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Projects and Energy Weekly Snippets

3 October 2014

Tender process for nuclear projects
On 23 September 2014, government officials announced that the nuclear cooperation deal will result in numerous competing countries to take part in a bidding process that is to be completed by the middle of 2015. Government reassured the public that these kinds of intergovernmental agreements are standard with nuclear vendor countries.

The energy department confirmed in a statement following the conclusion of the 58th session of the General Conference of the International Atomic Energy Agency (IAEA) in Vienna that "We foresee that similar agreements will be signed with other nuclear vendor countries, France, China, Korea, the US and Japan".

The agreement is said to be in the early stages after much criticism was received, mainly by the Democratic Alliance. 

29 September 2014 – Business Day and Engineering News

Westinghouse to review ZAR4bn Areva tender
It is apparent that Westinghouse will not let the recent Eskom controversial tender award slide. This comes after Westinghouse house echoed its intentions on Monday, 29 September, to review the utility's decision to award a tender of ZAR4bn for the replacement of steam generators at Koeberg power station to its competitor, Areva. Westinghouse had historically been awarded the tender twice. It claims that there were fundamental breaches of the tender process and that it has sufficient evidence to warrant the grant of a review of Eskom's decision. It highlighted a breach by Eskom of its obligations to administer a fair and transparent tender process as the primary basis for the review. There has not been an indication from Eskom as yet whether it will oppose the action or not. In late August, following the final award of the tender to Areva, Westinghouse brought an application to interdict the awarding of the contract to Areva, but subsequently withdrew. Eskom capitalised on this citing it as vindication. The application was made simultaneously with another to compel Eskom to provide it with all documentation used to arrive at its decision. Eskom has not fully complied with the order.

30 September 2014 – Business Day

DoE assures that SA-Rosatom deal not a procurement agreement
Although the public is still kept in the dark about the actual content of the recent controversial deal between South Africa and Russia's Rosatom, vague details surfaced on Wednesday as the Department of Energy denied that the contentious deal signed in Vienna on 22 September was for the procurement of eight VVER nuclear reactors. The DoE avers that the agreement merely formed part of preparations for a procurement process yet to be launched. The DoE assured that the procurement process would follow once the "outdated" IRP has been updated. Furthermore, it indicated that similar intergovernmental agreements would be signed with nuclear-vendor countries in the months to come, with an imminent one anticipated to be signed with France this month. Another such agreement was concluded with South Korea in 2013.

It is apparent that South Africa will seek to conclude agreements with China, Japan and the US. The agreement with Rosatom is awaiting endorsement by Cabinet for consideration by Parliament before it can be made available to the public. There have been suggestions by the DoE that although the procurement process would be fair, competitive and cost effective, it might not take the form of an open tender process. Government-to-government models are currently being explored, as well as a closed-tender model. The model is yet to be determined by Cabinet.

2 October 2014 – Engineering News

Concerns mounting as grid connection issues cause 3rd bid window financial close delays
Concerns seem to be escalating due to delays in the REIPPPP after only 26 of more than 60 projects selected to proceed from the three bid windows have been connected to the grid. The concerns arise from the delay of financial close for the third bid window due to "grid connection issues". Preferred bidders were identified in October 2013, and financial close was initially scheduled for 30 July 2014. The DoE subsequently announced that it was finalising a staggered financial-close protocol anticipated to be concluded in November. In a recent presentation to Parliament, Eskom indicated that the “low-hanging fruit” had been exhausted and that a strengthening of the network was now required to facilitate the introduction of additional IPP connections. Grid connection has emerged as a key immediate risk for REIPPPP bidders, with some discussions now taking place on the future framework for self-provisioning. Eskom is currently responsible for “deep connections” and the IPPs for “shallow connections”. Further delays translate to more costs incurred by bidders. This is likely to result in negative impact on projects. The South African Photovoltaic Industry Association has suggested that Eskom must allow bidders to go the self-build or own-build routes as a matter of course, not as a matter of exception to the current rule. Nevertheless, the continuously falling prices even in the 4th window indicate a definite interest in the REIPPPP.

2 October 2014 – Engineering News

The above reflects a summary of certain news articles published during the preceding week. It is not an expression of opinion in respect of each matter, nor may it be considered as a disclosure of advice by any employee of Hogan Lovells. 

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