HomeIndustry SectorsFinance and PolicyNERSA approves Karpowership and 4 other Co’s generation licence

NERSA approves Karpowership and 4 other Co’s generation licence

The National Energy Regulator of South Africa (NERSA) has approved generation licences for the seven preferred bidders in the emergency procurement programme, including three for Karpowership.

NERSA approved the issuing of the licences in a meeting held on 21 September for the seven Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) preferred bidders:

  • Oya Energy
  • Umoyilanga
  • ACWA Power Project DAO
  • Mulilo Total Hydra Storage
  • Karpowership SA Coega
  • Karpowership SA Richards Bay
  • Karpowership SA Saldanha

The RMIPPP programme is comprised of 11 projects totalling 1,996MW. Of the total RMIPP programme, 60% (1,220MW) is made up of three floating power plants. These plants are associated with floating storage and regasification units from Turkish company Karpowership.

The balance of eight projects ranging from 75MW to 200MW incorporates a combination of wind, solar photovoltaic (PV), battery energy storage projects and diesel/gas engines.

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Public hearings start on Karpowership gen licence application

Public hearings were held into the generation licence applications on 19 August amidst growing opposition to the Karpowership projects. This includes a submission by the Organisation Undoing Tax Abuse (OUTA) in terms of the Regulator’s call for comment and response to the licence applications by the public and other affected stakeholders.

The public hearings happened three weeks after the IPP Office extended the 31 July deadline for financial closure of the projects, stated by Department of Minerals Resources and Energy Minister Gwede Mantashe on 21 March when he announced the programme’s preferred bidders.

Objections to Karpowership generation licence not yet addressed

In a statement, OUTA questioned NERSA granting the Karpowership licences “while there are so many outstanding issues and questions over the process”. According to OUTA, these include:

  • Environmental authorisation has been refused by the Department of Forestry, Fisheries and the Environment (DFFE);
  • An internal appeal process by Karpowership is still underway challenging the decision by DFFE;
  • Absence of fuel supply agreement, fuel pipeline licence, or port authorisation; and
  • Eskom has not agreed to enter into a power purchase agreement.

A legal challenge from DNG Energy is underway alleging failure of due process, corruption and nepotism, due to be heard in court at the end of November.

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Op-ed: Risk Mitigation IPPP programme increasingly in disarray

The Organisation reckons a 20 year deal with Karpowership could cost South Africa up to R218 billion.

The non-profit civil organisation questioned the fairness of the bidding process after the DMRE moved the deadline for financial closure of the projects after the bidding process was closed.

“While government has claimed this is due to its own delays, OUTA has previously pointed out that the Karpowership projects are far from ready to achieve financial closure.

“OUTA’s objections included raising queries about the Karpowership tariffs, which are linked to the US dollar price of gas, the dollar exchange rate and the carbon price, with concerns over the likelihood of huge tariff increases over the years. OUTA also objected to significant portions of the Karpowership applications being redacted from public view,” read their statement.

NERSA said in a statement “the Decisions and Reasons for Decision (RfD) will be available on the NERSA website in due course.”

Theresa Smith
Theresa Smith is a Content Specialist for ESI Africa.