ENERGY: Reatile Energy Acquires 25% Shareholding in Egoli Gas,
Recent Gauteng Business News
Reatile Energy, a subsidiary of empowerment company Reatile Resources, has acquired a 25% shareholding in Egoli Gas, the city’s historical piped gas supplier since 1892.
Reatile Energy also owns a majority interest in Reatile Gaz (a joint venture with Engen that markets and distributes Liquid Petroleum Gas, or LPG).
Reatile Energy funded the transaction through a combination of its own funds and other funding obtained from the Industrial Development Corporation (IDC). The transaction was effectively finalised on the 29th April 2010.
The transaction will see Reatile Energy represented with 2 seats on the Egoli Gas board. This deal signals promising developments in the natural gas sector in the greater Johannesburg metropolitan area.
“This is an important strategic step for both companies: Reatile will extend its business to leverage opportunities in the natural gas market; while Egoli Gas will focus on building its corporate customer base with our existing customers,” says Simphiwe Mehlomakulu, Chairman of Reatile Energy.
Adds Bheki Vilakazi, Managing Director of Egoli Gas: “We aim to expand our natural gas network rapidly in Johannesburg, focusing on an anchor corporate customer base – and Reatile is associated with key companies and partners in the corporate and industrial sectors in South Africa.”
Vilakazi points out that the rationale behind partnering with Reatile Energy is due to their substantial technical background in the energy sector, especially since the company has close ties with established gas and energy industry players. Furthermore, the transaction will significantly improve the BBBEE status of Egoli Gas.
Natural gas will mainly be used for cogeneration – heating and cooling applications – in large corporate buildings and developments, Vilakazi explains. “There will thus be more choice available to customers, and less reliance on electricity as a sole source of supply for power needs.
Furthermore, Reatile`s intention is to grow volumes and reduce gas losses. We therefore view technology (co-generation and tri-generation), as strategic in growing the market,“comments Vilakazi.
Mehlomakulu notes that, as the cost of electricity increases and its reliability is not always consistent, many businesses could benefit from the use of gas as a power alternative. “Gas is available 24/7/365, is energy-efficient, environmentally-sound and cost-effective.”
“If businesses are to invest in a gas supply, they can expect lead times of between 12 and 18 months; however reliability and the consistency of supply post-installation, is guaranteed,” says Vilakazi.
Reatile and Egoli Gas have identified key corporate growth areas – targeting sectors such as financial institutions, telecommunications companies, public and private healthcare facilities, to name a few.
“We have had a major metropolitan academic hospital as an anchor client; however we are now looking to supply gas to companies in the central business district of Johannesburg and to expand the existing network into new areas like Sandton.
The benefits of using gas for business, industrial and domestic purposes are manifold as the substance generates a great deal of energy, without igniting easily. “Most importantly, it is clean and is sulphur-free,” notes Vilakazi.
Mehlomakulu adds that a crucial benefit to using gas is its reliability: there are no outages or failures. In addition, because it is sulphur-free, corrosion in piping is non-existent, so minimal maintenance is needed. “Pipe theft is also limited as pipes are usually buried. Electricity suppliers however, have to cope with the theft of copper cables and the theft of energy itself when unauthorised leads are tapped into cables.”
Mehlomakulu and Vilakazi concur that the biggest constraint they face in expanding the gas network is the consumer’s lack of knowledge about the availability and benefits of gas, particularly in the corporate sector.
Going forward, Egoli Gas aims to educate the public and the targeted corporate sector on the benefit and advantages of using natural gas in light of constraints on electricity supply, and spiralling electricity costs.
“In the near future we hope to offer tri-generation to customers, meaning that in addition to heating and cooling applications, they will use our gas for electricity,” says Mehlomakulu.
Currently, Egoli Gas supplies gas to six categories of customers: domestic, central water, multi- dwelling, commercial, high industrial and low industrial. High industrial consumers use more than 300GJ per month, using gas for diverse operations such as spray-drying on food products, steam generation and powder-coating ovens.
Over 100 years old, Egoli Gas supplies 8000 consumers in the greater Johannesburg metropolitan area with natural gas, and has a piping network of 1200 kilometres. Gas is supplied through high-pressure pipelines from the Temane Fields in Northern Mozambique. The gas is stored at a high-pressure, bulk storage facility at Langlaagte in Johannesburg, where it is distributed.
“Egoli’s very extensive experience, supply and infrastructure complements Reatile Energy’s own network, expertise, knowledge of the gas business, logistics and existing gas infrastructure capacity – there is tremendous synergy, ensuring a promising partnership going forward,” concludes Mehlomakulu.
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