The proposed development site is adjacent to Exxaro’s existing Grootegeluk mine but the fuel for the plant will come from a prospective greenfields operation, the Thabametsi mine.

Exxaro said it had signed a project development agreement and a coal supply term sheet with GDF Suez for 3.8 million tons per annum of run of mine coal to the plant, post ramp-up.

The mine is planned to be an opencast operation using a conventional truck and shovel operation and delivered to the plant via a surface conveyor belt.

“South Africa urgently requires the installation of additional electricity generation capacity in the near future due to the combination of a low reserve margin and growing electricity demand,” Exxaro said.

“GDF Suez and Exxaro are global leaders in their respective industries and are pleased to be able to combine their strengths to positively impact the baseload power generation capacity, with the aim of assisting in alleviating South Africa’s power supply challenges.”

The announcement comes amid heightened anxiety over the country's supply and demand balance of coal after state-owned utility Eskom announced further delays to the development of its Medupi power station, now expected to begin producing as late as the second half of 2014.

The period of the coal supply will be determined by the duration of the power purchase agreement but it is anticipated to be up to 25 years.

The total capacity of the plant could be expanded to circa 1200MW, depending on the availability of water and grid integration constraints, the company said.

Exxaro selected GDF Suez as its partner for the project in the middle of last year and prepared the project in line with the energy minister’s December 2012 determination.

The determination allocated 2500MW of coal capacity as part of a larger independent power producer baseload procurement program to be implemented between 2014 and 2024.

Last month, the Department of Energy made a fresh call for potential baseload IPPs to register their projects by July 12 to aid it in the design of procurement processes – which GDF Suez did, Exxaro said.

“We have taken advantage of the opportunities provided from current regulatory developments in South Africa’s mineral and energy sectors to develop a coal mine that can supply new power generating capacity,” Exxaro chief executive officer Sipho Nkos said.

“We have played to our strength of coal production and partnered with a competent entity such as GDF Suez for the development of the power plant and electricity production.

“We anticipate working closer with all the regulatory authorities to making this project a success for the benefit of all in South Africa.”