Black-owned and managed independent power producer (IPP) Pele Green Energy (PGE), which is an active owner and partner in wind and solar projects with a combined capacity of 900 MW, does not agree with prevailing arguments that South Africa’s IPP programmes are failing to deliver on South Africa’s transformation objectives.
MD Gqi Raoleka tells Engineering News Online that, while more can always be done to further transformation, the procurement programmes overseen by the Department of Energy and the IPP Office are already structured to ensure that “capable, determined and ambitious black IPPs can exist and thrive”.
PGE is participating in five projects procured during bid windows 3.5 and 4 of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), which stalled in 2016 when Eskom refused to sign further power purchase agreements (PPAs) for renewables projects after having returned to a surplus position. However, agreements for the 27 renewable-energy projects initially procured by the IPP Office in late 2015 were eventually signed on April 4.
PGE is participating in the 100 MW Copperton wind farm and the 100 MW Redstone concentrated solar power plant, both located in the Northern Cape, as well as three 140 MW wind farms, two located in the Northern Cape and one in the Eastern Cape.
Raoleka argues that, at its core, the REIPPPP is structured to ensure participation by black industrialists, black investors and communities across all aspects of the power generation cycle, from investment through to the operations and maintenance of the plants.
“The rules of these programmes have been structured to fully support the country's transformation objectives, with checks along the lifespan of our power purchase agreements to ensure the adherence to the commitments that each project has made,” Raoleka says, while acknowledging that there have been instances where some participants have fallen short of their commitments.
Nevertheless, over the past nine years the REIPPPP has been the main vehicle through which PGE has been able to accumulate what is “one of the largest project portfolios of projects by any IPP, be it foreign, South African or black”.
Raoleka adds that bid window 3.5 and 4 also resulted in some of the highest levels of South African and black-equity ownership to have been achieved since the REIPPPP was launched in 2011.
Energy Minister Jeff Radebe has stated that South Africans own 57.8%, or R11.9-billion, of the companies awarded projects during the most recent bid windows, of which black shareholders own 64.2%, or R7.64-billion.
The 27 projects are scheduled to reach financial close by no later than July 31 and are expected to involve a combined investment of R56-billion.
The projects are being financed through a combination of debt and equity. For the projects in which PGE is participating, about 75% of the investment expenditure will be debt financed. PGE will fund its equity contributions with support from South African development finance institutions, as well as commercial lenders.
However, Raoleka says the company is not content on being a passive shareholder in projects and has invested heavily to grow its capabilities to design, procure, manage and operate it own plants.
“This began several years ago with the Touwsrivier 36 MW solar concentrator photovoltaic plant being a reference point. We are the sole management services provider at the plant, which has been operating over the past three years.”
PGE will also work with its partner at the Copperton wind farm, Elawan, to deliver construction management services for the project, as well as operations and maintenance services once the wind farm is operating.
“We will continue to focus on expanding and optimising our project development and operational capabilities,” Raoleka states, adding that PGE also plans to increase its shareholding in its existing projects. “We have been minority (30% to 40%) shareholders over the past five years, but are preparing to hold the majority shareholding in future projects.”
As government moves to tighten its framework for transformation in the sector, PGE expects competition from other black energy companies to increase.
However, few other start-ups have emerged, with most of the interest being shown by larger black investment companies, which implies that the barriers to entry remain significant.
“At PGE our differentiating attribute is not that we are a leading black IPP that has been operating in the South African renewable-energy sector since the beginning of the procurement programmes, it is that we are now a leading IPP in the South African sector.”