Green shoots

21st October 2016 By: Terence Creamer - Creamer Media Editor

Green shoots

In a September 22 statement, Business Leadership South Africa (BLSA) reiterated the “grave concern” it had expressed in an earlier open letter to President Jacob Zuma about ongoing threats to charge, or even arrest, Finance Minister Pravin Gordhan. However, it also used the statement to urge government to “more actively demonstrate” support for the economic environment by, among other things, ensuring that the policy supporting the introduction of independent power producers (IPPs) remained unchanged and for existing and future contracts to be honoured.

On the issue of the Finance Minister, matters took a turn for the worse last week when the National Director of Public Prosecutions, Shaun Abrahams, announced that Gordhan, together with former South African Revenue Service officials Ivan Pillay and Oupa Magashule, had been charged with fraud.

On the IPP front, however, some progress has been made since late September, which is possibly why BLSA’s reaction statement to the decision to charge Gordhan no longer referred to electricity policy. It focused, instead, on restoring credible governance at State-owned companies, addressing mining uncertainty and dealing with the prevailing university crisis.

The easing of IPP anxieties – which it must be stressed have not disappeared entirely – can be attributed directly to several interventions made over the past few weeks by Energy Minister Tina Joemat-Pettersson.

It began with the release of the so-called project information memorandum (PIM) for the much-anticipated Liquefied Natural Gas Independent Power Producer Procurement Programme. By all accounts, the PIM, which outlines the framework for the development of gas-importation and gas-to-power infrastructure at Richards Bay and Coega, has been well received.

The Minister then made the much-delayed preferred-bidder announcement for the Coal Baseload Independent Power Producer Procurement Programme. Both of the bidders that met the November 2, 2015, bid-submission deadline prevailed and financial close for the 557.3 MW Thabametsi and 306 MW Khanyisa coal-fired power station projects is expected during the first half of 2017.

Following that, Joemat-Pettersson appeared before the Portfolio Committee on Energy to provide a much-needed update on government’s revamped approach to the Nuclear New Build Programme, following the decision to delay the release of the controversial request for proposals (RfP), which was initially expected on September 30.

There is naturally still much disquiet over the approach being pursued, with particular concern about the implications of a proposal that Eskom, rather than the Department of Energy (DoE), become the procurer of the power-plant component of the programme. However, the briefing at least gave clarity on how government sees the programme being managed. What remains unclear is whether the RfP will still be issued before the new Integrated Resource Plan is fully agreed.

Also outstanding is the identification of the preferred bidders for the most recent bid window of the Renewable Energy Independent Power Producer Procurement Programme, which, as with the coal programme, was thrown into doubt by Eskom’s insistence on a meeting with the DoE prior to signing any further power purchase agreements. In other words, while there are definitely some promising green shoots, much remains to be done if the prevailing uncertainty in the sector is to be truly lifted.