The department of mineral resources & energy has pushed back the deadline for the closure of financial agreements for the winning bidders of its emergency power procurement programme for the fifth time, to May.
The extension of the deadline for financial close — which refers to, among other things, the conclusion of financial agreements that ensure the winning bidders have the required financial capabilities to execute the projects — means the government’s plans to ease the country’s electricity shortages by having the projects operational from the initial date of August this year have been pushed back by a further 12 months.
The government’s procurement of emergency power from independent power producers is aimed at easing SA’s energy woes by providing state-power utility Eskom, which is buckling under debt and maintenance of its unreliable ageing power stations, with 2,000MW of power.
Eskom, which supplies the majority of the country’s energy, warned on Monday it would be forced to implement more growth-sapping power cuts should it experience further losses of its generation capacity.
Last week, the utility put the country on a harsh stage 4 load-shedding regime, which ended on Friday. But its capacity remained constrained over the weekend due to breakdowns of some of its generation units.
The department, which initially set a “non-negotiable” deadline for financial close for July 2021, has denied that the latest postponement is due to some bidders not being able to make the March deadline for financial close.
The department has laid the blame on Eskom, which sought at the beginning of April to postpone the signing of the power purchase agreements (PPAs) under the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP).
“Following previous Eskom’s request to postpone the signing of the power purchase agreements under RMIPPPP, there is a consensus to work towards signing by the end of May 2022,” department spokesperson Nathi Shabangu told Business Day.
The PPAs require Eskom to enter into 20-year contracts with the winning bidders at a huge cost to taxpayers.
Eskom, which has in principle agreed to sign the PPAs with the 11 winning bidders, said the request to postpone the signing of the agreements was due to various pending regulatory approvals.
“Among these are the PFMA [Public Finance Management Act] approvals from National Treasury and some guarantees the board wishes to obtain with regards to the transactions. It is anticipated a response may be forthcoming during the next weeks,” said Eskom spokesperson Sikonathi Mantshantsha.
The projects were initially scheduled to plug into the grid by August, but have been delayed due to litigation from an unsuccessful bidder that levelled allegations of corruption against the department and Karpowership, as well as a lack environmental approvals.
The firm’s legal woes are set to continue as the losing bidder, DNG Energy, was in April given the greenlight by the high court in Johannesburg to appeal against its earlier judgment
Additionally, Karpowership has yet to receive environmental approvals for its floating power ships, which are expected to be docked at the harbours of Richards Bay, Coega and Saldanha Bay.
The department of environment, forestry & fisheries, which had rejected Karpowership’s first application for environmental approvals in 2021, previously told Business Day that it had signed a contract with a technical expert to assess Karpowership’s renewed application for environmental approvals.
“When this process is concluded, the minister [Barbara Creecy] will make a decision on this matter,” said environment department spokesperson Albi Modise.
The extension of the deadline for financial close does not come as a surprise as mineral resources & energy minister Gwede Mantashe admitted in February during the debate on the state of the nation address that not all of the winning bidders would be able to sign PPAs with Eskom at the end of March, the previous deadline for the projects to reach financial close. However, he did not mention any names.
EE Business Intelligence energy analyst Chris Yelland said the winning bidders are unlikely to reach financial close by May because some bidders have not received the required approvals from energy regulator Nersa.
This will further push the state’s plans to plug emergency power into the grid by 12 months from the financial close, he said.
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