FOR a company that recently had its fingers burnt when things went wrong for independent power producers in South Africa, independent power plant developer Ipsa is still showing appetite for more power projects.
Ipsa chairman Richard Linnell said the company is considering new power-generating projects in South Africa and neighbouring countries.
Ipsa also had plans to extend its Newcastle, KwaZulu-Natal cogeneration plant.
Chief executive Phil Metcalf said the company was exploring opportunities to increase the capacity at Newcastle.
"We are currently examining a project which could add a further 50MW to the capacity at Newcastle, although this development will take around 18 to 24 months to be implemented," Mr Metcalf said.
This is a far cry from the days when the plant stood idle because Eskom was still finalising the medium-term power-purchase programme (MTPPP) tender process.
Ipsa is in a different shape today compared with a few years ago. The past few years have probably been the toughest for the company. The company has had what can best be described as a torrid time.
Ipsa’s troubles can be traced back to 2008, when it decided to get rid of four Fiat Avio 501 D turbines it had bought for its 521-MW open-cycle gas turbine project at Coega, near Port Elizabeth. This was after it became clear that the project would be delayed.
Ipsa had bought the turbines from TurboCare SpA, a subsidiary of Siemens Power Generation, at a cost of £21.8m. In 2008, Ipsa spent £9.8m to refurbish them.
What initially seemed like a routine sale of turbines turned into a nightmare for Ipsa as the company struggled to find a buyer.
Ipsa is still in possession of two of the turbines, while the sale of the other two was only concluded in January this year. Mr Linnell said the sale of the two turbines continued to experience delays.
"The board is currently negotiating with a number of potential buyers and at least two of these appear to offer a realistic prospect of being able to complete on satisfactory terms," he said.
Failure to sell the turbines has ruined Ipsa’s working capital. Not to mention piling debt. Understandably, the company’s priority at the moment is to clear its debts. In the year ended March, the company reduced its debt from £19m to £7.3m.
It is ironic that a company whose business is to produce power struggled at a time when the country faced an electricity crunch.
Ipsa, however, put the turbines on the market at probably the worst of times — when investors were putting projects on hold because of one of the worst global financial crises since the Great Depression.
It was only until recently that Eskom was in a position to purchase power from independent power producers (IPPs).
Even the most exciting IPP projects are worthless if there is no one to buy the power, which is why Ipsa’s financial position began improving when it started selling electricity to Eskom from its Newcastle, KwaZulu-Natal cogeneration plant.
A power purchase agreement signed by Ipsa and Eskom in 2010 and ending in March 2015 stopped what was a downhill slide for the company.
Ipsa said it had been a victim of circumstances and the company can still turn around.
Fortunately for Ipsa and other IPPs, Eskom has also been making the right noises about IPPs, saying it is eager to buy up available IPP power as South Africa continued to experience a "tight" electricity system.
This has resulted in renewed buoyancy at Ipsa.
"With reserve margins at an all-time low in South Africa and with the backdrop of positive encouragement towards IPPs in South Africa, the resolution of the legacy problems at Ipsa is well timed and we will have many excellent opportunities to develop the business in the coming 12 months," Mr Metcalf said.
"The next milestone for Ipsa now is to sell the remaining turbines, which will stabilise the company’s working capital," Ipsa said in its results released this week.
"There are other reasons why the sale is important ... Until the sale of the turbines is complete, there remains a material degree of uncertainty regarding the company and the group’s ability to continue as a going concern," the power producer said.