The Treasury has accrued a R300bn contingent liability through guarantees to independent power producers participating in the state-backed renewable energy programme.
Projects developed under the Renewable Energy IPP (REIPPP) Programme benefit from government guarantees to IPPs if Eskom fails to pay the agreed purchase price over the 20-year power-purchase agreement term.
However, according to the Treasury, the contingent liability on the state’s books for these IPPs is no longer sustainable and could pose a risk to the country’s credit ratings.
“We are saying that we need to look at the maturity of the sector to see when and how we can relieve the state [of this financial risk],” said Treasury’s deputy director-general for asset and liability management Mmakgoshi Lekhethe.
High government debt levels also posed challenges for Treasury to continue offering these guarantees going forward, she said.
Speaking at a round-table event hosted by the Development Bank of Southern Africa and the World Economic Forum in Johannesburg on Thursday, Lekhethe said the Treasury was now collaborating with development finance institutions to look at a credit guarantee vehicle that could provide guarantees for investors and see Treasury reduce its exposure to contingent liabilities.
The government has procured about 10,000MW of renewable energy through the REIPPP programme over six bidding rounds. The current, seventh bidding round seeks to procure 5,000MW of renewable power.
Business Day previously reported on the findings of a report published by nonprofit green economy organisation GreenCape in April, which said that opportunities in the renewable energy sector were shifting towards private sector projects (for private offtake) given the uncertainty and slow implementation of the government-backed REIPPP programme.
The report said the market for large-scale renewable energy projects in SA was expected to present an investment potential of more than R400bn by 2030, involving the deployment of about 22GW of generation capacity — about half of this was expected to come from private sector projects.
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