• Mini Hydro Power project of 9,81 MW. (1.05 MW, 3.7 MW and 5,06 MW).
• All the plants within an acceptable range of a major rural town. The town(s) will be the major base client(s) for the plant(s).
• Two plants to be constructed on the Axle River close to the town of Bethlehem.

Of these plants one at an existing dam wall with a head of 10-12 m, the other at a drop in the Axle River of approximately 40 m. The long-term water resource in the Axle River amounts to some 12 m³/s.

• Total cost estimate R 65 million complete.
• Approx. 8-10 year payback at 13 c/kWh and interest rate of 16%.
• Present average yearly electricity price for town is 14,6 c/kWh.
• Estimated rate of return on equity after taxes is +20 % based on pre-feasibility
• Avoided CO₂ emissions approx. 64.000 tons/CO₂/year.

Cost per ton CO₂ mitigated (based on AIJ-finance) is approximately US$ 8/ ton CO₂ (depreciated in 1 year) or US$ 0.43/ ton CO₂ (depreciated over lifetime)

• Project identification and pre-feasibility completed.
• Project development team secured. Intent to purchase obtained from base client. Discussions ongoing with Town Council re. Power Purchase.
• Detailed feasibility study required.
• Pending feasibility study outcome, project development to be completed.
• Project participants identified, IPP Company established. Commitments from stakeholders secured.
• Concession to generate power applied for from National Government. In principle approval obtained
• Tentative permit to utilise water resource applied for and received.
• Financing for feasibility study to be secured.

Pending study outcome bulk financing, equity partners and investors to be finalised.

In the middle of 1997 a mini hydro project was identified in South Africa by a landowner and a civil engineering consulting firm. What makes this relatively unique is the fact that South Africa does not have many rivers with a constant yearly flow. Generally the rivers are dry in the winter period (May to October) and have a high flow during the summer months (November to April). The Axle River, where the project was identified, however has an average (guaranteed) flow, which is artificially regulated, from the Lesotho Highlands. This water flows via the Axle River over a distance of approximately 300 km to Johannesburg where it is used for drinking water purposes. The South African and Lesotho Governments have entered into an agreement guaranteeing the yearly flow in the river. Furthermore in the past, the generation of electricity was stricily regulated in South Africa and fell solely within the mandate of the national electricity utility Eskom. The new energy policy stance of the post-apartheid government allowing electricity generation by the private sector and the constant water flow in the selected rivers led to the project proposal being formulated

The project was subjected to a pre-feasibility study by the project initiators. This pre-feasibility study showed that the project was broadly feasible. In terms of size the project was relatively small (approx. US$ 4,5 million). However the sunken costs for a project (detailed feasibility and development costs) are typically independent of its size. Small projects therefore have a relatively high sunken cost percentage in relation to the total investment. This problem, which is universally encountered, prevented the project from going forward.

The project initiators therefore approached a Dutch consultant with the request to investigate the possibility of some form of concessionary finance to cover the sunken costs. The project parameters made the project an ideal candidate for the AIJ-programme of the Netherlands Government. The project is in the renewable energy sector, mitigates large amounts of CO₂, has a developmental function and is commercially sustainable. South Africa is also a signatory of the Kyoto Protocol.

In a rural area of South Africa close to the major town of Bethlehem in the Province of the Free State, a town with a large black rural community, two sites have been identified which are ideally suited for the construction of mini hydro generation plants. The first site is situated at the Saulspoort Dam Wall. The town of Bethlehem uses this reservoir for drinking water. The effective head at this site is about 10-12 m. The dam wall offers a unique opportunity to construct a mini hydro plant without having to execute large civil works. The flow in the river is 24 m³/s. However, due to a plan to extract water 35 km upstream for the city of Johannesburg, this flow will be most likely reduced to 12 m³/s in 2012. The installed capacity for this site amounts to 1050kW.

The site is close to the water pumping station of the Bethlehem Council, their existing transformers and other electrical infrastructure, hence major electrical and/or civil works are not to be expected. The latter is of importance as experience has shown that the civil works are major cost factors in hydro projects and can be classed as "killer" aspects for mini hydro schemes if they tend to be extensive.

The other site will be along the banks of the Axle River, between 20 and 35 km upstream from Bethlehem. The Department of Water Affairs (DWAF) will be erecting in total 14 weirs in the years 2000 to 2001 in order to reduce the unexpected high erosion in the river since the increased water flow as a result of the delivery of water from Lesotho. In the present scenario it is proposed to construct a 3.5 km pipeline from one of the weirs belonging to DWAF to a point 40 m lower. This head in combination with the 12 m³/s flow allows a capacity of 3700 kW to be installed. The generated electricity from this plant will be evacuated to Bethlehem who will also be the base client for this plant.

It should be noted however that the exact location of the River Site has not been established. This will require detailed topographical and hydrographical analyses to be made and these results to be co-ordinated with the weir building activities of DWAF. It is not unlikely that this exercise will lead to a more optimal location and solution to be found. From Clarens, the river source, to Bethlehem, which is a distance of about 40 km, the river, drops in total 80 m. According to the engineers who have been consulted the required head is therefore not a problem. The detailed feasibility will have as one of its main tasks therefore to identify the most optimal site from a cost, technical and construction point of view. At the advice of the engineering consultants the economic modelling in this proposal looks at the most expensive option, i.e. a 3.5 km pipeline resulting in a 40 m drop.

The Axle River flows into the Saulspoort dam and is fed from the Lesotho Highlands Water Scheme. As said, the inflow from the Lesotho Highlands Scheme takes place at Clarence and the water flow is guaranteed from this scheme on a yearly basis (average of 24 m³/s).

As is common in South Africa, the town of Bethlehem purchases electricity from the national generator Eskom and is dependent on ESKOM's price structure in determining the tariff structure being passed on to consumers. The average cost price of the electricity purchased by Bethlehem in 1997/98 amounted to R 0,1462/kWh. This price reflects a combination of base and peak load tariffs. The economic model used an Eskom -10% tariff. Therefore the buyers will be assured of a 10% reduction in energy costs when purchasing from the hydro stations.

It is proposed to develop the project as a BOO (Build, Own, Operate). A number of project participants have been identified, who will supply technical support, operate the plant and provide financing. In this regard a dedicated IPP has being registered in South Africa. This company named Bethlehem Hydro, will develop, implement and operate the mini-power stations.

The shareholders in the company will be the equity partners which have indicated their interest to invest in the project pending due diligence (detailed feasibility). At this stage Cinergy Global Power Ltd (UK), who have a local office in Johannesburg have indicated their interest, as has Electricité de France (EDF) who also has an office in South Africa.  The Dutch Utility NUON has indicated interest in the past. However without a more detailed feasibility study NUON at this stage cannot commit itself yet. The development process has been taken over by the Dutch project management company Planet and a local energy consulting firm e3 Energy & Environmental Management.

Bethlehem Hydro has applied for an IPP license from the National Electricity Regulator and has also applied for the necessary licence to use the water resources in the river for generation purposes. The Department of Water Affairs conducts the latter licensing procedure.

At this stage a number of local businessmen have indicated their interest in the project and in becoming shareholders in tile project. Next to equity Bethlehem Hydro will attract (foreign loan) capital and as this project meets the requirements regarding CO₂ emission reductions and is in tile renewable energy sector, donor flinding will be sourced to assist in covering the noncommercial sunken costs such as the development costs.

Extensive talks with the Bethlehem Transitional Local Council have indicated a strong interest in the project The Local Council has indicated that it supports the project and has written a Letter of Intent to purchase the generated capacity conditional to certain requirements