Update of South African power sector
29 May 2015
On 19 May 2015, Energy Minister Tina Joemat-Pettersson delivered her Budget Vote address to the National Assembly. The following key points related to the South African power market should be noted:
The government remains steadfast in procuring 9 600 MW of electricity from nuclear power, and anticipates the first unit commissioned by 2023. The actual nuclear procurement process will commence in the second quarter of this financial year in order to select a strategic partner(s) and the outcome of the procurement process is expected to be presented to Cabinet by year end.
The Gas Utilisation Master Plan is in the final stage of internal approval and is due to be released for public comment during the second quarter of the 2015 financial year. The gas-fired generation RFI released on 19 May 2015 indicates the design of the Gas to Power Procurement Programme for a combined 3 126 MW allocation. Responses to the RFI are due on 20 July 2015. It is expected that the RFP for this programme will be released in September 2015. Through the RFI, the Department has requested market participants to select which elements of the entire gas to market process they will be in a position to provide, that is early power generation, power generation, gas supply, and gasification/receiving facilities. Prospective bidders, as well as other participants, should have commenced development activities at this stage.
The bid submission in relation to new coal-fired generation was initially scheduled for June 2015. However, in order to ensure a successful procurement phase and to incorporate a number of comments from the market, this date will be extended to the end of August 2015 and preferred bidders will be announced before the end of this calendar year.
From 2011 a total of 5 243 MW of renewable energy has been procured in the REIPPPP Bid Windows 1 to 4 and 37 projects, with a capacity of 1 827 MW connected to the national grid. Already submitted for concurrence to NERSA are new determinations for an additional 6 300 MW for the REIPPPP. Furthermore, a new RFP for an additional 1 800 MW from existing bid submissions is due to be released by June 2015 and open to all unsuccessful bidders from previous bid windows.
The DoE is engaged in the redesign of the IPP RFP paying particular attention to benefits to communities as well as to a greater local content approach.
Hydro and Co-Generation
The DoE is partnering with the Democratic Republic of the Congo in developing the Grand Inga project. As a result of the huge economic spin-offs to be harnessed from potentially one of the largest hydro-electric power projects in the world, the government is negotiating a preferential procurement status for companies domiciled within South Africa and the Southern African Development Community in order to take advantage of this economic opportunity.
The Department has requested a determination for 1 800 MW for co-generation. Approximately 720 MW of co-generation has been secured through ESKOM and the RFP for the revised co-generation approach is on track for release to the market. The announcement of the preferred bidders is expected in the third quarter of 2015.
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.