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Radebe to hold briefing on Independent Power Producers - this might be why

Feb 22 2019 16:10
Lameez Omarjee

Energy Minister Jeff Radebe will on Sunday hold a briefing on Independent Power Producers (IPP), which have been thrust into the spotlight following news of Eskom's unbundling.

This past week Finance Minister Tito Mboweni shared details on how government will provide financial support to help facilitate the turnaround at Eskom.

Government will set aside R69bn for the power utility over the next three years, conditional on the restructure. Mboweni and Public Enterprises Minister Pravin Gordhan will jointly appoint a Chief Reorganisation Officer to oversee the implementation of the turnaround.

Eskom will be split into three entities – generation, transmission and distribution. According to Treasury, the transmission entity will be established first and its board is expected to be appointed by mid-2019.

Part of government's rationale for the break-up is that it would transform the vertically integrated structure of Eskom, to one which is more diversified and can be conducive to a competitive energy sector. The aim is to have more players in the generation space- particularly IPPs.

Gordhan has said that SA needs to be mindful that the electricity systems across the world are shifting from fossil fuels such as coal to renewables.

Some unions have taken issue with this as they believe the transition would lead to mass job losses in the coal sector. The Economic Freedom Fighters (EFF) have also warned that the introduction of IPPs is the beginning of privatisation in the energy sector.

This is despite President Cyril Ramaphosa clarifying before the National Assembly that the unbundling is not privatisation and that the three entities will remain state-owned.

The EFF has suggested that both the president and Radebe have personal interests in IPPs. Both men are linked to SA billionaire Patrice Motsepe, whose company African Rainbow Energy and Power (AREP) is invested in IPP projects. Ramaphosa is married to Dr Tshepo Motsepe and Radebe is married to Bridgette Motsepe, the sisters of Patrice.

Motsepe however called a briefing on Monday at the African Energy Indaba in Sandton to clarify that AREP, which he founded and chairs, did not procure IPPs directly from government. AREP has minority stakes in private companies which tendered for IPPs.

AREP's share in nine current renewable energy projects is R800m, CEO Brian Dames explained at the briefing. This was 3.9% of the total equity value of the R20.6bn fourth round of the Department of Energy's Renewable Energy Independent Power Producer Programme.

Two of the IPPs – Kangnas Wind Farm (located in Springbok, Northern Cape) and Perdekraal East Wind Farm (located in Witzenberg, Western Cape) – were part of the 27 IPP agreements signed off by Radebe last year. 

According to Dames, in 2017 AREP was awarded a 11.25% stake in each of these projects, which was acquired through a bid to Irish company Mainstream Renewable Power, which owns the projects. The bid was originally for a 22.5% stake in the projects but it was denied.

Mainstream was awarded the IPP agreements for Kangnas and Perdekraal East from government in April and June 2015, before Radebe was appointed energy minister.

The total value of AREP's equity in the wind projects is R188.3m.

At the briefing Motsepe also clarified that he does not support the privatisation of Eskom.

"[Neither] AREP nor any company I am associated with will participate or be part of the sale or disposal of any entities or assets of Eskom," he said.

Radebe's briefing is scheduled at 10:00 on Sunday.

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