IPPs get ready to sign after Zuma fuels Eskom action | Fin24
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IPPs get ready to sign after Zuma fuels Eskom action

Feb 10 2017 17:09
Matthew le Cordeur

Cape Town – Eskom has set the ball rolling to sign 26 power purchase agreements (PPAs) that will mean independent power producers (IPPs) can start construction on wind and solar projects.

Eskom’s acting CEO Matshela Koko said on Friday the power utility will sign the PPAs, while the Department of Energy’s IPP Office head Karén Breytenbach said she readying plans to ensure a smooth roll-out for IPPs.

South African Renewable Energy Council (Sarec) chairperson Brenda Martin told Fin24 on Friday her sources said Eskom had reached out to the IPP Office for signature dates on Friday, but Breytenbach could not confirm this.

Eskom spokesperson Khulu Phasiwe told Fin24 on Friday that Eskom had sent budget quotes to the IPPs, which is a precondition before signing PPAs.

It would appear that President Jacob Zuma’s State of the Nation address (SONA) on Thursday contained a directive to Eskom to get the PPAs signed as soon as possible.

"Eskom will sign the outstanding power purchase agreements for renewable energy in line with the procured rounds," said Zuma.

That directive seems to have been heard, loud and clear. However, it followed months of tensions between Eskom, the IPP Office and the IPP industry, and could have long-term investor confidence issues.

The tensions started after former Eskom CEO Brian Molefe sent the industry into turmoil in mid-2016, when he refused to sign any more PPAs. He said they were costing Eskom too much money and were not required due to an oversupply of electricity for declining demand.

Koko continued Molefe’s freeze on the PPAs, saying Eskom would only sign up IPPs at a pace and scale the power utility could afford.

BEE boon was low-hanging fruit for Zuma

However, it would appear that the IPPs have a trump card that Eskom can’t duck: they have an excellent black economic empowerment record. It was therefore a low-hanging fruit for Zuma’s SONA message of speeding up radical economic transformation to combat poverty, inequality and unemployment.

“It’s an excellent investment for jobs, for black economic empowerment and for contributing towards upliftment,” said Breytenbach. “These are all the good things as it gives the opportunity to make those differences towards economic transformation.”

Energy Minister Tina Joemat-Pettersson has acted swiftly and wants to see a fast-tracked programme of action so the IPPs can get their projects under way, explained Breytenbach.

“The minister wants it now,” said Breytenbach. “I just want us to be ready and have a plan. There is a regrouping happening.

“We haven’t done a lot for a few months, but now we are seeing how quickly we can sign. We usually plan these things long in advance, so there is a lot of work to do.”
Martin said she expects to see the PPA signatures soon.

“We are very happy that the president has shown leadership,” she said. “He has made it very clear what has to happen.”

Koko tweeted on Friday: “We welcome the content of president's speech. Following a governance process and within the approved Nersa tariff of 2.2% we are going to sign.”

However, Phasiwe said on Friday that state regulator Nersa “has provided the necessary assurances for cost recovery of these power purchase agreements”.

He said the 2 383 MW of renewable PPAs remaining to be signed have been approved by the Eskom board’s investment and finance committee and approvals have been received from the minister of public enterprises.

“Eskom’s position is that all energy sources, be they nuclear or renewables, should be pursued at a pace and scale that the country can afford,” he said.

“To this end, Eskom supports the introduction of the renewable energy independent power producers as envisaged in government’s Renewable Energy Independent Power Producers Programme.

“To date, Eskom has signed 64 power purchase agreements (PPAs) for a total of 4 000 MW under the RE-IPP programme and two PPAs for the open-cycle turbines for a total of over 1 000 MW.”

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sarec  |  eskom  |  renewable energy  |  ipps  |  energy


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