GDF Suez is to participate in South Africa’s power generating market after signing contracts to develop two new power plants with a combined output of 1005 MW.

The French firm and its partners – Legend Power Solutions, Mitsui & Co. and the Peaker Trust – have signed power purchase agreements (PPAs) for two greenfield open cycle gas turbine power plants. The move is in line with the company’s international expansion strategy.

"These two plants represent a major step forward for the Group’s activities in Africa and demonstrate our ambitions in fast growing markets," said Gérard Mestrallet, Chairman and CEO of GDF Suez. "This is the starting point of a strong partnership with South Africa, to help support the Republic’s economic and industrial growth ambitions.

"The open-cycle plants are the first independent power projects originated by the Department of Energy in South Africa and they will add much needed extra capacity to the Republic’s grid."

The plants are the 335 MW Dedisa project in Eastern Cape province and the 670 MW Avon facility in KwaZulu-Natal province. Commercial operation is expected in 2015 and 2016, respectively.

The plants will be contracted to supply electricity to Eskom Holdings, the Republic’s state-owned utility, under 15-year PPAs, awarded by the Department of Energy (DoE), on a Build, Own, Operate (BOO) basis. In parallel, two Implementation Agreements (IAs) with South Africa’s National Department of Energy were signed for each power plant.

This investment has attracted financing from a number of local banks, with project cash flows supported by the long-term PPAs with Eskom Holdings, which is investment grade rated.

The plants will be 38 per cent owned by GDF Suez, 27 per cent by Legend Power Solutions and 25 per cent by Mitsui. The Peaker Trust, an independent trust established by GDF Suez to ensure that local organizations and communities will benefit from the projects, will own ten per cent.

Italian firms Ansaldo Energia and Fata will build the two plants.