Energy Buzz: Power Supply Solutions for Mines in Sub-Saharan Africa

Diesel Generators

Diesel generators are widely used as a backup or even primary power source for mines. Its key advantage lies in its potential for rapid deployment as generators can often be installed within just a few months. Mines commonly lease these generators, with the mine owner (MO) responsible for sourcing diesel.

While expensive and carbon-intensive, diesel generators provide a quick and flexible solution, especially when utility/grid supply is inconsistent or absent.

However, mining companies are increasingly taking into account ESG and energy transition considerations in their operations. This has led to a move towards renewable energy power solutions, such as the installation of solar PV systems at mines.

Captive Power Plants

Captive power plants are dedicated facilities built to supply a specific mine. These are generally suitable for long-life mining projects due to the high development, construction, and financing costs involved.

Such plants are typically located close to the mine to reduce transmission losses. They may be developed by the MO or outsourced to an Independent Power Developer (IPD). Ownership and operation models vary - MOs may own and operate the plant themselves or lease it from an IPD under a Power Purchase Agreement (PPA).

Historically, these plants have relied on thermal sources like coal, gas, or heavy fuel oil. However, ESG concerns and global energy transition efforts are pushing the industry towards renewables, particularly solar PV and hybrid systems that combine thermal and renewable sources. Complex systems are often developed and managed by IPDs, allowing MOs to avoid the risk and capital burden.

Project finance is a common funding route, especially for longer-term projects (10+ years), although the complexity of financing packages and due diligence requirements can delay implementation. In project financed power projects owned by the MO, power is often supplied to the mine free-of-charge, and debt is typically repaid through mine revenues. In order to preserve mine revenues, there is therefore increasing interest in outsourcing power to IPDs.

Cross-Border Power Trading

When national utilities cannot meet local power demand, mines may be able to obtain electricity via cross-border trading through regional power pools, such as the Southern African Power Pool (SAPP). Under this arrangement a host utility can import surplus power from a utility in another country. Typically, a tri-partite agreement is established among the MO, the host utility and the exporting utility, whereby the MO pays for the imported power indirectly.

Power trading arrangements are complex and must address dispatch, payment security, liability for supply failures, and other related issues. Still, when viable transmission infrastructure and a utility power pool with surplus exists, it is often the fastest way for mines to secure power.

A significant development has been the rise of licensed third-party power traders. These entities are authorised to buy and sell power in the regional power pools, bypassing the need for direct utility-to-utility agreements. Host utilities in such arrangements primarily provide wheeling (transmission) services.

Legal and Advisory Involvement

Hogan Lovells has extensive experience advising clients on structuring and negotiating these various power supply or power purchase arrangements. The firm has supported major projects in the Democratic Republic of Congo, Zambia, Nigeria, Ghana, and across West Africa, involving diesel solutions, hybrid captive power plants, cross-border PPAs, and fuel supply logistics.

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Authored by Arun Velusami, Emily Harris and Manisha Vekaria.