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SAPVIA: Statement on the recent announcemt by Minister Pravin Gordhan on government decision to "renegotiate" old renewable energy IPP Contracts

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SAPVIA: Statement on the recent announcemt by Minister Pravin Gordhan on government decision to "renegotiate" old renewable energy IPP Contracts

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Public Enterprises Minister, Pravin Gordhan

15th February 2019

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To stimulate and grow the SA economy, these five elements are critical: predictability, consistency, lower risk and policy certainty. A simple and blanket tariff renegotiation alone does not achieve this.

A one-dimensional  renegotiation does not afford the opportunity to create value for South Africa.

The renewable energy power projects have proven that they provide substantive economic value for our struggling economy - they attract much needed investment,  drive down costs with their continually decreasing tariffs, create new jobs, mitigate climate change impacts and add significant economic value to local economies and communities that are struggling for survival.

Extending PPAs by 10 years, to 30 years, affords South Africa and investors better long term value alongside lower tariffs. Simply renegotiating tariffs, without a comprehensive solution, may have limited short-term gain but and could dent investor confidence and potentially increase the cost of capital as financial institutions and investors price in the risk of an uncertain policy environment.  Ultimately this defeats the perceived short-term benefits of renegotiating tariffs. SA needs less risk, not more.

The only way to sustainably lower power prices for South Africa is to consistently procure low cost solar and wind power through a consistent, well managed programme over an extended period.
 

 

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