The Renewable Energy Power Producer Procurement Programme, also known as “REIPPPP”, is a South African private-public programme developed to encourage private investment in South Africa. It is designed to contribute to achieving the national renewable energy target whilst encouraging foreign investment and developing socio-economic and environmentally sustainable growth in South Africa (you will be able to find out more information about the independent power producer programs at the following website https://www.ipp-projects.co.za/).
The type of projects that are covered by the REIPPPP programme include: onshore wind, solar photovoltaic, concentrated solar power and other forms of energy such as biomass, landfill gas, small hydropower and biogas.
To date, 4 rounds of bidding for the REIPPPP programme have been successfully completed. The 4th round project winners were announced in April 2015, however the signing of the power purchase agreements (“PPAs”) for the projects was delayed for over two years due to a number of factors including, inter alia, the financial issues of South Africa’s power utility, Eskom SOC Limited (equivalent to Enel S.p.A), and ex-president Jacob Zuma’s favoured plans to build additional nuclear power plants.
On 04 April 2018, the 27 outstanding PPAs were finally signed by the South African minister of Energy, which means that the “Round 4 projects” can finally take off with the construction of the projects which reached financial close and the bidding for further REIPPPP projects can now be considered. The procurement of the 27 new projects is the biggest independent power producer procurement by the Department of Energy to date, representing a total of R56 billion of investment and about 2 300 megawatts of energy capacity to be added to the national grid over the next five years.
The 5th round of bidding for the REIPPPP programme will be held in upcoming months (the dates must still be confirmed, but we are hopeful that it will be in 2018), which is where opportunity lies for foreign investors (and perhaps certain of your clients). We would definitely be able to provide you with more information as soon as more information has been released.
Generally, the main evaluation criterion for the bid selection process is pricing (as the biggest factor) but includes other factors such as job creation, local content (meaning value added in South Africa by South African recourses and persons) and black economic empowerment (“BEE”) (a selective programme launched by the South African government to redress the inequalities of Apartheid by giving certain previously disadvantaged groups of people economic privileges previously not available to them).
The above bidding criteria encourages joint ventures with local renewable energy companies, as well as a number of international firms to set up local operations. Funding for the programme is procured through a variety of methods including foreign private equity, local private equity and large commercial and development banks.