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Republic of South Africa IPP Procurement Programme IPPs: An Investor & Community Perspective Maduna Ngobeni Departm

Republic of South Africa IPP Procurement Programme IPPs: An Investor & Community Perspective Maduna Ngobeni Department of Energy of South Africa. Introduction.

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Republic of South Africa IPP Procurement Programme IPPs: An Investor & Community Perspective Maduna Ngobeni Departm

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  1. Republic of South Africa IPP Procurement Programme IPPs: An Investor & Community Perspective Maduna Ngobeni Department of Energy of South Africa

  2. Introduction • In August 2011, the Minister determined that 3725MW of renewable energy be procured by IPPs in five different rounds (“Bid Windows”), subsequent to which the DOE initiated the procurement process. • In December 2012, in a trio of further determinations, the Minister determined that a further 3200MW of renewables generation capacity was to be procured from IPPs, as well as IPP procurement of coal, gas, hydro and cogeneration generation capacity under the BaseloadProgramme and the Medium Term Risk Mitigation Project.

  3. Introduction (cont’d) • To-date, the Department has: • Under renewables Bid Window 1, entered into 28 agreements on 5 November 2012 totaling 1416MW generation capacity; • Under renewables Bid Window 2, entered into 19 agreements on 9 May 2013 totaling 1044MW generation capacity. • With regards to renewables Bid Window 3: • Received 93 bids on the 19 August 2013 • Appointed 17 preferred bidders totaling 1456MW generation capacity • The Department was pleased to note the competitive pricing offered in the bids received

  4. Introduction (cont’d)

  5. PROCUREMENT

  6. Procurement Process Background Procurement documents* * Subject to variation across each programme.

  7. Procurement Process Background Request for Proposal (RFP)* * Subject to variation across each programme.

  8. Project cost Rand/MWh • Job creation • Socio economic • Local content Bidders with the highest combined price and economic development scores that fall within the capacity allocation per Bid Window are awarded preferred bidder status. COMPARATIVE evaluation * Subject to variation across each programme.

  9. Contractual Arrangement Bidders are issued standardised agreements as part of the RFP. PPAs are issued on a per technology basis. Implementation Agreement (IA) Power Purchase Agreement (PPA) Government Framework Support Agreement

  10. STRUCTURE OF AN IPP

  11. Project Structure • Majority of bidders in the renewables programme use a project finance structure. • Project finance debt is generally more expensive than corporate debt as the only collateral is the project assets. • However, a project finance structure shields the equity sponsors from harm should the project fail.

  12. Typical Shareholding Structure* • Smaller South African players have the opportunity of teaming up with large international players to form a project company. * A typical shareholding structure on the renewables programme. Shareholding structures may be substantially different in other programmes.

  13. Funding Packages • The DOE wishes to optimise the involvement of black people in the IPP projects and ensure that capacity is built within shareholders which are owned or controlled by black people or local communities to enable them to participate in the energy sector. In support of this, the DBSA may offer a funding package (in the form of a loan) to eligible candidates. • The IDC and PIC may also provide loans to South African shareholders.

  14. RENEWABLES & SMALL RENewAbleS

  15. Focus on ED • The DOE is committed to furthering economic development in South Africa as can be seen by the 30% weighting assigned to ED in the scoring mechanism of the renewables programme. The table below illustrates some of the criteria on which the ED scoring is based in the renewables programme:

  16. Small Renewables Fund • The DOE, with National Treasury, is looking to set up a fund to assist small, new developers with financing, as well as reducing the cost and complexity to bid. • KfW(German Government development bank) has offered a 34 million euro loan to contribute to the fund. • The DOE will seek to involve commercial banks (the DOE has already received commitment from the commercial banks to contribute to the fund) and other funders to create a fund large enough to cater to the market.

  17. Small Renewables Fund (cont’d) • The fund may well offer standardised documents and panels of EPC and O&M contractors and equipment suppliers (these are the primary participants in an IPP project); this will assist small new developers to become involved and will further the Department’s aim of encouraging local developers. • This fund will take some time to create which means that the small renewables programme will need to shift timelines to move in line with the fund’s creation. However, this will allow more local developers to participate which is desirable to the DOE, the greater Government, the country and local communities.

  18. RENEWABLESFACTS & FIGURES

  19. Total Project Funding per MW All figures nominal in R’millions/MW

  20. Total Jobs Created* Figures represent totals during construction and operations combined. * One job = 12 person-months

  21. All Renewables Locations

  22. THANK YOU

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