- The Development Bank of South Africa (DBSA) has advertised for a new IPP Office Head.
- The IPP Office was originally set up by the DBSA, the Department of Mineral Resources and Energy and National Treasury to implement the country’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).
- The fate of the incumbent head, Mr Bernard Magoro, is unknown.
Job Description
The Head: IPPO currently reports to the Director General: Mineral Resources and Energy (DMRE), with the Chief Executive Officer: Development Bank of Southern Africa (CEO: DBSA) contributing support to the IPPO as agreed to in the MoU. He/she is responsible for leading the IPPO in the achievement of all strategic, tactical and operational objectives associated with the Independent Power Producers Procurement Programme (IPPPP). Additionally, he/she is responsible for strategic direction, stakeholder management, financial management, ethical governance, operational and people management, as well as the developmental impact of the IPPO. Link to the full advert here.
IPP Office facing major legal challenges
Since the Independent Power Procurement Office (IPPO) was seconded to the Central Energy Fund in 2017 and then purged in 2019 to fall under the Department of Mineral Resources (DMRE), the ability of the country to procure new generation capacity under the leadership of Bernard Magoro, has declined dramatically. Read more
After multiple deadline extensions, Magoro recently confirmed that he has called the bid bonds (termination) on 14 projects which failed to reach commercial close in REIPPPP Bid Window 5.
The outcome of Bid Window 5 has been racked with controversy and allegations of tender rigging. Twenty-one of the twenty-five preferred bidders were found to have the same Broad Base Black Economic Empowerment (BBBEE) local partner in H1 Holdings. Most of the projects that won preferred bidder status were not shovel-ready and had outstanding development works activities including environmental impact assessments, grid feed-in cost estimate letters and other permitting. The tariffs bided were unsustainably low and not bankable. The average weighted price bid for solar came in at (R) 42.9c kW/h while the average bid for wind was (R) 49.5c kW/h. Only eleven of the twenty-five projects reached commercial close after multiple commercial close deadline extensions.
In one of his recent press briefings, Minister of Electricity and Energy, Dr Kgosientsho Ramokgopa, said pulling the bid bonds was necessary for the credibility of the REIPPP Programme. “These (bid bonds) are legally binding documents, we are going to pull the bid bonds,” he said, expressing impatience with the fact that contracts were not being honoured. “If we land in court, let’s land in court, we must stick to the rules of this programme,” he added.
Of the fourteen failed projects, one bidder, the TotalEnergies/Mulilo/Du Plessis 75MW solar PV project consortium has agreed to pay their outstanding bond of R15 million.
Foreign independent power producer (IPP), Globeleq, and the Ikamva Consortium made up another foreign IPP, Mainstream Renewable Power plus local BBBEE partners, Africa Rainbow Energy & Power (AREP) and H1 Holdings, who make up more than 45 % of black ownership, are contesting payment of bid bonds for six 75MW solar projects and six 140MW wind projects. According to clauses 26.1 and 26.2 of the general requirements, rules, and provisions of REIPPPP Bid Window 5, the consortium is liable to pay the IPP Office a total of R254.8 million calculated at R200000.00 per MW as a preferred bidder.
The Engie/Pele Green Energy/Sannapos Solar PV Consortium are also allegedly contesting payment of their bid bond of R15 million for a failed 75MW solar project.
Bid Window 7 Controversy
The Mulilo and Scatec consortiums were awarded 240 MW each while Infinity Power (part of Masdar) dominated by winning six of the eight projects totalling 1280MW with local Broad Based Black Economic Empowerment (BBBEE) partner, Pele Green Energy. This has raised questions on the preferential treatment of BBBEE partners and how the IPP Office adjudicates projects because Pele Green Energy, along with their consortium members, is contesting payment of a bid bond relating to Bid Window 5.
Pele Green Energy offered the following response,
‘The specifics around the BW5 bid bond are in front of the courts and we are unable to comment at this time. What we can confirm is that we will abide by the decision of the courts. We can confirm that neither us nor the other organisations that have had projects not reach financial close, are in any way precluded from participating in any bid window and have continued to do so under the rules of the programme’.
Author: Bryan Groenendaal
