South Africa Renewable Energy IPP Request for Proposals

August 2011

Contacts

Introduction

Following publication of the South African Renewable Energy IPP Request for Proposals, the long-awaited procurement process for South Africa’s first renewable energy projects has begun. This legal update outlines the key details of the South African Renewable Energy IPP Request for Proposals.

Headlines in the renewable energy IPP RFP as now issued are as follows:

  • Instead of 1025MW being available for allocation (as originally intended), the Minister has determined that 3725MW generated from renewable energy sources is to be allocated in this first round. The available allocation is broken up as follows: onshore wind – 1850MW; CSP – 200MW; Solar PV – 1450MW; biomass – 12.5MW; biogas – 12.5MW; landfill gas – 25MW; small hydro – 75MW; small projects (1MW-5MW), using wind, solar pv, biomass or biogas technologies – 100MW.
  • As indicated by DoE, selection will be by way of a competitive bid process. Although earlier information was that the 2009 REFIT tariff would act as an upper limit on price, the actual caps are as follows: wind – R1 150/MWh; solar PV – R2 850/MWh; CSP – R2 850/MWh; biomass – R1 070/MWh; biogas – R800/MWh; landfill gas – R600/MWh; small hydro – R1 030/MWh. A bid will be ‘non-compliant’ and automatically rejected during the qualification phase if the price cap is exceeded.
  • If, after the qualification phase, a bid is found to be ‘compliant’, the bid is then evaluated against certain stipulated evaluation criteria. The two main criteria are price and economic development. As regards price, there is a formula to calculate an ‘equivalent annual tariff’ for the MWh price put forward, with points then being calculated according to a further formula. As to economic development, a scorecard has been formulated to which bidders are obliged to respond, thereby enabling the department to determine bidders’ commitment to economic development requirements. Each technology has its own economic development matrix, but common to all are questions of job creation, local content (with special emphasis on local manufacturing), rural community development, skills development and education, enterprise development, socio-economic development, and participation by the historically disadvantaged. The points allocation between price and economic development is 70/30.
  • Bidders whose responses rank the highest will be appointed Preferred Bidders, with as many being appointed as may be necessary in order to provide the maximum allocation of MW for each technology. In the event of selection, a Preferred Bidder will be held to compliance with the price and economic development proposals in its bid, with regular reporting to demonstrate compliance during the life of the project. Non-compliance will result in progressive demerits, and may eventually result in cancellation of the PPA and other agreements.
  • The draft PPA, Implementation Agreement, Direct Agreement and Connection Agreements are non-negotiable, although DoE reserves the right to revise the templates of any of these draft agreements during the course of the IPP Procurement Programme.
  • Bidders will be required to lodge, along with their bids, a bid guarantee issued by a first class South African bank for an amount equal to R100,000.00 per MW proposed in the bid.
  • There are 5 bidding ‘windows’- 4 November 2011; 5 March 2012; 20 August 2012; 4 March 2013; 13 August 2013. If the maximum allocable MW for any particular technology has been allocated during any particular window, then the subsequent windows will not be opened for that technology.
  • Each window has specific milestones. As regards the first window, the timetable is as follows: 31 August 2011 – bidders to submit questions to be dealt with at the bidders’ conference; 31 August 2011 - bidders to notify DoE of intention to submit a bid in respect of the first or second windows; 14 September 2011 – bidders’ conference (attendance is mandatory); 7 October 2011 – deadline for last submission of clarificatory questions; 14 October 2011 – deadline for last issuing of briefing notes by DoE; 4 November 2011 – first window bid submission deadline; 25 November 2011 – selection of preferred bidders in respect of the first window; 19 June 2012 – deadline for signature and effective date of PPA’s, Implementation Agreements, and Connection Agreements, and financial closing.
  • The immediate deadline for those intending to submit bids in the first or second ‘windows’ is to give notification of this to DoE, in the form prescribed in the RFP, by or before 31 August 2011.

On 1 June 2011 Deneys Reitz joined the Norton Rose Group. The know-how, experience and expertise of Deneys Reitz in South Africa is now seamlessly combined with Norton Rose Group's market leading African power and global renewable energy experience.

We continue to be recognised as a leading legal service provider in the renewables sector. In 2010, the Legal 500 recognises Norton Rose Group as ‘the best firm for renewables work bar none’, stating that its ‘lawyers pride themselves on staying ahead of market trends’ and ‘demonstrate understanding of the technical aspects of transactions’.

The South African energy team would be delighted to discuss the programme with you in more detail. Please do not hesiate to contact us.