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Acting IPP Office head promises ‘extensive’ talks with stakeholders on new bid documents

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Acting IPP Office head promises ‘extensive' talks with stakeholders on new bid documents

Advocate Sandra Coetzee

19TH AUGUST 2019 

BY: TERENCE CREAMER 
CREAMER MEDIA EDITOR

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The acting head of the Independent Power Producer Office (IPPO), Advocate Sandra Coetzee, has indicated that there should be “no surprises” in the bid documentation that will be released once procurement activities resume again, following a hiatus of nearly five years.

Coetzee, who stepped into the role in late July following the departure of Karen Breytenbach, tells Engineering News Online it is premature to offer detailed insight into the changes being considered. She confirms, however, that these adjustments will be guided by the principles of greater inclusivity and transformation, as well as affordability.

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“With regard to procurement design, the team has done a considerable amount of work that is putting us in a good position for procurement as soon as determinations are in place after promulgation of the Integrated Resource Plan (IRP).  We are actively engaging with our colleagues at the Department of Mineral Resources and Energy (DMRE) in this process."

The IPPO also intends having an “extensive” series of stakeholder engagements ahead of the release of the documentation to ensure the bankability of programmes and that they remain attractive to potential independent power producer (IPP) investors. These engagements will be initiated once the IRP is published.

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“The roll-out of the programme will continue to build on the strong foundations of the past nine years,” Coetzee insists, describing those foundations as being a predictable regulatory framework, as well as proving investors with the certainty of lawful and compliant procurement.

Through the IPPO’s flagship Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) 6 323 MW of mostly solar and wind capacity has been procured since 2011 across 92 separate projects, spurring about R200-billion in investment.

Coetzee’s immediate priority is to ensure that the IPPO is ready to implement any procurement programmes that will arise once the IRP is promulgated and the Ministerial determinations are published. With the energy sector being in crisis, the role of a capable and ready IPPO is important to attract urgently needed investment in generation capacity in South Africa.

Coetzee has deep knowledge and rich experience in infrastructure development in South Africa and across the continent. She also has senior management experience in government and the public sector having previously worked at the Department of Public Enterprises and South African Airways.

The office she is leading currently comprises over 50 people, but its capacity will be supplemented, as has been the case previously, by external professional resources once the competitive bidding processes resume.

Coetzee also emphasises the important roles that other stakeholders play in the procurement process and beyond, from the financial sector, Eskom, national departments to the developers and construction and manufacturing industry.  Consultation and collaboration across a wide range of stakeholders will be part of the roadmap towards procurement, she says.

Coetzee is optimistic about government plans for the “institutionalisation” of the office in the future.  The joint implementation committee of the DMRE, the National Treasury and the Development Bank of Southern Africa (DBSA) has already appointed a consultant to review the institutional options for the IPPO itself.

"A first deliverable will be the options mapping, which will also give an indication of timelines for implementing various options.  Business continuity and preserving the key features of the programme are important considerations in this work," Coetzee tells Engineering News Online.

At the same time, the process for selecting a permanent replacement to Breytenbach has been initiated by the DBSA.  Coetzee confirmed that she is not precluded from applying for the position.

IRP KEY TO UNLOCKING PROCUREMENT

Mineral Resources and Energy Minister Gwede Mantasheannounced in his Budget Vote address to lawmakers in July that the IRP would serve before Cabinet in September. Once Gazetted, the Minister is expected to publish determinations for the procurement of generation capacity from IPPs and/or organs of State, such as Eskom, across the various technologies outlined in the IRP.

The draft IRP currently serving before those social partners represented in the National Economic Development and Labour Council (Nedlac) assumes that new solar, wind, gas, coal and hydro capacity will be added.

Coetzee acknowledges that there are still “loose ends” relating to procurement rounds conducted in 2014 and 2015, but not yet concluded.

The office oversaw a coal IPP programme, through which the Thabametsi and Khanyisa projects were named as preferred bidders, and also managed a small renewables programme and the so-called expedited round of the REIPPPP. Following competitive bidding processes, preferred projects were identified but never procured.

The IPPO will be guided by the DMRE, as well as the National Treasury on how to address these outstanding procurement processes.

Bid window 4 of the REIPPPP reached financial close despite a delay of nearly four years and it may be possible to do likewise with the outstanding procurement processes.

Coetzee acknowledges, however, that conditions have changed materially for coal during the intervening period, with several financial institutions demonstrating a growing reticence towards the funding coal projects. That said, she highlights that the draft IRP before Nedlac makes provision for 1 500 MW of new coal for the period up to 2030.

IPP BACKLASH

Coetzee is concerned, albeit unsurprised, by the current backlash against IPPs, including the initiation of an investigation by the Public Protector against the most recent procurement of generation capacity from 27 IPPs.

The backlash is characterised by a degree of misinformation about the IPP programme, which Coetzee admits has not been properly countered by either government or the industry.

“I don't think we should become defensive. Rather, we need to communicate more clearly about the programme, its costs as well as its benefits.”

She views better communication about the role of the IPPs as particularly important in the context of South Africa's current fiscal constraints, which will require a greater reliance on public-private partnerships to deliver much-needed economic and social infrastructure.

“The IPP model creates much needed fiscal space by transferring the infrastructure investment cost and performance risk to the private sector.  These objectives remain relevant today.” 

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