The head of South Africa’s Independent Power Producer (IPP) Office believes that improved stakeholder management and alignment are key to overcoming delays to the introduction of urgently required new electricity capacity and to creating the predictable “procurement rhythm” required to attract electricity and manufacturing investment.

In a wide-ranging interview Bernard Magoro tells Engineering News that all stakeholders, including multiple government departments, the regulator, Eskom and the bidders, need to “come to the party” to overcome the current impediments to projects achieving financial close.

Since the resumption of procurement – which stalled from 2014 to 2020, after Eskom refused to conclude new power purchase agreements (PPAs) and following delays to the finalisation of an updated Integrated Resource Plan and the Gazetting of the determinations required to initiate procurement – none of the projects selected as preferred bids during two separate procurement processes have achieved financial close.

This, despite ongoing warnings of an immediate supply shortfall of as much as 6 000 MW and a sharp deterioration in the performance of the Eskom coal fleet, which has resulted in an intensification of load-shedding over the period.

Procurement officially resumed with the release, in August 2020, of the ‘emergency’ Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) for 2 000 MW, financial close for which has been shifted four times from the initial deadline of the end of July 2021.

It remains uncertain as to how many of the 11 projects, including the three controversial power-ship projects, will meet the new deadline of the end of May, with Magoro indicating only that there should be further clarity soon.

He reports that most of the outstanding issues relating to the gas-pricing formula and local content have been addressed, with the Department of Trade, Industry and Competition (DTIC) having issued a letter lowering the local-content threshold for solar panels from 100% to 35%.

However, an Eskom board request for the insertion of an indemnity clause in relation to any possible adverse legal findings against Karpowership has not yet been resolved. In addition, no project can proceed in the absence of an environmental authorisation, as such authorisations are a bidding requirement.

“I'm hoping that we will have some of the 11 projects reaching financial close by the end of this month.

“We are just finalising a few issues that Eskom raised in the PPA and we have shared some of those changes with the bidders and they're busy evaluating these,” Magoro tells Engineering News, while refusing to speculate on prospects for the power-ship projects.

He also refuses to be drawn on whether the RMIPPPP projects should proceed at all in light of ongoing criticism over their high cost of production, noting that the IPP Office is implementing the programme in line with the requirements as outlined by the Eskom system operator.

The IPP Office has also obtained a legal opinion stating that the non-Karpowership projects are not affected by the decision of the court to grant losing bidder DNG Energy leave to appeal a judgment setting aside its corruption allegations.

“There is also no interdict saying that the bidders cannot sign because of the court case.”

RENEWABLES DELAY

Regarding the delay to the concluding of financial close for the 25 wind and solar photovoltaic (PV) projects selected as part of Bid Window Five (BW5) of the Renewable Independent Power Producer Procurement Programme (REIPPPPP), Magoro says every effort is being made to meet the new staggered deadline of 14 projects by the end of July and 11 by the end of September.

The delay from the initial deadline of the end of April has been necessitated, he reports, by the fact that none of the projects had secured final budget quotes from Eskom for grid connection by the deadline.

Magoro explains that, without such a quote, it is not possible for an IPP ...