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- Globeleq and its consortium partners, which includes Mainstream Renewable Energy, has reached legal close on six solar PV projects under the South African government’s fifth bid window of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).
- REIPPPP Bid Window 5 has come under fire with serious allegations of BBBEE compromise and unfair competition.
Achieving legal close means that power purchase agreements with Eskom, and implementation agreements with the Department of Mineral Resources and Energy (DMRE), have now been signed and the Consortium will continue to move the projects to commercial close, provided that banks finance the deal. Banks in South Africa are required to uphold fair competition and BBEEE principles considering the legacy of apartheid that the country grapples with on a daily basis.
According to the World Bank, South Africa remains a dual economy with one of the highest and most persistent inequality rates in the world, with a consumption expenditure Gini coefficient of 0.67 in 2018. High inequality is perpetuated by a legacy of exclusion and the nature of economic growth, which is not pro-poor and does not generate sufficient jobs. Inequality in wealth is even higher, and intergenerational mobility is low, meaning inequalities are passed down from generation to generation with little change over time.
Related news: Mainstream CEO resigns after making racist comments about Africa
The Consortium, led by Globeleq (UK) and Mainstream Renewable Power (Finland), were awarded Preferred Bidder status by South Africa’s DMRE in October 2021, and continues to move all projects toward completion. The six 75MW solar projects are located in the Municipality of Tokologo, in the Free State, and will be the province’s largest renewable energy development.
The awarding of a cluster of six 75MW solar projects located together with the same BBEEE partner to a single foreign owned consortium questions the merits of fair competition in the bidding process and the due diligence plus competence of the DMRE and Independent Power Producer Office (IPPO) in adjudicating projects. The compromise of fair competition and the principles of the BBBEE Act are glaring.
Related news: The BBBEE cat that has all the Bid Window 5 renewabe energy cream in South Africa
In total, 8700MW is to be procured under the three energy procurement programmes in South Africa yet to date only 150MW ( 3 x 50MW projects) and two 140MW wind projects have reached financial close and are expected to feed electrons into the grid at the end of Q4 2023.
Related news: South Africa’s REIPPPP in Tatters While Energy Crisis Depends
The legal close of 13 projects announced by South Africa’s energy minister, Gwede Mantashe, in REIPPPP Bid Window 5, bring a total of 19 of 25 projects to the legal close stage. This news follows Red Rocket and EDF signing Bid Window 5 legal close on three wind projects each in the last two months. EDF has reached a financial close on two of its three wind projects while Red Rocket is still in the financial close process.
Related news: SAWEA on REIPPPP: Delays, Inconsistencies and Halted Bidding Windows
The results of REIPPPP Bid Window 5 under the current DMRE reveal a very unbalance outcome and projects are struggling to reach financial close. Taking a closure look at the outcome of Bid Window 5 there are several standout red alerts:
- International IPP, Mainstream Renewable Energy, was a winner in 12 of the 25 projects
- 21 of the 25 preferred bidders have the same BBBEE partner in H1 Holdings – Mainstream Renewable Power (12 projects), Scatec (3 projects) and EDF (3 projects) and local IPP Red Rocket (3 projects). The underlying principle of B-BBEE is to spread wealth sustainably and as far as possible, to the previously disadvantaged.
- Substancial amounts of funding have been channeled by UK and Finland to H1 Holdings. Read more
- 21 of the 25 projects were won by foreign-owned IPPs.
- The tariffs bided were unsustainably low and not bankable. 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. 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.
Broad-based Black Economic Empowerment (BBBEE) is an integration programme launched by the South African government, forming part of the governments broader Black Economic Empowerment efforts, to reconcile South Africans and address the inequalities of apartheid by attempting to compensate for land that was repossessed from Africans. It encourages businesses to integrate black people in the workspace, support black businesses, and give back to poor black communities affected by land repossession. Businesses are awarded points which they can claim on a BBBEE certificate which entitles them to a greater chance of obtaining government contracts. Link to the BBBEE Act here.
Author: Bryan Groenendaal
