Background to the Project

Southern Africa is facing power supply constraints over the next 10 years as it seeks to build new capacity in order to meet the region’s growing demand for power in the Southern African region. These supply constraints have resulted in reduced power quotas for intensive users in the country and has hampered new growth and expansion opportunities due to a lack of energy security of supply.

In addition, due to the costs of new generation build program of South Africa to meet the growing energy demand in the future, the price of electricity in the South African market is forecasted to grow at super inflationary rates in the next 5 years in order to reach international norms.

A trend has therefore emerged where intensive users are now considering alternative energy supply options to mitigate the risks of rising energy prices and guarantee security of supply for existing businesses and expansions. These changes in the Southern African energy market support the importance of the Project to the region and underwrite its success.

Electricity in Mozambique is mainly generated through hydro power and a number diesel fired power stations. Mozambique has substantial proven natural gas reserves of which currently less than 3% is being utilised. These natural gas resources could be used for power generation to the benefit of the region.

Generating power from the Mozambican natural gas was first proposed to the Mozambican Government by the shareholders of Gigawatt as far back as 2004 when construction started on the gas pipeline from Ressano Garcia to Matola. MGC has had the foresight to provide a suitable gas take-off facility at that stage. The MGC pipeline as well as a distribution network was completed in 2005 and by 2010, more than 20 industries in Matola/Maputo were using natural gas as their main source of energy and the first numbers of vehicles are using clean natural gas.

The consortium composed of Gigajoule, Eagle Holding and Electrotec completed a number of studies on the viability of a gas fuelled power station at Ressano Garcia in Mozambique. The studies showed that it will add substantial value to the Mozambican economy, which gas is currently leaving the country, attract substantial investment, create much needed jobs and generate substantial benefits to the Mozambican Government.

A new company, Gigawatt Moçambique SA, was incorporated and the development of the Project commenced. The ideal site outside the border town of Ressano Garcia was secured for the Project due it is close proximity to the existing gas infrastructure, the EDM transmission network, the EN4 main road.

The EIA revealed no fatal flaws and MICOA, the Mozambican environmental authority, published a positive RoD for the Project.

The proposed grid connection will be to the 275kV line of EDM that connects the Komatipoort substation (Eskom) to the Infulene substation (EDM).

The Project and a power concession application were presented to the Government of Mozambique. On 23 December 2010 the Council of Ministers, on behalf of the Mozambican Government, awarded Gigawatt a 25 year concession for the generation of 100MW of electrical power, using Mozambican natural gas as fuel.

The development of the Project is currently continuing in accordance with the Project development time table and budget. Gigawatt is presently negotiating the EPC contract, WOM contract, GSA and the PPA for the Project. It is forecasted that the first power will be supplied into the grid in Q2 2013.

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