South Africa Sugar Industry Proposes $2.1 Billion Power Projects

South Africa’s sugar industry has proposed that 20.4 billion rand ($2.1 billion) be invested in 15 cane-fueled power projects to help address electricity shortages in the continent’s largest economy.

The projects could create as many as 712 megawatts of capacity and 37,786 jobs, the South African Sugar Association said in a written presentation to Parliament’s energy committee today. Implementation is contingent on the government agreeing to power-purchase agreements that will cover fuel and operating costs and provide for an appropriate return on capital, it said.

State-owned Eskom Holdings SOC Ltd. currently supplies about 95 percent of South Africa’s power. Electricity shortages caused mines and factories to shut for five days in 2008 and demand is currently close to outstripping supply. Today, peak electricity usage is forecast to exceed capacity by 7 megawatts, Eskom said. One megawatt is enough capacity to power 500 to 1,000 homes.

South Africa’s 26,600 sugar farmers produce about 2.2 million metric tons of the sweetener a year, earning revenue of about 12 billion rand, the industry association’s data show. The country has 14 sugar mills that produce sufficient power to meet their own needs from bagasse, a byproduct from cane that remains once the juice has been extracted.

The plants could invest in bigger and more efficient boilers and sell excess electricity to other users, according to the association.

Illovo Sugar Ltd. (ILV), is South Africa’s biggest sugar producer by output and market value.

The country will face a capacity shortfall of at least 700 megawatts next year that will have to be met by encouraging co-generation by companies and economizing, according to the South African National Energy Development Institute, a state research body.

While waste from sugar, pulp and paper plants has the potential to produce 1,500 megawatts of power, industries have no incentive to increase generation because of a lack of off-take agreements and tax incentives, Kadri Nassiep, the institute’s chief executive officer, told the energy committee.

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net;

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

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