The Office of Independent Power Producers (IPP) has confirmed it will oppose a legal attempt by two renewable energy consortia to prevent payment of preferred bidder guarantees called after their projects failed reached commercial close.

The two consortia – Engie-Pele Sannapos Solar PV Consortium and Globeleq-Mainstream SA Renewables Power – have been selected as preferred bidders in Bidding Window 5 (BW5) of the Independent Power Producers Procurement Program in renewable energy, launched in 2021.

A total of 2,600 MW was allocated for the procurement of wind and solar PV technologies during the bidding period, which was the first round of renewable energy bidding launched in accordance with the determinations departmental actions arising from the 2019 Integrated Resource Plan.

This also followed a lengthy supply disruption, triggered when Eskom announced in 2015 that it would no longer enter into new power purchase agreements with IPPs based on the assertion that Eskom had sufficient production capacity.

South Africa then experienced extreme power outages, which have since eased, with load shedding suspended since March 26.

A total of 25 preferred wind and solar bidders were selected in a round in which the weighted average price of wind and solar PV projects came in at 47.3c/kWh, the lowest price proposed since the launch of South Africa’s renewable energy program in 2011.

Several projects, however, have encountered financial difficulties due to supply chain disruptions linked to Covid lockdowns and the surge in energy prices following Russia’s invasion of Ukraine in February 2022 .

A number of BW5 projects have therefore failed to reach commercial close, triggering the payment of preferred bidder guarantees.

The two consortia launched their legal actions in October after the IPP Office “presented payment guarantees from the preferred bidder based on their conditions”.

“Their action is an attempt to prevent payment by ABSA Bank of the preferred bidder’s guarantees,” the IPP office told Engineering News & Mining Weekly in response to questions.

The IPP Office also confirmed its intention to object to both cases, saying that “once the proceedings are concluded, the matter will be heard”.

However, she refused to rely on the amounts involved or on what the tender documents said concerning the conditions for forfeiture of the preferred bidders’ guarantees.

It was also unclear 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 reach financial close , while five projects with a combined capacity of 1,600 MW failed to reach the financial close stage. closure as part of the risk mitigation cycle.

At a briefing in October, the Minister of Electricity and Energy, Dr Kgosientsho Ramokgopa expressed support for removing bid bonds, even if it led to legal challenges.

“We have to follow the rules of this program,” he said.