The National Energy Regulator of SA (Nersa) has approved generating licences for all the applicants among the preferred bidders of the so-called emergency round of energy procurement, including for three power ships owned by Turkish company Karpowership.
The emergency procurement round, known as the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), was conceived of in October 2019 to plug SA’s power supply gap as quickly as possible. But the programme has been bogged down in bureaucratic delays and it was only in March this year that the department of mineral resources & energy announced eight preferred bidders.
The Karpowership project, however, has been clouded in controversy with allegations of corruption by losing bidders and the failure to pass environmental tests. Karpowership had also earlier tried to obtain environmental approval on false pretences, but this has since been retracted by the department of forestry, fisheries & the environment.
Nersa spokesperson Charles Hlebela confirmed on Tuesday that all the applicants for generation licences were approved. One of the preferred bidders did not apply for a licence. In addition to the three gas-powered power ships, the other four projects are renewable energy projects backed up by battery storage or liquefied natural gas (LNG).
The granting of the licence by Nersa is one of the stages in the approval process. Projects must also receive environmental approval and obtain whatever additional permits are required. In the case of Karpowership, this also includes obtaining port authorisation from Transnet, a fuel pipeline licence and a fuel supply agreement, none of which it yet has.
Karpowership has appealed against the refusal of all three of its environmental impact assessments, which were turned down by the department for failing to complete an underground noise impact study on marine life.
All seven projects must also negotiate power purchasing agreements with Eskom before they can obtain funding and reach financial close. Eskom CEO André de Ruyter has said that Eskom would need to examine the implications of the Karpowership contracts for the company. While power ships are frequently used as emergency power suppliers, especially in countries were infrastructure has been destroyed, these contracts are usually of short duration.
Controversially, the department of mineral resources & energy (DMRE) has awarded a 20-year contract to Karpowership on the grounds that all participating projects received the same contracting terms. Critics have pointed out that this will tie SA into contracts with Karpowership long after the “emergency” has ended.
The RMIPPPP is also under threat from litigation which, if successful, could set the procurement round aside. Losing bidder DNG Power has asked the high court in Pretoria to set aside the bids on the grounds that senior officials of the DMRE solicited a bribe in return for a successful bid.
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