- The South African government is exploring alternative support for the country’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).
- The country’s Treasury currently provides debt guarantees to independent power producers (IPP’S) who are successful with projects under the programme should the off-taker, the national energy utility, Eskom, default on the power purchase agreement.
- The national treasury announced this surprise move in the 2022 Budget Review released earlier today.
While the Treasury expressed that contingent liability risks for independent power producers represent a low risk to the fiscus, a government study is exploring alternative support for the REIPPPP. This is expected to result in a reduction or elimination of guarantee requirements for the programme, reducing the stock of contingent liabilities.
The report further communicates:
‘After signing additional projects in 2021, government has committed to procure up to R208.5 billion in renewable energy from the Renewable Energy Independent Power Producer Procurement (REIPPP) Programme. The value of signed projects, which represents government’s exposure, is expected to amount to R177 billion by 31 March 2022. Exposure is expected to decrease to R156.6 billion in 2022/23, R137.8 billion in 2023/24 and R120.8 billion in 2024/25.’
The move will mean that it will become more difficult for IPP’s to obtain finance for their projects. If implemented, debt cover will have to be sought in the private sector which will come at a premium.
Link to 2022 Budget Review (page 89) HERE
Author: Bryan Groenendaal