Gas-to-power ships deal ‘stinks’

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JEREMY MAGGS: There have been reports of a so-called special directive from government, instructing Transnet to find space for three gas-to-power ships that would be in the Coega Harbour in the Eastern Cape province. The arrangement would be controversial, to say the least. With me now is Hilton Trollip, an independent consultant in energy research and a research fellow at the Global Risk Governance Programme at the University of Cape Town. Thank you very much for joining us. Are these ships a solution?

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HILTON TROLLIP: Good afternoon, Jeremy, we need more power onto the grid. There are a variety of options. If these ships, and there are caveats to this, were planned to be brought in only so long as they were the least cost solution to getting emergency power onto the grid because of the immense damage being done to the economy, then they would be a solution. But the proposal, the offer given to these ships was a 20-year contract at huge cost, much higher than the average electricity cost of the rest of our generating fleet, and quite simply, and this isn’t just me, but this is a number of other people, Mark Swilling, Anton Eberhard, a number of people, the whole deal, frankly, stinks.

It stinks of massive rent seeking, in other words, various interests trying to use their connections in government – and I’m going to use the word connected again – to connect their solutions to the system at vastly higher costs than is necessary.

If they bring them into the port for only so long as they are necessary, and herein lies the rub, they are necessary because other much cheaper solutions aren’t being connected to the grid and the department that wants to connect these ships to the grid is the one that’s not connecting the other options for a number of reasons.

The minute they get connected, if there are rents – rents being what we’ve become very used to in South Africa here, greasing any deal with the government – if there are rents flowing to influential interests, then we’ll be stuck with these ships and we won’t solve the problem, so long as people are making money out of them connected to the grid.

JEREMY MAGGS: What sort of cost and money are we talking about here?

HILTON TROLLIP: I did a calculation a year ago, and you can hear I get passionate about this. I did a calculation a year ago when they announced the results of the so-called Risk Mitigation Independent Power Producer Procurement Programme and we are looking at amounts over the 20 years of some R200bn. It depends on the gas price because most of the actual tariff that will, in fact, be paid will depend on the gas price because these ships basically turn gas into electricity. The capital cost is entire, the gas makes up most of the price in that electricity.

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Shortly after that, we had this crisis in Europe with the gas supplies to Europe and I think the prices went up to five times.

If we signed the deal then and had those Karpowerships connected, we would have been obliged to be paying five times the tariff we thought that they’d won the contract on. So ja, it’s complicated but this contract really needs to be much more transparent. We need to see the numbers.

We need to see power purchase agreements and at the moment it’s all secret.

JEREMY MAGGS: The sense, Hilton Trollip, that we’re getting at the moment is there is a Hail Mary strategy from government. Effectively the president saying that at this point anything cheaper than diesel is the best option for Eskom but that’s no solution, that’s no rationale, is it?

HILTON TROLLIP: No, it’s not because basically the same interests that are going to benefit probably from this have caused the problem. So you cause a big problem and then you arrive with your knight on your white charger, but a very expensive one, with a solution. As I say, at this stage, we are stuck with this terrible power shortage doing massive damage to the economy. Yes, ships like this usually they have been used in other situations, as we’ve heard from government. There were some in Ghana that I know about but there was a big controversy over them, they had two.

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The Karpowership company, there’s a history of controversy around it too.

So signing up with a company with controversy into the kind of corrupt, dirty dealings we’ve had in state capture, around Eskom power stations, ongoing corruption in procurement, we really need much more transparency if this is going to happen. Not a behind the scenes, the Department of Transport, the minister orders a port to connect these ships with power purchase agreements, which we only know the rudiments of. We need more transparency, then we can really see if they can save us money or save the economy money.

JEREMY MAGGS: Hilton Trollip, independent consultant in energy research, also a research fellow at the University of Cape Town in the Global Risk Governance Programme, thank you for joining us on Moneyweb@Midday.

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