Risk Mitigation IPPP programme increasingly in disarray.14 Jul 2021 10:45
Following the announcement on 18 March 2021 of preferred bidders for 2,000MW of new emergency generation capacity in South Africa in the Risk Mitigation IPPP programme, the “non-negotiable” timelines for both financial closure by end July 2021 and power to the grid by mid to end 2022, are looking increasingly unlikely.
In addition, the local content designated by the Department of Trade, Industry and Competition (the dtic) for plant and components procured under this Risk Mitigation Independent Power Producer Procurement (RMIPPP) programme is proving to be significantly unrealistic.
Some 1,220MW, or 61% of the 2,000MW, of despatchable generation capacity procured under the RMIPPP programme is to come from three floating power plants (powerships) and floating storage and regasification units (FSRUs), all leased from Turkish company Karpowership and moored in South African harbours for 20 years.
Already, Karpowership has successfully applied for exemption from the local content designated by the dtic for ships, in the request for proposals (RFP) documents of the IPP Office of the Department of Mineral Resources and Energy (DMRE). The powerships, FSRUs and all associated onboard equipment will come fully equipped, with no local content.
Furthermore, the powerships are fuelled via fully imported liquified natural gas (LNG) arriving from abroad periodically in tankers to fill up the FSRUs. After regasification of the LNG, the natural gas obtained is piped to fuel the gas engines driving the generators in the powerships.
A legal challenge by an unsuccessful bidder, DNG Energy, is expected to be heard in court from 14 to 16 July 2021, and could put a spanner in the works. DNG Energy claims that the award of preferred bidder status to Karpowership was irregular and corrupt, and that DNG Energy, with its land-based gas-to-power offering, should be substituted as preferred bidder in place of Karpowership.
In addition, the decision by the Department of Forestry, Fisheries and the Environment (DFFE) to refuse the applications by all three Karpowership projects for environmental authorisation, and the subsequent internal appeal announced by Karpowership, is also likely delay financial closure of these projects.
Even if the internal appeal by Karpowership to DFFE succeeds in reversing this decision, it is expected that this would simply trigger legal proceedings in the courts by environmental groups, in further efforts to prevent the projects from proceeding.
Achieving financial closure by end July 2021 for the eight projects making up the balance...........
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