Siemens AG
This Siemens-operated power plant in Taiwan won an award for Best Environmental Plant of the Year in 2008.

Does Siemens Want to Build Gas-Fired Power Plants in South Africa?

July 8, 2016
The South African government wants to reduce its nation's dependence on coal for power and end an electricity shortage that has curbed economic growth for close to a decade. Enter Siemens and a possible gas-fired plant.

Siemens AG is interested in bidding to build gas-fired electricity-generating capacity in South Africa as the German engineering company boosts its presence in the country and the government seeks to end power shortages.

“Gas can be a complete game-changer for the South African economy,” Siemens South Africa CEO Sabine Dall’Omo, 58, said in an interview in Johannesburg. “Gas is one of our strongholds. International investors are very interested in South Africa when it comes to developing the gas industry.”

The government wants to reduce the nation’s dependence on coal for about 80% of its power and end an electricity shortage that has curbed economic growth since 2008. Energy Minister Tina Joemat-Pettersson said in May she wants companies to provide about 3,725 megawatts of power generated by gas, including a 600-megawatt plant at one of the country’s major ports.

South Africa’s state-owned utility, Eskom Holdings SOC Ltd., has more than 40,000 megawatts of capacity and generates about 90% of the country’s power. Alongside the gas-development initiative, the government approved a plan last year for the country to develop as much as 9,600 megawatts of nuclear capacity by 2030 and Russia’s state-owned Rosatom Corp. said it might join forces with local companies to develop it.

The engineering company is also in talks about converting two Eskom diesel-fired power plants to gas, although the state-owned utility could need to part-finance the project, the executive said. The project will need a financial review to determine the cost, she said.

Siemens is seeking growth opportunities throughout Africa as lower commodity prices hurt demand from the mining industry. The Munich-based company’s revenue from the continent rose 3% over the past year, and it sees the region as a growth market. Recent projects included the construction of a transmission link to connect the Kenyan grid to its counterpart in neighboring Ethiopia, while in South Africa the company is looking to invest in a closely held Mobisol, a business that supplies solar panels to communities without access to electricity.

General Electric Co., Siemens’s main competitor on the construction of power plants and turbines, is also seeking to expand in Africa through electricity, health and locomotive opportunities.

Siemens’s shares have fallen 2% in Frankfurt this year, valuing the company at 75 billion euros ($82.99 billion). That compares with a 12% decline on the city’s DAX Index. The stock fell 0.3% to 87.81 euros ($97.17) as of 9:02 a.m. on Friday.

Developing South Africa’s gas industry has the potential to create jobs in a country with unemployment of almost 27%, Dall’Omo said. The setting up of gas-powered generation, facilities to convert liquefied natural gas imports back into the fuel and the industry to provide services could add as many as 250,000 work opportunities, according to the executive.

“The gas industry,” she said, “is very labor-intensive.”

By Loni Prinsloo

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