiler.

The fuel is fed into the boiler surge bins through a redundant feed system, at a controlled feed rate. The boiler plant will offtake potable water from the Ngodwana Mill, and stored in situ for use as required. The boiler draws this water through a demineralisation plant and preheats it before sending it to the boiler make-up water tank. The boiler will make steam by burning the biomass to heat the water.

The steam is used to drive a steam turbine which in turn drives a generator. The generator creates electricity which feeds the plant auxiliaries and the balance is fed to the grid. The output steam from the turbine is condensed in an air cooled condenser.

The exhaust gases from the boiler are fed through a dust collector to ensure compliance with emission requirements and then to a stack. The dust collected from the dust collector and the ash collected from the bottom of the boiler will be disposed of at Ngodwana Mill Land fill site.

Power produced by the generator is to be delivered into to the grid through a separate connection to Eskom’s existing 132kV substation at the Ngodwana mill. Ngodwana will sell this energy to Eskom under a 20 year power purchase agreement.

Three shareholders are sponsoring, developing and will own the completed facility:

• Sappi Southern Africa, which will lease to the project company the land required for the plant, and will deliver the biomass fuel under a fuel supply agreement with the project company.
• KC Africa, which will oversee and drive the technical solution for the power plant and connection to the grid.
• Fusion Energy, a private equity investment company which is also providing project management services in the project.

Scope of work

A team of energy and projects lawyers in Norton Rose Fulbright’s South Africa office is representing and advising the project company on all aspects of the project, including:

• assisting in project structuring and development in order to compile a bid compliant with the strict bidding requirements and criteria under the REIPPP programme, as well as providing support through the bid process
• negotiating and concluding the long term fuel supply agreement
• negotiating and concluding the requisite EPC Term Sheet, a FEED Contract for preliminary geotechnical investigation, initial design and engineering package, and the full EPC contract, for the construction of the facility, as well as the long term O&M contract for operation and maintenance of the plant
• negotiating and concluding the long term lease and option
• negotiating all finance agreements required for the project finance of the development and construction of the facility
• ensuring and verifying compliance with all REIPPP requirements as to authorisations, permitting, economic development and social upliftment
• all other legal work streams required to take the project to financial close.

What makes the project unique?

• The project is essentially a base load type project, anticipated to generate in excess of 200,000MWh of power each year.
• The biomass fuel supplier has a direct interest in the power project, thereby underpinning security and sustainability of fuel supply.
• The biomass recovery process lends itself to job creation and skills development, which are central elements in the REIPPPP programme.