With 4 days left before the 27 January 2022 deadline to reach financial close for the repeatedly delayed Risk Mitigation Independent Power Producer Procurement Programme (RMPIPP), the lack of a status update from the Department of Mineral Resources and Energy (DMRE) raises the prospect of yet another deadline extension and a programme on the verge of collapse.
For the RMIPPP to proceed to implementation stage, preferred bidders should already have secured Environmental Impact Assessment approvals, port authorisations, pipeline agreements, power off-take MoUs and fuel purchase agreements. However, all indications are that the bidders are yet to meet some or all of these mandatory requirements.
If the bidders to the RMIPPP fail to meet the financial close deadline, the question is whether DMRE will follow through on its commitment to effect consequences on the respective bidders. In March 2021, DMRE’s IPP Office Acting Chief Operating Officer Maduna Ngobeni stated that:
“…there are consequences for a preferred bidder failing to achieve financial closure and commercial operation by the target dates. If the dates for financial closure or commercial operation are not met, the bid bond can be pulled or the power purchase agreement (PPA) can be terminated.”
Having already lost credibility due to its Stalingrad approach to renewable energy generation in South Africa, DMRE’s failure to implement an effective, transparent and sustainable programme to urgently address our electricity crisis will only serve to deepen distrust in it as an entity.
The DMRE cannot keep extending the financial close deadline in perpetuity. If the successful bidders are unable to meet the requirements of their contractual obligations, Mantashe should come clean and inform the country, and alternative plans should be put in place. What his Department cannot and should not do is to negotiate questionable environmental impact certification and project finance with the banks on behalf of the RMIPPP bidders. That would be against the contractual terms of the programme which enjoined successful bidders to assume all the risks associated with project implementation.
The uncertainty around the RMIPPP is not helped by the fact that bidders such as Karpowership are struggling to secure the requisite environmental impact certification due lack of clarity on how their operations will impact the marine environment and coastal communities. For other potential bidders, the inability to comply with local manufacturing requirements, as dictated by the Department of Trade, Industry and Competition, remains a problem. This is indicative of a government that places ideological concerns ahead of the urgent need to to reinforce our economy and rapidly address our electricity generation shortfall.
DMRE’s RMIPPP was meant to add 2000MW of power to the grid and help alleviate South Africa’s crippling power crisis. As things stand, the country may have to start factoring in the reality that this will never happen, as the RMIPPP may be on the verge of collapse. Minister Mantashe needs to acknowledge that this poorly planned and badly implemented programme is a handbrake on the economic potential of the country. South Africa needs electricity now, and the private sector is ready to provide – if Mantashe and his incompetent department would just allow them to do so.