The government’s office for independent power producers (IPPs) has started calling on the preferred bidder bonds of its Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) projects that fail to reach financial close by the set deadline.
That means IPPs that cannot make good on their promises will lose substantial amounts they are required to pledge when pitching their projects and are appointed as preferred bidders. The value of the bid bonds is calculated per megawatt of the specific project.
This pertained to failed projects in the government’s fifth bid window, Lena Mangondo, head of legal at the IPP office, said at a briefing by electricity & energy minister Kgosientsho Ramokgopa on Monday.
“On the failed projects, we have gone through a process of getting representations from the bidders to enable us to then terminate,” she said. “We have terminated all the preferred bidders that did not achieve commercial close under bid window 5 and we are busy going through the process of calling the bid guarantees associated with that.”
Announcing a revamp and acceleration of the REIPPP, Ramokgopa said contracts were entered into for a reason. The government backs contracts with IPPs with guarantees and if it cannot deliver, it is liable. Equally, if developers of IPP projects cannot deliver on their undertakings and cannot substantiate the reason for their failure, they are liable.
Two of the affected bidders are trying to interdict this move and the matters are set to be heard in November. The IPP office has, however, asked for a later date, due to the complexity of the issues, journalists were told.
Chris Yelland, an energy analyst, said this decisive action by the government was long overdue. He said it would prevent IPPs from submitting bids that were priced too low and therefore could not be executed.
“This is an intervention by Ramokgopa that will force IPPs to be serious when bidding. The previous energy minister, Gwede Mantashe, just kept on extending deadlines, which sent a bad signal that you can submit any bid and we will reserve grid capacity for you,” said Yelland.
He used the example of the controversial Karpowership bids, which were awarded preferred bidder status in March 2021 but failed to reach financial close. Eskom only announced in January 2024 that it would no longer reserve grid capacity for it.
The Turkish group would have provided floating gas-to-power projects in the harbours of Richards Bay, Saldanha Bay and Ngqura, with a combined generation capacity of 1,220MW. Last week Ramokgopa told journalists: “Karpowership is dead in the water ... it hasn’t met the deadlines. It is something that is buried and behind us.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.