Cape Town – Energy Minister Tina Joemat-Pettersson has announced two Limpopo and Mpumalanga firms as preferred bidders for the first Coal-based Independent Power Producer Programme.
Briefing journalists in Cape Town on Tuesday, the Minister said the two preferred bidders – Thabametsi and Khanyisa – will collectively add 863.3MW to the country’s grid over the next five years.
“Both bidders were selected as per the stingiest requirements of the first bid submission phase, with all bids reviewed and evaluated by the IPP office,” she said.
The Minister said while Khanyisa is set to begin commercial operations in December 2020, Thabametsi will be commercialised in March 2021.
She said the Coal IPP Programme, which was launched in December 2014, is the first baseload programme which allows the private sector to generate energy using coal resources.
The programme will run parallel to the internationally acclaimed Renewable Energy Independent Power Producers Programme (REIPPP), which was first launched in August 2011, and already feeds power into the national grid.
Both projects will use proven technology from suppliers with a track record of timeous delivery, the Minister said.
She said with the collective backing of foreign developers from Korea, Japan and Saudi Arabia, the SA banking sector, including the Development Bank of South Africa, the PIC and IDC, the two bidders already have a formidable set of partners committed to enabling their project’s success.
“In their bids, Thabametsi and Khanyisa have submitted prices well below the stipulated qualification price of 82c/kwh, which will escalate with CPI (all components of the tariff other than the Fuel Charge Rate, which will escalate with reference to a basket of published indexes, currently CPI plus 1%),” she said.
Minister Joemat-Pettersson said sellers are not able to seek adjustment of the tariff outside of the agreed escalation for cost overruns, including the cost of coal, limestone and water charges over the life of the PPA power purchase agreement.
“The buyer – Eskom – has no exposure to ongoing mine operating costs including residual environmental risks arising from mining operations.
“Significant penalties will be levied for not timeously achieving scheduled commercial operation, that is, six days for one day late connection.”
Projects to contribute to local job creation
The Minister said, meanwhile, that while the two projects will add the much needed capacity to the national grid, they would have a far greater role to play in terms of the overall value they will add to the sector.
She said the value has been enabled through a strategic bid design – which saw participants required to have a minimum South African entity participation of 51%, black ownership of 30%, and a weighted B-BBEE contributor status of level five in respect of locally based shareholders, among others.
She said she obtained an exemption from various requirements of the Preferential Procurement Policy Framework Act, Act Number 5 of 2000 (PPPFA) and its regulations to enable the department to set forward looking commitments for B-BBEE and job creation so as to ensure long-term economic development.
“Thresholds for some of these elements were set upfront, with sub-contracting of the project activities allowed to facilitate special skills transfer, as well as foreign investment in the project,” she said.
The Minister said the two coal IPPs will additionally unlock investment in much needed infrastructure and stimulate local procurement.
“While the over R40 164 million of debt and equity funding committed to the projects demonstrates what the investors see in the coal programme space, the jobs created both during construction (6 613) and operations (13 524) will impact surrounding communities in Limpopo and Mpumalanga where Thabametsi and Khanyisa are respectively based.
“Their collective emphasis on skills transfer and enterprise development will create additional opportunities for transformation and empowerment in these regions,” she said. – SAnews.gov.za
