- Rayburn Hendriks, CEO of H1 Holdings and Revego Africa Energy must be smiling.
- His company, H1 Holdings, is the BBEEE partner in no less than 21 of 25 large-scale wind and solar projects awarded in South Africa’s Renewable Energy Independent Power Producer Procurement Programme(REIPPPP) Bid Window 5.
- H1 Holdings is also a 49% BBBEE partner with Norwegian IPP, Scatec, in their mega solar/battery hybrid project in South Africa that was the only project to reach financial close in the country’s Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP).
- Collectively, the 22 projects have a market CAPEX of over R30 billion.
Participants and investors in South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) Bid Window 5 tender are scratching their heads regarding the outcome. Many are questioning the integrity of the once international revered Independent Power Procurement Office (IPPO) and Department of Mineral Resources (DMRE), who are responsible for energy procurement in the country. Many have had enough of the inconsistency in policy and procurement and decided to rather invest in other countries altogether.
Since the Independent Power Procurement Office (IPPO) was seconded to the Central Energy Fund in 2017 and then purged in 2019 to fall under the Department of Mineral Resources (DMRE), the ability of the country to procure new generation capacity has declined dramatically. Since Mr Gwede Mantashe was appointed Minister of Mineral and Energy Resources in May 2019, a total of 7100MW is to be procured under the three procurement 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. Read more
After a very skewed outcome in REIPPPP Bid Window 5, South Africa’s Competition Commission is currently investigating the Independent Power Procurement Office (IPPO) on whether they violated their procurement prescripts, the BBBEE Act and section 217 of the Constitution.
Taking a closure look at the outcome of Bid Window 5 there are several standout red alerts:
- One majority Norwegian-owned international IPP, Mainstream Renewable Power/AKER Horizons, won 12 of the 25
- 21 of the 25 preferred bidders have the same BBBEE partner in H1 Holdings – Mainstream RenewablePower (12 projects), Scatec (3 projects) and EDF (3 projects) and local IPP Red Rocket (3 projects).
- 21 of the 25 projects were won by foreign-owned IPP’s.
- 15 of the 25 projects were won by Norwegian IPP’s.
- 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.
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.
So just how did Rayburn Hendriks and his company H1 holdings win so many projects and by so doing, compromise the undelying priciples of the BBBEE Act? Did they strike more favourable terms with IPP’s which sees BBBEE profits rechannelled back to them? Was the REIPPPP Bid Window 5 tender rigged? Tender rigging allegations are rife amid the unprecedented outcome but the DMRE denies these allegations. There are many questions but no answers. Read more
Big money from UK and Norway flows to H1 Holdings
The windfall for H1 Holdings also extends to a second procurement programme. H1 Holdings is the 49% BBBEE partner with Norwegian IPP, Scatec, in their mega solar/battery hybrid project in South Africa. This was the only project to reach financial close in the country’s Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP). Standard Bank and British International Investment (BII) partnered with Scatec and H1 Holdings to successfully reach financial close on this project. BII is acting as the Lead Bank plus they are providing R2.2bn in senior debt investment. Alongside this, they are providing an additional equity investment of R445mn mezzanine financing to H1 Holdings. Norway’s Norfund is also a big investor (R360 million) in H1 Holdings. Read more
UK government funding pops up again at Revego Africa Energy, where Hendriks is a shareholder and CEO. Revego has three cornerstone investors, namely Investec, UK Climate Investments (a joint venture between the Green Investment Group and the UK government’s Department for Business, Energy and Industrial Strategy) and the Eskom Pension and Provident Fund. Eskom is the off-taker in both REEIPPP Bid Window 5 and RMIPPPP projects.
Rayburn Hendriks and H1 Holdings did not respond to any requests for comment from this publication.
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
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
Until the IPPO and DMRE provide a valid explanation for their skewed energy procurement tender outcomes, it is unlikely that the banks and institutional investors will invest in Bid Window 5 or 6 projects.
Author: Bryan Groenendaal