- South Africa’s Minister of Mineral Resources and Energy, Mr Gwede Mantashe has signed power purchase agreements (PPA’s) on the first three projects under the 5th Bid Window of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP Bid Window 5).
- The signing ceremony took place in Centurion this morning.
- The Head of the IPP Office, Mr Tshifhiwa Bernard Magoro, announced that the deadline for PPA’s for the remaining 22 projects, has been further extended by one month to October.
At the ceremony it was announced that the Department and IPP Office are currently engaging with the remaining 22 Preferred Bidders under REIPPPP Bid Window 5 with a view to finalizing the conditions precedent to enable the signing of the Project Agreements. “A number of bidders who have recently received their Budget Quotations will be scheduled for signing of agreements once these have been finalised. Announcements around this will be made shortly. Some bidders have challenges around their issued BQs that have to be resolved first before their legal agreements can be finalised, ” said the DMRE.
Minister Mantashe lauded EDF Renewables for taking up the challenge to invest in the three wind power projects that are going to contribute 420MW renewable capacity to the national grid. “Congratulations and we must not put pressure on you to put energy on the grid in two months, it is not going to happen. We must accept that you are going to build the facilities and give us that energy in the medium to long term”, said the Minister.
Related news: DMRE denies tender rigging allegations in REIPPPP Bid Window 5
The Minister emphasised that the Department committed in IRP 2019 to increase renewables by 18% and reduce coal by 15%.
The signing took place at the IPP Offices in Centurion, where Minister Mantashe, Deputy Minister Dr. Nobuhle Nkabane, Director General of the Department of Mineral Resources and Energy Jacob Mbele, Eskom Group Executive: Transmission Segomotso Scheppers, Head of the IPP Office, Tshifhiwa Bernard Magoro, CEO of EDF Renewables, Tristan de Drouas, and Group CEO of GIBB Group of Companies, Richard Vries, outlined the significance of signing the three EDF Renewables projects.
Each project will comprise 26 wind turbines, with a height of 124m and a blade length of 83m. EDF Renewables will also be constructing the Koruson Main Transmission Substation (MTS) on behalf of Eskom, under a self-build agreement (SBA), which is transferred to Eskom upon completion.
The three projects were awarded Preferred Bidder Status in October 2021 under Round 5 or the fifth bid window of the Renewable Energy Independent Power Producer Programme (REIPPP) by a consortium led by EDF Renewables in South Africa, together with its local Broad-based Black Economic Empowerment (B-BBEE) partners, H1 Holdings and GIBB-Crede. H1 Holdings are controversially BBEEE partners in 18 other Bid Window 5 preferred bidder status projects. Read more
The Projects have committed to providing 2230 job years, which includes 400 full-time jobs to local, RSA citizens during the construction period of two years and 35 full-time jobs to local, RSA citizens during the operating period of twenty years. Furthermore, the projects have committed to contributing approximately 40% of the total project value, during the construction and operations period, to local content.
The three projects are to be commissioned from mid-2024 to beginning of 2025. Over the 20 year operational period, 1.2% of revenue will be dedicated to local communities through socio-economic initiatives.
Tristan de Drouas, CEO of EDF Renewables in South Africa, said: “The signing of the PPAs with Eskom is a key milestone before financial close and the launch of the construction phase of the three wind farms. Our teams in Gqeberha and Cape Town have been working very hard, so today’s closing is the achievement of a long journey. Going forward, completing these projects as soon as possible, under safe conditions, will be the main challenge for our teams, partners, and contractors. This 420 MW project also confirms our long-term perspectives in the country, adding to the almost 1 GW that EDF Renewables already develops, builds, or operates in South Africa, supporting the government’s and our ambitions to develop low-carbon energy solutions for the future.”
Background to the REIPPPP Bid Window 5
The REIPPPP Bid Window 5 Request for Proposals (RFP) was released on 12th April 2021 and was the first bid window to be launched under the Ministerial Determination promulgated on 25th September 2022 under IRP2019. The bid window aims to procure a total of 2 600MW energy, consisting of 1 600 MW onshore wind and 1000MW Solar PV plants.
The bid submission on 16th August 2021 confirmed the strong interest from the market with 102 bids submitted totaling an oversubscribed 9 644 MW. The Minister announced 25 Preferred Bidders on the 28th October 2021, to provide a total capacity of 2 583 MW. Of this, 1608 MW will be procured from 12 Wind projects, and 975 MW from 13 Solar PV projects.
Related news: South Africa’s energy ministers considers re-opening of REIPPPP Bid Window 5
Controversial outcome
REIPPPP Bid Window 5 has been marked by extended delays in financial close deadline and tender rigging allegations. The country’s competition commission is also investigationg the skewed outcome. Read more
The tariffs bided were unsustainably low and not The average weighted price bid for solar comes in at (R) 42.9c kW/h while the average bid for wind is (R) 49.5c kW/h. Industry experts claim that the winning tariffs are too low to be realistic and may be sponsored. Read more. The majority of the projects who won preferred bidder status were not shovel-ready and had outstanding development works activities including CEL, EIA and other permitting. The increase in cost of components like wind turbines, inverters and solar panels during the extended delay has found winning bidders with ‘stranded’ financial models that may not be bank presentable.
Related news: Investec and Revego implicated in REIPPPP Bid Window 5 tender rigging allegations
Extended delays
In April 2022, the Department announced that commercial close of the Preferred Bidders will be undertaken in a phased approach, informed by the anticipated timelines required to finalise preparations to enable the signature of the Power Purchase Agreements (PPAs) and Implementation Agreements (IA) under the REIPPPP Bid Window 5. One of the factors that had influenced this timeline was the indicative timelines from Eskom to issue Budget Quotations (BQs). Read more
Related news: The real reasons for the extended delays in energy procurement in South Africa
The Budget Quotations are required in order to finalise final costing and commercial operation timelines to incorporate into the Project Agreements and prepare for Commercial Close. Various factors have contributed to the longer BQ timelines, including scope changes initiated by both the Preferred Bidders and Eskom, as well as the finalization of grid connection plans for the proposed projects. Eskom denies that they are delaying the Budget Quotations. Read more
Watch the video recording of the signing ceremony on YouTube HERE
Author: Bryan Groenendaal
Where and how to invest in Africa’s power sector? Start by understanding the power markets and changing regulation landscape:
