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Update of South African power sector

22 April 2015

While announcing the 13 successful bidders under the fourth round of the REIPPP Programme on 16 April 2015, Energy Minister, Tina Joemat-Pettersson, used the platform to shed light on the Department of Energy's plan to roll out further investment in the South African power sector, particularly in respect of its intentions towards renewable energy.

Some of the notable points made are as follows:

Renewable energy: Current and future programmes

  • The Department will allocate additional MWs to the Bid Window 4 procurement process. The Department has committed to clarifying the process and parameters of this additional allocation by no later than May 2015.  
  • The Department intends to issue a revised Request for Further Proposals (Revised RFP) “for an expedited procurement process of 1800 MW from all technologies”. This process will be open to all unsuccessful bidders from previous windows (1 to 4), whose projects are ready for re-submission. The Department and IPP Office have committed to this Revised RFP being issued by no later than June 2015. 
  • The Minister has requested that the current RFP for the Fifth Bid Submission phase is to be redesigned and be ready for release in the second quarter of 2016. The Minister noted the key aspects subject to revision include the definition of local community, the mechanisms to ensure early, efficient and equitable benefits to the communities and the local content/industrialisation regime, as well as to take into account the constrained distribution and transmission systems that we are dealing with. 
  • Subject to NERSA's concurrence, a new determination for an additional 6300 MW for the Renewable Energy IPP Procurement Programme will be made. This is done in accordance with the IRP 2010-2030 and to maintain the momentum of the programme.

Base-load procurement

  • The bid submission date for the first round of procurement of 2500 MW from coal-based power stations remains set for June 2015, with preferred bidders expected to be announced before year end. 
  • While the Gas Utilisation Master Plan is still to be published, the Minister confirmed that a Gas to Power Request for Information (RFI) will be released to the market by end of April 2015 whereby a combined 3126 MW are intended to be procured. Responses to this RFI will be used in designing the Gas to Power Procurement Programme.
  • An RFP for the procurement of 800 MW (subject to upward revision) of cogeneration based power will be released to the market in April 2015 and the announcement of the preferred bidders will be in the third quarter of 2015.

Grand Inga

  • The treaty between the Democratic Republic of the Congo and the Republic of South Africa on importing hydroelectricity from the Grand Inga project came into force on 20 March 2015. The treaty obliges South Africa to negotiate an off-take agreement for the purchase of 2500 MW of electricity generated from the Inga phase 3 Low Head project, with a right of first refusal for up to 30% of generated capacity from all future phases.

The announcement has been well received by the private sector, with market commentators believing that foreign investors should gain much needed comfort that South Africa remains a favourable investment destination when it comes to independent power producers.  

Disclaimer: The above update is a summary of the Minister's announcement taken from the media statement published by the Department of Energy in connection with the Minister's speech. This update is not an expression of opinion or view regarding the nature and extent of any business opportunities that may arise from the above announcement and Hogan Lovells takes no responsibility for any of the above commitments not materialising as envisaged.

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