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Mediclinic opts for own power too

Plans to generate 4 100MWh per annum at six hospitals.
The hospital group expects multiple benefits from having clean, affordable energy on-site. Image: Supplied

Constant power disruptions and the spiralling cost of electricity have pushed Mediclinic to start generating its own electricity.

The hospital group made the announcement just as President Cyril Ramaphosa announced that government is increasing the limit on self-generation of power from one megawatt (MW) to 100MW and that new “power stations” will soon be able to sell excess electricity to the national grid.

Read: Companies can produce up to 100MW of power – Ramaphosa

Mediclinic has signed an agreement with Moshesh Partners to install solar photovoltaic (PV) generating systems at six of its hospitals. The solar systems will generate electricity that will be used by the hospitals directly, with Mediclinic saying that it will save costs and relieve pressure on the national grid.

The group has signed a 12-year power purchase agreement with Moshesh Partners, with the option to extend it to 25 years.

Moshesh is a black-owned alternative renewable energy asset manager that raises funds for investment in renewable energy and clean infrastructure in sub-Saharan Africa.

Private equity fund

Moshesh launched its first private equity fund, the Moshesh Partners Renewable Energy & Clean Infrastructure Fund I, in 2020 and the Mediclinic solar project will be its first investment. Moshesh will be responsible for the installation and management of the system.

The project illustrates how the fund can help businesses secure consistent energy supply at predictable pricing from independent and renewable sources, while businesses do not have to invest the capital itself, according to Moshesh.

“Our investment in the project portfolio includes the full installation cost of the solar PV systems, as well as maintaining them to ensure consistent, excellent performance,” says Daniel Palm, chief investment officer and founding member of Moshesh.

“Mediclinic will benefit from immediate and tangible savings, as well as consistent energy supply from a renewable energy source, without having to allocate capital expenditure.”

Palm says the infrastructure fund is registered in accordance with the Financial Sector Conduct Authority (FSCA) and raises funds from investors such as pension funds.

“We are not a BEE company that is being funded by a financial institution to do a project. In addition, we actually were involved in the whole development process of the Mediclinic project – from bid preparation, financial modelling, the negotiation of legal agreements and execution to the monitoring of the actual roll out of the project,” says Palm.

“The power purchasing agreement means that the hospital group will also be protected from excessive power price increases,” he adds.

Six installations

The six separate installations will have the capacity to generate approximately 4 100 megwatt hours (MWh) per annum. The installations will start within weeks, with the largest plants to be installed at Mediclinic Vergelegen and Mediclinic Durbanville.

These installations come at a time when Eskom has warned that load shedding is likely for the next five years, while pushing for very large increases in electricity tariffs. The National Energy Regulator of SA (Nersa) has already allowed an increase of 15% for the current year.

Ramaphosa announced last week that government will amend the Electricity Regulation Act to increase the Nersa licensing threshold for embedded generation projects from 1MW to 100MW.

Read: Is this Ramaphosa’s most decisive economic decision since taking office?

The amended regulations will exempt generation projects up to 100MW in size from the licensing requirement, whether they are connected to the grid or not. “This will remove a significant obstacle to investment in embedded generation projects,” according to Ramaphosa’s statement.

“Generators will also be allowed to wheel electricity through the transmission grid, subject to wheeling charges and connection agreements with Eskom and relevant municipalities,” he added.

Requirements

Generation projects will still need to obtain permission to connect to the national electricity grid to ensure they meet all the technical requirements to avoid compromising the integrity or stability of the electricity network.

The statement says that generation projects will however still need to have their registration approved by the regulator to verify that they have met the requirements, and need to receive authorisation to operate.

It’s good news that municipalities will have the discretion to approve grid connections to their municipal networks, as is Ramaphosa’s promise that the final version of the amendment to the relevant legislation will be published by the Department of Mineral Resources and Energy within the next 60 days.

Read: Eskom cuts maintenance to the bone and still can’t avoid Stage 4 blackouts

“There is no doubt that the prospect of a continued energy shortfall and further load shedding presents a massive risk to our economy,” said Ramaphosa.

He mentioned that SA is in the midst of the worst economic crisis in our country’s recent history, which has seen a “dramatic increase in unemployment and hunger”.

Government expects that these changes to legislation will unlock significant investment in new generation capacity in the short and medium term as businesses will be able to install their own generation systems to generate their own electricity.

“This, in turn, will increase the available supply of energy and reduce the burden on Eskom, allowing Eskom to proceed with its intensive maintenance programme and reduce its reliance on expensive gas and diesel turbines,” according to the government announcement.

Research by Moshesh has found that infrastructure in Africa is falling to pieces.

The continent’s infrastructure currently lags well behind that of the rest of the world, with some 30% in a dilapidated condition.

It notes that there is vast opportunity for investors. “There is widespread recognition of the vast business opportunities on the continent as a growing consumer market, as well as the vast opportunities for infrastructure investment and development,” says Moshesh.

It quotes a PwC report that predicted that infrastructure spend in Africa is estimated to grow to $180 billion per annum by 2025, saying that renewable energy and embedded generation systems have the potential to provide good returns for investors.

“Having access to on-site clean, affordable energy will help Mediclinic manage its energy costs while helping us reduce the group’s carbon footprint – a key priority for our business,” says Kobus Jonck, Mediclinic’s general manager of infrastructure.

For patients, it is reassuring that the lights won’t go off halfway through heart surgery.

Read:
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Why not… Eskom will become obsolete in the next 20 years…

ESKAM is already obsolete.
They have nothing but themselves to blame for this.

It might be “obsolete”, but it is not going anywhere. There is too much money to be made by the corrupt and inept ANC cronies. From inflated coal prices, to fixed tenders and Cadre deployment for loyal deployees.

Eskom is the gift that keeps on giving..to the ANC.

Economic realities are forcing Ramaphosa to become a Margaret Thatcher. The UK was the “sick man of Europe” until it turned away from the socialist policies of the Labour Party to embrace a market economy under the brave leadership of Baroness Thatcher. The fact that the ANC has pushed South Africa to the brink of economic and social collapse, while already a failed states in some aspects, forces the few sensible individuals who have the political power to act drastically and contrary to the nature of their party.

Ramaphosa passed laws that made it more difficult for unions to hold the country at ransom through militant action. The majority of members have to vote in favour of a strike, otherwise, it is not legal. The next step was to hold unions accountable for damage during strike action. Margaret Thatcher implemented similar steps to break the back of the unions. She also closed the loss-making national coal mines that were kept in operation by the Labour Party, simply to “protect jobs”. Eskom is in exactly the same position. The power utility is an inefficient government monopoly whose primary purpose is the protection of jobs and BEE projects at coal mines. These BEE projects have in effect been nationalised through loaded Eskom coal contracts as part of a project to channel taxes and purchasing power from clients to politically connected cadres. Eskom is a government-protected ambush for economically active citizens.

Ramaphosa went toe to toe with the compromised Mantashe and Ramaphosa came out unscathed while Manatshe is sitting in his corner, bruised and battered. Ramaphosa broke the Eskom monopoly on extortion for the benefit of BEE projects. This has to go further to end the monopolies at municipalities and SOEs. He has no alternatives. To stick to the status quo will be political suicide. This is his Margaret Thatcher moment. How far will he go? He has big shoes to fill…. and feet of clay….

Thatcher was not a BEE princeling surrounded by gangsters and incompetents. The Conservative Party also wasn’t literally bankrupt. She was also a lady “not for turning”. Ramaphosa turns like a clock.

Great comment Sensei. The next RADICAL step that MUST be taken is to abolish BEE in totality. These moves, by securing power supply and eradicating the destructive nature of BEE, will see this country soar like an eagle! By doing away with BEE as the official status, the natural consequence will be BEE – that is the only way Black Economic Empowerment will really be achieved! The solutions are actually quite elementary:

1. Get rid of the excessive legislation
2. Get rid of BEE
3. Secure power supply
4. Secure water supply
5. Secure road, rail, port (air and sea) infrastructure
6. Give power to Employers to fire unproductive workforce (only way unproductive workforce will become productive)
7. Demolish Social grants and rather replace it with an entrepreneurial grant where grants are given to new Entrepreneurs

Probably a lot more that we can through in there. Elementary my dear Sensei, elementary!

You are far more optimistic on Ramaphosa than I, and far more optimistic than I expected you to be..

Absolute stupidity. Watch Mediclinic go running back to Eskom within 7 years begging for electricity again.

Solar is NOT sustainable.. shareholders will experience the increase in maintenance costs. There is NO such thing as “green” energy. Mediclinic and it’s shareholders will learn the hard way making this dumb decision

is that you uncle Gwede?

Wow, where to even start with this comment… undoubtedly one of the most ignorant I’ve seen on Moneyweb and that’s saying something. What exactly is not sustainable about solar energy? The sun not coming up every day? Too many solar eclipses lately? I guess those poor fools at Mediclinic and countless other businesses that are now investing in solar should’ve spoken to you first, huh? Seeing as how you’re clearly such an expert. Well, shame on them! They’ll just have to suffer in the dark now. Or rather, they’ll be the ones with power for their patients while the rest of us sit in the dark the next time Eskom goes on the fritz.

Absolute stupidity… you have no idea what you’re talking about. Watch Planet of the Humans documentary and you will understand.

Solar has been around for decades, yet you don’t find “solar” billionaires.. if this were the solution it would have been done ages ago… but just wait and see the degradation and destruction in maintenance within the next 10-15 years… goodluck to the shareholders

Solar is not sustainable!! Unless the ANC has taken over the sun you may be mistaken?

That’s 2.5MW solar across six sites… The nation won’t notice but thank you

as to leasing solar energy – somebody at Mediclinic needs urgent help with that spreadsheet. It can NEVER make sense for a profitable business that owns its buildings not to own its solar from inception.

Why not? I know many rural enterprises are going off grid using a combination of solar and fossil fuel generation.

Actually it IS sustainable. I have been completely off grid for many years. With solar, batteries and a backup generator you can kiss Eskom goodbye. I’m not an engineer, and even I can get it right. It is really that simple.

Would be interested to hear the reasons why solar won’t work for Mediclinic please? It’s not good enough to just say it won’t work.

I’d have said that they’ve probably done more due diligence on this decision than you think. And if it fails it is shareholders who bear the brunt which is fine by me – they know the risks and trust management to make the right calls, or they sell.

I suggest that they will do a “grid-tied” option (once government agrees tariffs) as running on pure solar, even with batteries, is not likely to work for a hospital and it can’t be left with no power if the weather is bad for extended periods. This is the opinion of a layman.

I guess in the end I trust the decision of a corporate like this more than the decisions that government would make about electricity production.

I think it is a great move. Effectively privatizing renewable energy allowing government to meet their targets, but let the private sector fund it, but also benefitting from it. With Eskom pushing prices up ridiculously I’ll be be generating my own power soon as well.

Watch “Planet of the Humans” documentary and you will understand. It will also help you make some money by staying away from so-called “Green Funds”

The massive move to Solar power getting underway in SA has an interesting sting in the tail.
Most of these installation will be grid tied with a minimum of energy storage. This basically means that they will generate quite a bit of their own power requirement in the period of 08h00 to 16h00 which will cut down their daily consumption.

The problem resides that the morning and evening peaks will remain in place and still make the demands on the installed base load of Eskom and its associated problems.
The Eskom revenue stream will also suffer whilst the baseload costs remain !!

This is called the death spiral for utilities and is one of the reasons that government is looking to tax self-generation. The main problem with a utility becoming unreliable is that those who can afford to do so will seek their own power sources. As this becomes more common, the utility loses more and more revenue, ultimately becoming unsustainable. This is obviously not ideal because it means those of us who cannot generate our own power for whatever reason have to pay more and more for electricity. So you see the problem. In our case, however, there is no choice as Eskom has been in a state of general decline for so long now, with no hope in sight.

There is SOME hope in sight. With Andre de Ruyter as CEO, at least a few lazy incompetents have lost their “jobs” at Eskom.

And Eskom has just paid back some R81 billion of debt — nowhere near enough, but a start!

If you look at the battery technology and advancements over the last ten years I do believe we will be able to store energy for the off periods.

Eskom has already approached me to build a storage facility on the substation on my property which has a windfarm on it.

I really hope Mediclinic have done a thorough cost analysis prior to embarking on this project. While solar may be “cheap” to generate electricity, its not cheap to store and the power generation can be quite erratic based on weather conditions and no generation at night.

Well, people who run hospitals are known to be quite flighty so they probably just did it on a whim. Let’s hope the patients survive!

Cable and copper theft is one of the key current fashion items within SA Crime Inc. This will now gradually change to PV cells and battery packs. I wonder if security costs are being costed and built into these new projects. Interesting question for journalists to raise. I’m sure Cell phone tower operators could assist with some knowledge in that respect.

4100 MW hours per year is a mere drop. Well below the old 1 MW cap per hospital implemented by ol’ gwede.

The ”colonists” in government, has now all but left – but fortunately Cyril and some of his ”comrades” started privatizing some of the ”’worst-performing” state-owned enterprises. This reform might only start bearing fruit in the years to come.

The ANC in 1994 was forced to make a shift overnight – the old market economy was converted to centrally planned ones. This shift (like in the rest of Africa), away from ”colonial” capitalism towards socialism – they created a BEE dominated black-market system.

Black markets with their unregulated prices and actions, and closed competition, seemingly replicate what goes on in a market economy. State capture becomes the ”play of the day”.

However, black markets are not supported by the rule of law. The linchpin of a free-market economy, property rights, is taken away. Few will risk their capital if the rewards are going to be subject to arbitrary seizure by the government or mobsters.

Methinks sunny SA will always be supported by old-fashioned socialism, but the new ”champagne socialists” now seems to be advocating a highly diluted form, often called market socialism.

There will always be those like the EFF who will oppose any form of International Trade and Finance (free-market capitalism), but in times like these (Fauci sneeze), even the high-tech world economy can falter. My view will always be that the verdict on central planning, all over the world, has been rendered, and it is unequivocally negative.

All the SOE’s has faltered – bring on the change Cyril, and remember – ”if you want to run with the big dogs, you can’t pi$$ like a puppy”!

Poor Maggie Thatcher must be turning in her grave.
Can there be a bigger insult to her than to be compared to Ramaposer the Frogboiler?

End of comments.

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