Sappi and Gledhow mills plan to share power and steam in a joint energy deal that could cut costs, while also being a major blow to municipal revenue.

A proposed partnership between Sappi Stanger Paper Mill and Gledhow Sugar Mill aims to reduce electricity costs by sharing power and steam during the eight-month sugarcane crushing season.

Gledhow, which exited business rescue proceedings on January 24, is upgrading its cogeneration equipment to boost internal electricity generation. If approved, it will supply 12 megawatts of electricity, steam and bagasse (a sugarcane by-product) to Sappi during its peak season.

For the remaining four months, KwaDukuza municipality will continue to supply power to Sappi as usual.

The two mills have a long history of working together. Since the 70s the paper mill has used Gledhow’s bagasse, a by-product of sugar processing, as the raw material for its production.

While the joint energy plan could improve efficiency and reduce grid reliance, it poses a potential financial risk to the municipality. A report presented to council warns that reduced electricity purchases may cost the municipality millions in lost revenue, particularly as it is currently invested in upgrading Sappi’s substation, which is also available for neighbouring industrial users, such as Hesto Harnesses.

Further complications include the possible underuse of municipal infrastructure, the need to renegotiate existing supply agreements and regulatory approval required from the National Energy Regulator of South Africa (Nersa).

To manage the risk, the municipality is considering battery energy storage, energy wheeling and tariff adjustments.

KwaDukuza’s executive director for electrical engineering services, Sibusiso Jali, told council that the project is not expected to affect the current financial year, as implementation may only occur in the next five years.

Together, Sappi and Gledhow employ about 800 people and contribute nearly R1-billion to the local economy annually through jobs, supplier contracts and social development initiatives.
Jali said further financial analysis will be done once more technical details are finalised.

Gledhow and Sappi had not responded at the time of publication.

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