Mainstream Renewable Power Mum on Tender Rigging Allegations in South Africa

The Department of Mineral Resources and Energy (DMRE) along with the Independent Power Producer Office (IPPO) is responsible for energy procurement in the country. It appears that both entities may have violated their own relevant procurement prescripts and criteria. They may have also violated section 217 of the Constitution.

The results of REIPPPP Bid Window 5 have revealed a very skewed outcome:

South Africa is in a massive energy crisis. Rotational load shedding is getting worst and the cost to the economy is a massive R950 million a day. According to a report presented by the University of Capetown, if 5GW of renewable energy was rolled out before 2021, the country would not be experiencing load-shedding. Read more

Related news: Ramaphosa misses the boat spectaculalry in his sweeping energy reforms

In a special address to the nation on 25th July, South Africa’s president, Mr Cyril Ramaphosa announced sweeping energy reforms stating that 2600 MW of capacity has been procured through Bid Window 5, which will begin to add capacity from early 2024.

“The relevant government departments are working together to ensure that all projects from Bid Window 5 of the renewable energy programme can start construction on schedule. This includes taking a pragmatic approach to the local content requirements for these projects and prioritising the need to build new capacity as quickly as possible. The Department of Trade, Industry and Competition together with the Independent Power Producers Office will provide further details in this regard within the coming days,” said Ramaphosa. Read his full speech here.

Bid Window 5 projects were awarded at the end of October 2021 and were given a deadline of 31st March 2022 to reach financial close. Not one of the 25 projects was able to reach financial close prompting the country’s energy minister to grant a six-month extension to the end of September 2022. Read more

Since Mantashe’s appointment, three energy procurement programmes have been implemented namely; the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) which seeks to procure 2000MW of new generation capacity (launched in September 2020), and the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) Bid Window 5 which seeks to procure 2500MW of new generation wind and solar capacity (launched in April 2021). A third procurement programme, REIPPPP Bid Window 6 which seeks to procure 2600MW of solar and wind capacity, was launched in April this year.

In total, 7100MW is to be procured under the three programmes yet to date only 150MW ( 3 x 50MW projects) has reached financial close and is expected to feed electrons into the grid at the end of Q4 2023.

Racist slurs 

It must also be noted that Mainstream/AKER Horizons were last year embroiled in a major racist incident where their CEO made derogatory statements about Africa. Eddie O’ Conner was forced to resign after saying that ‘Africa’s energy transition was held back by a lack of education in tribal societies‘. To many in South Africa, considering the legacy of the evil apartheid regime and what many fought and died for in the liberation movement,  it is incomprehensible that the DMRE/IPPO wants to still do business with Mainstream/AKER Horizons let alone award them 12 projects. Read more

Do all roads lead to Norway?

It is alleged the rigging of Bid Window 5 may have involved the government of Norway through their funding arm Norfund.

Norfund appears to have exclusively concentrated its funding on H1 Holdings, a local black economic empowerment company (BBBEE) and did not engage or fund any other BBBEE company involved in Bid Window 5. H1 Holdings is the exclusive BBBEE partner for the 12 Mainstream/AKER Horizons projects plus the 3 Scatec ASA Projects in Bid Window 5. Both companies are majority Norwegian-owned.

Norfund have refuse to answer any questions and H1 Holdings have not replied to the allegations.

Institutional Project Funding Controversy and the Investec link

Where the DMRE and the IPPO may lack in capacity and/or competence, the financial institutions that fund renewable energy projects in South Africa do not. The banks and institutional investors have highly qualified teams that carry out the most stringent due diligence when evaluating wind and solar projects.

Considering the Broad-Based Black Economic Empowerment (B-BBEE) programme provides a legislative framework for the transformation of South Africa’s economy and the Broad-based Black Economic Empowerment Act, [No. 53 of 2003], as amended, aims to advance economic transformation and enhance the economic participation of black people in the South African economy, I approach the big five banks in South Africa to find out if they are investing or funding any the 25 projects awarded in Bid Window 5.

Investec declined to respond and instead referred me to Brunswick, a leading ‘critical issues’ firm that represents them in ‘external matters’. Standard Bank, Nedbank and RMB failed to respond while ABSA responded by saying that their decisions in determining whether to finance renewable energy projects, as is the case with any other projects, follow established and rigorous processes in compliance with regulatory requirements. “It is not appropriate for ABSA, as a service provider to clients, bound by confidential contractual agreements, to disclose the identity or affairs of our clients,” they said.

I also sent a set of questions to Revego Africa Energy (Revego) who are a private equity fund manager investing in renewable energy projects in Sub Saharan-Africa set up by Investec Bank. Investec recently provided a R1.25 billion bridging facility to Revego. Read more

According to the Revego website, their CEO is none other than Mr Reyburn Hendriks. Reyburn is also a joint controlling shareholder and manager of H1 Holdings. H1 Holdings has a 16% stake in Revego Fund Managers. Revego recently invested in 360MW of Mainstream/Aker Horizons wind assets in South Africa. Read more

Revego have repeatedly failed to reply to my set of questions.

2000MW Risk Mitigation IPP Procurement Programme

H1 Holdings and Scatec also pop up in the 2000MW Risk Mitigation IPP Procurement Programme(RMIPPPP) where there are key contractual issues, the majority of projects are not bankable and/or EIA approved. The only three projects totalling 150MW to reach financial close are jointly owned by Scatec ASA and H1 Holdings. Read more

The knee-jerk reaction by IPPO

REIPPPP Bid Window Round 6 tries to address the skewed outcome of Bid Window 5 with updated criteria but it is still flawed and too little too late. Read more

Author: Bryan Groenendaal

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