JOHANNESBURG (miningweekly.com) – The go-ahead for the power project that Anglo American Thermal Coal has been facilitating for an independent power producer (IPP) in Mpumalanga has been deferred, Mining Weekly Online can today report.

The plan was for group company Anglo American Platinum (Amplats), as the sole offtaker of all the electricity from the proposed 450 MW Khanyisa power project, to carry the power purchase agreement (PPA) on its balance sheet as a $1-billion finance lease.

But under the platinum sector’s current circumstances, the level of commitment to Amplats’ balance sheet is considered inappropriate at the present time.

Khanyisa was to make use of the large volume of discard coal from Anglo’s collieries in eMalahleni, formerly Witbank, where Kleinkopje, Greenside and Landau alone have sufficient waste to generate 1 200 MW of electricity for 40 years.

“We have been asked to defer the project to a more appropriate time. This view may still change – we plan to approach our investment committee again in May,” Anglo American Thermal Coal regional head: strategy Ian Hall said in an emailed response to Mining Weekly Online’s questions.

Having finalised all the transaction documents with the preferred IPP, the engineering, procurement and construction process had been due to start in the first quarter of this year, reach financial close by the end of 2013 and achieve commercial operation of the first unit during 2015.

The selected third-party IPP was to build, own and operate the power plant, which was to have access to more than 137-million tons of discard coal on dumps in the area, and which would have provided an opportunity for South Africa to use waste to alleviate the country’s electricity shortage.

The IPP was to access international financing on the back of a 25-year PPA and secure supplementary supply agreements from Eskom for the ‘wheeling’ of electricity to platinum mines in Rustenburg.

Anglo’s Kleinkopje colliery was the chosen site and circulating fluidised bed the chosen technology for what was to be a dry-cooled power station.

Water was to be made available from Anglo’s eMalahleni water reclamation plant, which treats effluent from underground collieries in the area, including BHP Billiton’s closed South Witbank mine.

Owing to the relatively high sulphur content of the 50%-ash discard coal – which is typically in the range of 10 GJ/t to 15 GJ/t – the plan was for the coal to be partially beneficiated and for the technology to produce lower sulphur-oxide and nitrogen-oxide emissions relative to other coal-fired generators.

With the schedule now being held back, the employment of up to 1 200 people during construction and 100 people during operation is also being delayed.

Anglo’s ten South African coal mines produce 59.2-million tons of coal a year, 16-million tons of which are exported.

The diversified mining company also has two large coal projects – the New Largo project, which will supply 14-million tons of 
energy coal a year to Eskom's new Kusile power station, and the Zibulo project, which will supply 3.3-million tons to Eskom and export another 3.3-million tons a year.

While Anglo has no intention of entering the business of power generation itself, the proposed IPP facilitation offered the group improved security of power supply and a way of mitigating an environmental liability through turning dumped coal to positive account.

Self-generation was seen as providing additional stay-in-business and expansion potential for a group that requires 1 600 MW of electricity for its own needs, at a time when South Africa’s electricity reserve margin is under pressure.