South Africa: Public Protector Investigates Irregular and Unlawful Awarding of Renewable Energy Contracts to IPP’s

  • The Public Protector of South Africa is this week engaging stakeholders as part of an investigation into allegations of improper conduct and maladministration by power utility Eskom and the Department of Mineral Resources and Energy (DMRE) and the Department of Public Enterprises (DPE) regarding the alleged irregular and unlawful awarding of renewable energy contracts to Independent Power Producers (IPPs).

A complaint from non-governmental organisation, Anti-Poverty Forum, lodged on 19 February 2019, triggered the investigation. The complainant alleged that Eskom Executives concluded Power Purchase Agreements (PPAs) with the IPPs at the expense of Eskom’s sales and savings for the maintenances of its own power plants. The Executives allegedly did so under pressure from their political principals.

According to the complainant, Eskom is forced to pay R93million a day to private power producers. The complainant is of the view that the conclusion of the PPAs was improper and therefore unlawful. Another complaint, from a whistleblower, who wishes to remain anonymous, was received during the course of the investigation.

Following a preliminary investigation, the Public Protector decided to subpoena all the relevant stakeholders to enable them to respond to the allegations and to provide the necessary supporting documents regarding the issues under investigation. Stakeholders in this regard include the Minister of Mineral Resources of Energy, the Director-General of the DMRE, the Director-General of the DPE, the Director-General of the National Treasury and the Chairperson of National Energy Regulator of South Africa (NERSA).

First to give evidence will be the Minister and Director-General of Mineral Resources of Energy on Tuesday, November 23, 2021 at 13:30. The Director-General of the DPE will follow on Wednesday, November 24, 2021 (09:00), followed by the Director-General of the National Treasury on Thursday, November 25, 2021 (09:00) and the Chairperson of NERSA on Friday, November 26, 2021 (09:00).

The investigation comes at a time when serious concerns have also been raised regarding the recently announced outcome of the country’s long awaited Renewable Energy Independent Power Producer Programme (REIPPPP) Bid Window 5. Exceptionally low tariffs submitted by foreign wining bidders are considered too low to be realistic plus they have shut the local IPP’s out of the market. This has prompted losing IPP’s to claim that foreign governments may have subsised bids. 

The case of Irish independent power producer Mainstream Energy, whose CEO earlier this year resigned after making derogatory comments about Africa, stands out. The company was awarded no less that 12 of the 25 renewable projects in Bid Window 5. Aker Horizons earlier this year aquired 75% of Mainstream Energy. Aker Horizons is majority-owned by Aker ASA, a Norwegian industrial investment group listed on the Oslo Stock Exchange. The question is then asked; has the  government of Norway and Ireland subsidise Aker/Mainstream Energy in their bid window 5 project bid portfolio or is it simply economies of scale that have yielded such low bid tariffs?

Author: Bryan Groenendaal

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