New delay in emergency power plan as state extends financial close yet again

31st January 2022

By: News24Wire


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The Department of Mineral Resources and Energy has again extended the deadline for 11 companies to reach financial close in a project meant to fast-track emergency power to cut down on load-shedding. 

This is the third time the deadline has been extended. 

The state's Risk Mitigation Independent Power Producer Procurement Programme was designed to enable independent power producers to rapidly add about 2000MW of electricity to the national grid. 

Preferred bidders, including floating powership company Karpowership SA, were initially supposed to reach financial close by the "non-negotiable" date of the end of July 2021. This was later extended to end September and then again to the end of January 2022 as companies struggled to obtain regulatory approvals.

This date has now been extended by two months to the end of March. 

A lawsuit launched by a losing bidder also caused delays. In early December, DNG Energy argued in court that the emergency power programme had been marred by "undue influence" which favoured its rival Karpowership SA, and should be set aside.

The government denied claims there was a plot to keep DNG Energy from winning its bid, saying the emergency company was simply disqualified for not meeting tender requirements. Karpowership also denied DNG's claims, calling them "completely unbelievable". 

While the legal challenge was dismissed, DNG has said it may appeal. 

On Monday, the Department of Mineral Resources and Energy said the ruling "enables the government and Eskom to finalise its governance and regulatory approval processes". 

'Fundamentally flawed' 

"It is expected that these projects will be operational and ready to deliver much needed generation capacity to the national grid starting 12 months from Financial Close.'

For energy analyst Chris Yelland, speaking to Fin24 last week before the third extension was officially confirmed, the project appears to have been hamstrung by a lack of urgency. 

Yelland said the project was first announced in December 2019 when President Cyril Ramaphosa cut short an official visit to Egypt to rush home as the country experienced stage 6 load shedding.

But just over two years later, construction has not yet started on any of the projects. 

"It was supposed to be an emergency procurement," he said.  "Why are we having an emergency round for with special provisions. It was supposed to come really quickly."

Yelland noted that South Africa's "normal" independent power producer procurement programme had now essentially "caught up" with the emergency project due to repeated delays. 

"It just seems to me to be fundamentally flawed," he said. 

He noted that National Treasury and power utility Eskom both still had to to sign off on the multi-billion rand project. 

Edited by News24Wire



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