The Independent Power Producer (IPP) Office has confirmed that it will oppose a legal attempt by two renewables consortia to prevent the payout of preferred-bidder guarantees called after their projects failed to advance to commercial close.

Both consortia – Engie-Pele Sannapos Solar PV Consortium and Globeleq-Mainstream SA Renewables Power – were selected as preferred bidders during Bid Window 5 (BW5) of the Renewable Energy Independent Power Producer Procurement Programme, launched in 2021.

A total of 2 600 MW was allocated for procurement from wind and solar PV technologies during the bid window, which was the first renewables round initiated in line with Ministerial determinations arising from the Integrated Resource Plan of 2019.

It also followed a long procurement hiatus, triggered when Eskom announced in 2015 that it would no longer enter into new power purchase agreements with IPPs based on a claim that Eskom had sufficient generation capacity.

South Africa subsequently experienced extreme power disruptions, which have since tapered with loadshedding having been suspended since March 26.

A total of 25 wind and solar preferred bidders were selected during a round where the weighted average price across both wind and solar PV projects came in at 47.3c/kWh, the lowest prices bid since the launch of South Africa’s renewables programme in 2011.

Several projects, however, ran into financial difficulties amid supply-chain disruptions associated with Covid lockdowns and a spike in energy prices that followed Russia’s invasion of Ukraine in February 2022.

A number of BW5 projects, thus, failed to reached commercial close, triggering the payment of preferred-bidder guarantees.

The two consortia initiated their legal challenges in October after the IPP Office “presented the preferred bidder guarantees for payment on the basis of the terms thereof”.

“Their action is an attempt to prevent a payout by ABSA Bank of the preferred bidder guarantees,” the IPP Office told Engineering News in response to questions.

The IPP Office also confirmed its intention to oppose both cases, saying that “once the pleadings have been closed the matter will be heard”. 

However, it refused to be drawn on the amounts involved or on what the request for proposal documentation said regarding the conditions for forfeiture of preferred-bidder guarantees.

It was also not clear whether similar attempts could be made by others, given that 14 projects with a combined capacity of 1 400 MW selected under BW5 failed to advance to financial close, while five projects with a combined capacity of 1 600 MW had failed to close under the risk mitigation round.

During a briefing in October, Electricity and Energy Minister Dr Kgosientsho Ramokgopa expressed his support for the pulling of bid bonds even if it resulted in legal challenges.

“We must stick to the rules of this programme,” he said.