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S African industry body opposes idea of renewable PPAs renegotiation

Noupoort Wind Farm, South Africa. Source: Mainstream Renewable Power. License: All Rights Reserved

February 18 (Renewables Now) - The South African Wind Energy Association (SAWEA) has voiced opposition to the suggestion that state-owned utility Eskom Holdings SOC Ltd could seek to renegotiate contracts with winners from the first two rounds of South Africa’s renewables programme.

Brenda Martin, CEO of industry body SAWEA, said in a statement that such a move would be a clear breach of contract and would damage investor confidence. She, however, noted that thus far, none of the preferred bidders from Round 1 of the Renewable Energy Independent Power Producer Procurement Programme (REI4P) have received formal requests for re-negotiation of the contracts.

Her statement followed last week’s informal comments by minister Pravin Gordhan, who said that the government was considering renegotiating deals in order to take the pressure off Eskom and electricity tariffs. The utility is in a bad shape, with ZAR 420 billion (USD 29.8bn/EUR 26.3bn) of accumulated debt. According to a presentation released by the Department of Public Enterprises last week, Eskom is “technically insolvent” and “struggling to maintain operational sustainability”.

“SAWEA is mindful of the national imperative to find solutions to Eskom’s financial crisis. However, we question the wisdom of any move to undermine the successful public private partnership that has grown under the REIPPPP, particularly at a time when concerted efforts to attract investors to South Africa are being led by the President, and when bid prices have clearly declined consistently as a direct result of competitive bidding,” Martin said.

SAWEA’s head also pointed out that Round 4 projects bid at ZAR 0.96 per kWh for solar and ZAR 0.76 per kWh for wind, which represents an average drop in price of more than 50% from earlier rounds.

The REI4P programme awarded power purchase agreements (PPAs) a total of 1,416 MW of onshore wind and solar capacity to 28 successful bidders as part of its first round. A further 19 projects with a total capacity of 1,044 MW were selected in the second bidding round.

(ZAR 10 = USD 0.710/EUR 0.627)

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