Is the Risk Mitigation Independent Power Producer Procurement Programme on the verge of collapse?

1 October 2021

With reports indicating that the Department of Mineral Resources and Energy (DMRE) is due to extend the deadline for emergency power companies to reach financial close to end of January 2022, the urgent question that Minister Gwede Mantashe needs to answer is whether the RMIPPP is still on track or if it has essentially collapsed?

The latest deadline extension is the second concession from the Department to bidders, after it extended its ‘non-negotiable’ July deadline to September 2021. It is no secret that some of the successful bidders, like Karpowership, are struggling to secure the requisite environmental impact certification due lack of clarity on how their operations will impact the marine environment and coastal communities. Other potential bidders are believed to have withdrawn because of the unrealistic timeframe set out in the initial bid documentation.

Worse still, local financial institutions who had expressed interest in bankrolling some of these projects, a key milestone in securing financial close, are said to be rethinking their positions and withdrawing. They cite the ongoing legal contestation by a losing bidder on the RMIPPP process and the failure by some of the successful bidders to secure environmental impact certification. 

The DMRE cannot keep extending the financial close deadline in perpetuity. If the successful bidders are unable to meet the requirements of their contractual obligations, Mantashe should come clean and inform the country. What his Department should not do is to negotiate environmental impact certification and project finance with the banks on behalf of the RMIPPP bidders. That would be against the contractual terms of the programme which enjoined successful bidders to assume all the risks associated with project implementation. 

If anything, the decision to extend the deadline for financial close appears to be a desperate attempt by the ANC government to buy time and give South Africans false hope that it is attending to the country’s crippling power challenges. The reality is that the DMRE made a mess of the emergency power procurement process from the beginning and these delays are symptomatic of that. Mantashe needs to accept responsibility for his department’s ongoing failure in this regard. 

Issued by Kevin Mileham, DA Shadow Minister of Mineral Resources and Energy, 1 October 2021