Law firm continues to represent REIPPPP preferred bidders

13th December 2013

By: Carina Borralho

  

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South African law firm Cliffe Dekker Hofmeyr has once again represented projects that have been awarded preferred bidder status as part of round three of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

Cliffe Dekker Hofmeyr director and national practice head of projects and infrastructure practice Kieran Whyte tells Engineering News that the company is advising on two concentrated solar power (CSP) projects, one landfill gas project, two onshore wind projects, one biomass project and one solar photovoltaic (PV) project.

Preferred bidders for the third bid submission phase of the REIPPPP were announced on October 29 by the Department of Energy (DoE).

The DoE said they had received 93 bid responses during the third bid submission phase and sent letters of appointment of preferred bidders to 17 successful bidders.

“We have also advised four additional preferred bidder projects on an ad hoc basis,” he adds.

Whyte says that Cliffe Dekker Hofmeyr is under mandate on several other onshore wind and solar PV projects that submitted bids under round three. “These could still be selected as additional preferred bidders as outlined by the DoE,” he notes.

The DoE says that a large number of competitive bid responses were submitted for the third bid phase in the onshore wind and solar PV technologies and it is considering the appointment of additional preferred bidders for those technologies from the remaining compliant bidders.

The preferred bidders that have been appointed in particular technologies may not be the only preferred bidders for the third bid round.

Whyte says the firm’s Cape Town and Johannesburg offices were involved in the projects across many practice areas, including projects and infrastructure; banking and finance; environmental ; corporate and commercial; black economic empowerment; construction and engineering; employment, including immigration; tax, including foreign exchange, customs and excise; competition; public procurement; and administrative law. “This made teamwork essential.

The REIPPPP was launched in August 2011 and entails the procurement of 6 725 MW of renewable energy from onshore wind, CSP, solar PV, biomass, biogas, landfill gas and small hydro,” he adds.

The REIPPPP is being conducted in phases and 3 916 MW of energy has been awarded in the first three bid submission phases.
The request for proposals (RfPs) was updated for the third bid submission phase and released in May. The DoE introduced several significant changes to the RfP, includ- ing increased local content and economic development requirements. Bids for the third bid submission phase were submitted to the DoE on August 19.

The target allocation for the third bid submission phase under the RfP was 1 473.1 MW. The appointed preferred bidders have a total contracted capacity of 1 471.5 MW. Under the current schedule, financial close is expected to take place before the end of July 2014.
The DoE estimates that by the end of the programme, the REIPPPP will have attracted investment of more than R100-billion over its lifetime in the renewable-energy sector.

“This confirms the importance of the REIPPPP to South Africa’s growing energy demands and the need to develop natural resources programmes in an environmentally friendly and sustainable manner, while, importantly, facilitating and steering the development of job creation and South African participation in the energy sector,” says Cliffe Dekker Hofmeyr director of projects and infrastructure practice Jay Govender.

Bidding Process

Whyte describes the bidding process as competitive for law firms. Each firm had to stipulate the professionals that will work on the project, the scope of work and the costs.

He adds that the bidding process is time consuming, with no room for error. “We had to work with multiple teams of people, locally and internationally, which also requires consistency while being accommodating.”

“Compared with the first bidding round, the second and third bidding rounds have become a lot more streamlined,” says Cliffe Dekker Hofmeyr projects and infrastructure director Zahra Omar, adding that changes to the bidding process are being made and require the legal team to keep abreast of challenges, which will always exist.

The bidding process is an ongoing educational one, as it requires people involved to adapt as they learn. The use of corporate financing in some instances saw a reduction in tariffs.

Pricing

Cliffe Dekker Hofmeyr says prices and resource management are the two biggest challenges the company faced during previous REIPPPP bidding rounds.

“Charging hourly fees is not always the norm in the REIPPPP. Law firms either propose a fee structure that ensures payment after a certain period or against a deliverable. Sometimes it was required to discount fees or to accept a success fee,” says Whyte.

He states that the pricing process is a wake-up call for South African law firms, who do not normally favour these sorts of alternative pricing mechanisms.

Whyte mentions how law firms are likely to adapt their pricing systems going forward, as the REIPPPP has been a learning experience in terms of pricing.

The management of resources and capacity go hand in hand with pricing management. Omar describes the process as “tricky”, as it is forcing the legal industry to do away with its “archaic ways” and adapt to new methods of pricing and management.

Benefiting South Africa

“The REIPPPP has been highly positive for developers, contractors, lenders and advisers,” says Whyte, adding that the programme has created a whole new stream of work in South Africa.

He says the programme has placed South Africa on the map for renewable energy and it is showing the world that South Africa can run a sophisticated procurement programme, even though the programme has been regarded as a rigid one.

“This is a moment of pride for South Africa – not only is the programme a success but it has also ensured that the energy sector is being developed in a sustainable manner and not at the expense of other sectors,” says Omar, adding that South Africa will be the springboard for the rest of the continent.

The programme saw strict localisation requirements, and the threshold of 40% was exceeded in some instances under round three. “It also gave the lending community a new sector to lend into,” he notes.

The programme gave Cliffe Dekker Hofmeyr a new revenue stream and an opportunity for some of its junior professionals to get involved in large-scale projects from cradle to grave. “A lot of university graduates have a strong sense of wanting to make a difference. Renewable-energy projects enable these students to learn how to do so,” he explains.

Further, Whyte notes that another benefit of the programme is new technologies being introduced to South Africa.

Besides the opportunities for investment that were created by the REIPPPP, “awareness on environmental, legal and even socioeconomic issues has been created,” he says.

The programme also enabled various companies to participate, allowing for skills sets to develop throughout various industries. “We came up against sophisticated pur- chasers of legal services who have had experience elsewhere in the world,” says Whyte.

He adds that solid working relationships were established with other law firms during the bidding process.

More than 50% of the lawyers in the company who worked on the project were women, which added to the diversity of the legal team involved.

About Cliffe Dekker Hofmeyr

Of the 19 projects awarded in round one, Cliffe Dekker Hofmeyr worked on 17.

Cliffe Dekker Hofmeyr is one of the few law firms in South Africa that has been working in the energy sector for quite some time and, between Whyte, Omar and Govender, it boasts extensive experience across the full project value chain in the energy sector, spanning numerous technologies.

Whyte says that staff were often required to work throughout the night and over weekends to complete the work required for the bidding process.

“We are having to deal with clients who assume that, because we have been involved in bidding processes, it is a cookie-cutter system, which is not the case.

“Going forward, we are also aiming to build on the programme and participate in the upcoming projects. We want to continue pursuing opportunities in sub-Saharan Africa,” concludes Whyte.

Edited by Megan van Wyngaardt
Creamer Media Contributing Editor Online

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