https://www.engineeringnews.co.za

Movement at last on long awaited coal baseload tender

23rd January 2015

By: Terence Creamer

Creamer Media Editor

  

Font size: - +

South Africa’s Department of Energy (DoE), which issued the long-awaited coal baseload independent power producer (IPP) procurement programme request for proposals (RFP) in December, is insisting that 51% of the equity in qualifying projects be held by South Africans, a material increase on the 40% stipulation in the renewable-energy programme.

The RFP also specifies that at least 30% of the shares be owned by black South Africans and sets a qualifying price cap of 82c/kWh for the first bid submission phase, the deadline for which is June 8.

The DoE has requested prospective bidders to register and pay a nonrefundable fee of R200 000 to receive the RFP documentation.

IPPs will also be required to pay a bid guarantee of R150 000 for every megawatt of proposed installed capacity, with a 600 MW maximum capacity threshold having been placed on projects. Prospective bidders have until May 11 to notify the department of an intention to submit a bid.

The programme has been anticipated since late 2012 when then Energy Minister Dipuo Peters approved determinations paving the way for the procurement of 2 500 MW of baseload coal capacity from IPPs. But two years and two Ministers later, the RFP emerged only after Cabinet approved a five-point electricity stabilisation plan at its final meeting in December.

The Cabinet plan emerged as the financial and operational crisis at Eskom came to the fore again in November following the collapse of a coal silo at Majuba, which left the electricity supply system increasingly vulnerable to rotational power cuts. Several load-shedding events occurred in November and December and Eskom has warned that more are likely between January and the end of March, with the first cuts of the year instituted on January 9.

The Cabinet plan includes an aspiration to harness short-term IPP opportunities and the baseload coal RFP indicates that only projects that can be brought into commercial operation before December 2021 will be considered.

The DoE will seek to procure 1 600 MW of capacity in the first bid submission phase, comprising 1 000 MW from domestic sources and 600 MW from cross-border projects. However, it has the flexibility to adjust the allocations in response to the offers made.

It is not immediately clear why the allocation has been restricted to such a modest level, with the DoE not immediately responding to enquiries made on the issue. But the RFP indicates that government intends following up the first bidding round with subsequent yearly rounds, much as has become the case with the Renewable Energy Independent Power Producer Procurement Programme, through which some 66 projects have been selected with a combined capacity of around 4 000 MW.

Macfarlanes partner Scott Brodsky tells Engineering News that the release of the RFP is welcome news for investors, many of which having been preparing projects for a number of years.

However, he says the minimum 51% South African ownership stipulation has taken a number of potential bidders by surprise, as several bid-ready projects involve higher levels of foreign participation. Nevertheless, there is still much relief that the rules governing the tender have finally been published and Brodsky believes work is already being done to adjust to the new requirements.

“The June 8 deadline appears to be tight, but feasible,” Brodsky adds.

Successful bidders will conclude a 30-year power purchase agreement with Eskom, which will be backed by the South African government.

The bids will be assessed in two stages, with the first focusing on its alignment with qualification criteria and the second stage involving a comparative assessment against other compliant bids. Price will make up 90% of the evaluation and economic development 10%.

The DoE also stipulates that the bids remain open and capable of acceptance for 18 months from bid submission, notwithstanding possible exchange rate movements and the difficulty of securing engineering procurement construction prices over such an extended period.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

Comments

Showroom

Stewarts & Lloyds
Stewarts & Lloyds

Stewarts & Lloyds today supplies steel and tube, pipe and fittings, valves, pumps, irrigation, fencing, profiling and roofing products. The cash...

VISIT SHOWROOM 
Aqs image
AQS Liquid Transfer

AxFlow AQS Liquid Transfer (Pty) Ltd is an Importer and Distributor of Pumps in Southern Africa

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.068 0.118s - 137pq - 2rq
Subscribe Now