A proposed R15bn gas-to-power plant in the financially strained Matlosana municipality (Klerksdorp) is under intense scrutiny, with energy analysts and local councillors raising concerns about the project’s feasibility and regulatory compliance, as well as the credibility of its developer, Urban Blue International.
Urban Blue plans to finance, build, operate and transfer the plant to the municipality over 20-25 years using a build-operate-transfer public-private partnership (PPP) model.
However, the company is in the process of deregistration on the Companies and Intellectual Property Commission database, and its registered address is listed as a sushi takeaway in Kuils River, Western Cape.
Urban Blue CEO Jing Sun attributes the deregistration to an administrative error.
First announced early last year as a provincial project by then acting North West premier Patrick Maloyi, it was presented as a solution to load-shedding, promising economic growth and job creation.
In April North West MEC for economic development Bitsa Lenkopane “handed the project over” to the city of Matlosana for implementation, with much fanfare.
Electricity & energy minister Kgosientsho Ramokgopa’s office confirmed, however, that it had not received an application for a ministerial determination that is a prerequisite for such a large-scale development. The energy regulator, Nersa, which must concur with the determination, also does not know about the project.
The company said in a statement on Friday that it was ready to proceed with the PPP despite an “ongoing absence of relevant documentation”. It nevertheless blamed the provincial government and municipality for “the premature announcement in April” and admitted the project “was still curtailed by outstanding governance and administrative processes”.
The company claims it has backing from Chinese firm VPower, a developer of gas-to-power projects across Asia. However, this affiliation is not mentioned on Urban Blue’s website, which lacks concrete project examples and contains placeholder text.
The project suffered a serious setback on Tuesday when it was halted during a Matlosana council meeting to allow for the required public consultation and adherence to regulations.
In a statement, DA councillor Gerhard Strydom emphasised the onerous legal requirements for PPP transactions that had seemingly had not been complied with.
Urban Blue expressed surprise at the DA’s announcement, saying it was informed by mayor Fikile Mahlophe that the project had been approved, a claim the company says was confirmed by senior provincial leaders from the ANC and EFF.
Despite these assurances, Urban Blue has not received formal communication regarding the council’s decision and has sought clarity from the municipal manager.
A municipal spokesperson did not respond to a request for clarity sent by Business Day and did not answer her telephone.
Documents presented to the council reveal that the municipality had already allocated 311ha of land to the provincial government for renewable energy development that is now proposed to be leased to Urban Blue for the gas project. This though gas generation is not a renewable energy technology. The council was not informed what the value of the lease would be.
The municipality is expected to purchase power at R2.55/kWh with a 5% annual escalation from 2028, purportedly cheaper than Eskom’s average price of R3.11. This, the council heard, would save the municipality R656m a year.
However, energy expert Hendrik Barnard questioned these figures, noting that some municipalities pay less than R2/kWh on average.
The PPP requires a power purchase agreement and a guarantee from the National Treasury to cover payments if the municipality defaults. Given Matlosana’s substantial debts to Eskom and Midvaal Water, securing such a guarantee is uncertain.
Urban Blue is identified in the council documents as the local representative of the China National Technical Import and Export Corporation, collaborating with Genertec Holding Group for technical expertise and financing.
Despite these associations, Urban Blue’s website describes the company as “proudly South African”, omitting mention of these partnerships.
The project’s timeline is ambitious, with construction expected to be completed within six months and commercial operations commencing by April next year, pending council approval.
Chris Yelland, MD of EE Business Intelligence, expressed his scepticism, saying site preparation alone could take six months.
Yelland also questioned the availability of gas for the project, since the resource in Mozambique from which piped natural gas is now imported for use by industries in SA will be depleted by 2028 and gas import infrastructure is underdeveloped.
According to Sun, Urban Blue will use imported liquefied natural gas, which the company hopes to transport to the plant by train, provided Transnet successfully revives its rail corridors.
She says initially the company may have to transport it by road to Klerksdorp.
Antoinette Slabbert
www.businessday.co.za
