The signing of power purchase agreements (PPAs) for the projects procured under the fourth bid window of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) will not take place on April 11 as initially envisaged.

The date had been set by former Energy Minister Tina Joemat-Pettersson, following the announcement by President Jacob Zuma in his February 9 State of the Nation address that “Eskom will sign the outstanding power purchase agreements for renewable energy in line with the procured rounds”.

However, Joemat-Pettersson was replaced during the March 31 Cabinet reshuffle by Mmamoloko Kubayi, who has subsequently requested a postponement of the PPA signing to enable her to consult with stakeholders, including Public Enterprises Minister Lynne Brown.

The delay would affect 37 projects that are said to carry a combined investment value of R58-billion and the potential to create 13 000 construction jobs.

Independent Power Producer Office head Karen Breytenbach confirmed with Engineering News Online that the April 11 deadline would not be met, but said she remained optimistic that the PPAs would be signed in line with Zuma’s directive.

Likewise, Eskom spokesperson Khulu Phasiwe said the State utility would “not be signing tomorrow”. However, he insisted that the utility would sign once the cost-recovery mechanism had been finalised.

Phasiwe indicated that, owing to the legal uncertainty surrounding the application of the Regulatory Clearing Account (RCA), Eskom did not have certainty on how it would secure the revenue required to pay for the electricity arising from the renewables power stations. The use of the RCA was thrown into question by the Gauteng High Court’s August 16 ruling, which determined the most recent RCA adjustment to be “irrational, unfair and unlawful”.

The National Energy Regulator of South Africa (Nersa) is appealing the judgment, but would not process further RCA applications until legal certainty had been established. Therefore, it had only granted Eskom a 2.2% tariff increase for 2017/18.

Eskom has written to the signatories of the Government Support Framework Agreement (GFSA) – which guarantees support for the State-owned utility in meeting its obligation to buy electricity from renewable-energy independent power producers (IPPs) – to discuss a possible triggering of government support in light of the RCA uncertainty. However, there has been no triggering of the GSFA.

Neither Breytenbach nor Phasiwe could be drawn on when the PPAs could be signed and Breytenbach also indicated that other procurement programmes, including the gas programme, were unlikely to proceed until the updated Integrated Resource Plan (IRP) had been finalised.

In February, a senior Department of Energy (DoE) official indicated that the updated IRP would only be submitted for Cabinet approval in the second half of 2017.

The delay serves as a blow to both the winning bidders for projects procured in 2015, as well as the REIPPPP overall, which has stimulated R194-billion in electricity investment since 2011.

The South African Renewable Energy Council (Sarec) expressed concern that the deadline for financial closure of the projects would not be met. It said that the delay had been communicated as necessary to allow Kubayi to meet with Brown and that, once the two Ministers had met, a new signature deadline would be set.

“While we recognise the need for the new Minister to get up to speed on the issues, financial closure of duly procured renewable power for 37 PPAs now stands at almost two years,” Sarec chairperson Brenda Martin said in a statement.

Martin added that IPPs had, since the setting of the April 11 deadline, taken all necessary steps to ensure that they were ready for PPA signature. “Over the past few weeks, since the previous Minister issued her instruction to Eskom, affected IPPs have been working with Eskom officials to ensure that the necessary paperwork is up to date, so that financial closure can be achieved and construction can begin."

She said that, all of Eskom’s concerns in relation to PPA signatures had also been addressed by the National Treasury, Nersa and the DoE.

"By signing PPAs with duly selected preferred bidders, Eskom is not at risk of any unforeseen financial exposure. It is understood that Eskom’s obligation to pay for power procured, will only kick in once power plants are built and power is generated by IPPs,” Martin said.

NUCLEAR BY JUNE?

She also expressed the hope that Eskom would honour its legal obligations to the renewables IPPs "before embarking on plans relating to its proposed nuclear deal in June".

In a media release responding to media reports alleging that a nuclear deal had been concluded, as well as those indicating that the procurement programme would begin in June, Eskom reiterated the National Treasury's assurance that no deal had yet been signed.

"Eskom expects to issue a full request for proposal (RFP) to the open market once the request for information (RFI) has been assessed and the relevant approvals have been obtained. To date Eskom has therefore not received any formal proposals from potential suppliers and has not signed any power plant procurement agreements. Eskom has not undertaken any prequalification assessment to date related to the potential respondents to a potential RFP," chief nuclear officer Dave Nicholls said.

A nonbinding RFI was released to the open market on December 20 and would close on April 28.