The BBBEE Cat That Has All the Renewable Energy Cream in South Africa

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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.

Related news: Investec, Revego and H1 Holdings implicated in REIPPPP Bid Window 5 Tender Rigging Allegations

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:

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

Related news: UK Climate Investments Commits Another £15 Million to Revego/Investec

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.

Energy crisis

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


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