28 May 2012 by Cliffe Dekker Hofmeyr

Cliffe Dekker Hofmeyr advising 40% of projects that received preferred bidder status in Round Two of the IPP Procurement Programme

Cliffe Dekker Hofmeyr, in conjunction with DLA Piper offices in Melbourne and London are advising on 40% of the projects that received preferred bidder status under Round 2 of the IPP Procurement Programme.

"The Department of Energy (DoE) is currently seeking to procure 3 625 MW of renewable energy capacity from independent power producers (IPPs) between 2012 and 2016. The first bidding window closed in November last year and the second closed in early March this year.

“We are currently also advising on 13 projects that received preferred bidder status in Round 1 and are already under mandate for Round 3 of the programme,” said Kieran Whyte, Director and National Head of the Projects and Infrastructure practice at Cliffe Dekker Hofmeyr.

“Our mandates are spread amongst acting for developers, lenders and contractors. The developers and sponsors are both South African and international, and the lenders are South African financial institutions.
“We have acted on photovoltaic, concentrated solar power (CSP), wind (onshore), hydro, biomass and landfill gas projects. Both our Cape Town and Johannesburg offices were involved in the projects across many practice areas from projects and infrastructure, project finance, environmental, corporate and commercial, intellectual property, BEE, construction and engineering, employment including immigration, tax including foreign exchange as well as customs and excise, competition, public procurement and administrative law. Teamwork has been essential,” said Whyte.

Whyte said that the latest and most advanced renewable energy technology had been introduced in South Africa because of the IPP procurement programme, which was great news for the country. A long term sustainable renewable energy procurement programme would stimulate job creation and localization opportunities.

“A continued rolling renewable energy bid programme will enhance market competition amongst developers. The successful roll-out of Bid 1 and 2 would further reduce perceived programme risk. In the past, some major equipment and EPC contractors were concerned about South African risk. Because of this programme we are seeing new developers and investors coming in to the country."

“Also, the South African energy industry is gaining valuable international experience and skills transfer, which will further enhance local capability and job creation."

“Another positive is direct foreign investment and the continued commitment to the IPP Procurement Programme shown by South African financial institutions,” he said.

In her budget speech in May, Minister Peters said the Renewable Energy IPP Bidding Programme had lived up to expectations by attracting foreign direct investment into South Africa worth about R100 billion over a period of 12 months.

“Round 3 and 4 of the procurement programme could well see an increase in the requirement for localization. Localization objectives will benefit from a long term commitment to procure renewable energy on a regular basis," said Whyte.

With regards to challenges that the programme faces, Whyte noted that secure grid connection arrangements were critical especially grid connection dates. Other challenges would include the implementation of the proposed Integrated Systems Operator (ISMO) Bill and the amendment to the existing Grid Code to allow for self-despatch of renewable power plants.

Whyte said that working with DLA Piper meant that his South African team had full access to international best practice and it had allowed them to harness additional skills set and resource capacity.

“In this regard, we received market recognition for the standard of documentation produced including guidance notes produced to assist clients and our ability to find solutions to the numerous challenges that arose in respect of property related issues and from the nature of the Project Agreements.

“The introduction and implementation of the IPP Procurement Programme has ushered in a very exciting period for all stakeholders in the South African energy sector,” he added.
 

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