Cape Correspondent

CAPE TOWN The long-term supply of electricity to the Cape Town city council at favourable rates will be key in determining which bidder gets the contract to transform the ageing Athlone power station.

In advertisements published this week bidders have been asked to address issues such as the transfer of the power station assets as well as its refurbishment and upgrading, the conclusion of a long-term power purchase agreement with the city and continued economic operation of the power station.

The council is expecting "innovative" bids to return the power station, which has racked up losses of more than R53m in the past three years, to a profitable business unit through the formation of either a publicprivate partnership or an independent power producer.

It also hopes for proposals to transform Athlone into a gasfired power station, using gas exploited from the proposed West Coast gas fields. Athlone is currently a coal-fired power station.

Bid proposals also need to address issues such as pollution control, black economic empowerment and job security.

Athlone is operating on environmental permits that were issued in 1962 and do not meet modern environmental standards. Any change in ownership might require new permits requiring the new owner to upgrade the station to meet current environmental standards for approval by Western Cape's department of environmental affairs and development planning.

Clarence Oelofse of Fieldstone Africa, which is advising the city, said the key to the transaction would be the long-term-power purchase agreement to supply the city at competitive rates.

The city has accepts that Athlone power station requires capital investment to regain its efficiency or it faces closure.

Losses incurred by the power station since 2000 were R8,7m (2000-01), R15,1m (2001-02) and R29,9m (2002-03).

It is likely that in the absence of capital expenditure these losses may increase significantly as plant availability drops further, coal prices escalate and essential maintenance backlogs continue to increase.

Part of the proposal is that the council retains ownership of the land, which would be leased to the generating company under a separate lease agreement.

Bidding closes on April 30 this year, and it is expected that the preferred bidder will be announced in August.

Final transfer of the power station to its new owner is expected to take place in June next year.

Jan 30 2004 06:43:21:000AM Chris van Gass Business Day 1st Edition