Key changes are being seen in the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) third round project bid submissions, compared with those bids submitted during the previous two rounds, management consultancy firm Arup said on Friday.

The company had recently provided independent technical advisory services to more than 800 MW of projects submitted in the third REIPPPP bidding round.

“The REIPPPP process has evolved throughout the three bidding rounds and the industry has certainly learnt some lessons over the past 18 months,” Arup said.

It noted that the finance structure of the proposed projects had changed over the course of the three bidding rounds with more projects making use of “off balance sheet” investments rather than going the conventional project finance route.

Further, the majority of equity was now based overseas, which demonstrated the global reach of the South African REIPPPP.

“Other key changes include the engineering, procurement and construction (EPC) and operation and maintenance heads of terms being much more developed during the prebid stage of the third round. In some cases, the accompanying schedules and clauses included a level of detail usually found only at the financial close stage,” Arup said.

The firm stated that this could be as a result of the tight pricing that was required to be competitive in the third bidding round.

“Projects were keen to price all risk out of the process with tighter contracts at the prebid stage,” it added.

Further, EPC negotiations also began and ended much later in the bid preparation process of the third round, which was related to the sensitivities around pricing. The Arup team also experienced key changes to the design and layouts late in the process.

“For the first time, Arup, as technical adviser was also asked to comment on the commitment to local content levels claimed by module and inverter suppliers. Previously, this had been an area wholly left to economic development consultants to review,” the company added.

Arup expected to see similar trends during a possible fourth round of REIPPPP bids, as price margins would be squeezed further.

The company also expected procurement strategies for projects to be altered to move away from fully wrapped EPC contracts, as were seen in the first three bidding rounds, to split contracts.

The first of Arup’s nine first round REIPPPP projects would reach commercial operation in two months.