INSTEAD of load shedding, Eskom could be buying power from its sole private sector competitor, Independent Power Southern Africa (IPSA).

Since September, IPSA has been operating a power station able to generate up to 18 MegaWatts (MW) of electricity, enough to supply the suburbs Eskom currently switches off for two hours at a time.

But the state-owned utility has refused to buy IPSA’s power so far.

The chief executive of IPSA, Peter Earl, said: “I have not managed to get a satisfactory explanation from Eskom about this. Apparently, they say paying penalty clauses for load shedding is cheaper than buying from us. But considering it is a regulated market where Eskom dictates the price, I don’t understand why price is the issue.”

Buying IPSA’s power would not only save South Africans from cursing the dark, but would also be good for the environment. The company’s plant in Newcastle, KwaZulu- Natal, converts waste heat from two large chemical plants into electricity.

Since Eskom refuses to buy this power, IPSA’s plant survives by selling mainly steam back to Karbochem and German chemicals giant Beyer’s Chrome International South Africa.

IPSA’s Newcastle power station is technically South Africa’s second privately-owned power station. The first was Kelvin, which the Johannesburg municipality sold to US energy group AES shortly before Enron’s woes prompted AES to sell all of its assets.

AES recently returned to South Africa as the sole bidder for two “peakers” – power stations which only operate during peak demand. IPSA declined to pitch for the bid because the design dictated by Eskom was uncompetitive, said Earl.

IPSA is in the process of building a 1600MW power station in the Coega Industrial Development Zone outside Port Elizabeth. This will start as a liquid fuel “peaker” and then later be converted into gas powered generator which Earl believes can undercut Eskom’s coal-fired generators. The AltX-listed company’s share leaped more than 20% yesterday to R8 after it announced an alliance with CEF, a state-owned enterprise formerly called Central Energy Fund.

The CEF’s PetroSA division will supply IPSA’s Coega plant with liquid fuel, and then CEF’s iGas division will supply it when it converts to gas.

The first phase of this project sees a turbine able to generate 512MW built at a cost of around R840 million.

Alcan’s smelter, the anchor tenant of Coega’s industrial development zone, needs 500MW of guaranteed un-interruptible power which IPSA will be able to supply.

The cost of the second 512MW turbine will be more than R1 billion. Earl said the cost will go up because of the queue of countries which have left expanding their generation capacity too late.

IPSA owns the first turbine, which it can bring into operation once the red tape involved in entering South Africa’s electricity generation market has been navigated.