Page 8 - Energize June 2022

NEWS

Wind energy association unpacks

complexities of procurement process

esponding to the announcements projects to reach financial close needs to be short enough so that pricing from suppliers and
made last month delaying two contractors can be as close as possible to the pricing that was bid on, and long enough so
Rrenewable energy procurement that all permits, consents, and the Eskom budget quote can be obtained, as well as for all
rounds, meant to unlock and deliver new agreements to be negotiated and finalised,” explained Howie.
generation capacity for the country, the While six to twelve months may be an ideal timeframe, this is still challenging for
South African Wind Energy Association’s preferred bidders considering the current international market conditions, which means that
(SAWEA) Working Group for Policy and pricing cannot be locked in for significant periods. On the other hand, regulatory processes,
Markets has provided insights. for example, the water-use licence process, take months to complete, even with the
The sector in general, views the assistance of the Presidency’s office.
interrupted procurement as unfortunate, Further addressing the policy and regulatory environment, Howie and his industry
citing that this delays the achievement colleagues are looking at how processes can be adjusted to ease the pressure on IPPs.
of investment, job creation and security “Firstly, the capacity of various government departments needs to be improved to
of electricity supply that South Africa ensure that requests for permits and consents can be processed as quickly as possible.
desperately needs. However, Chair of the Secondly, given the uncertainty and instability in the global manufacturing and logistics
Working Group, Kai Howie, notes that markets, placing full pricing risk on bidders is not conducive to projects reaching financial
considering the complexity of the market close. Finally, relooking at the risk allocation to ensure that there are not onerous terms
and scale of the procurement process, it is which need to be passed down to suppliers and contractors could go a long way in ensuring
understandable. that the projects reach financial close in a shorter period of time as this would simplify the
“We understand that these projects negotiations significantly,” reported the SAWEA Policy and Markets Working Group.
are complex and that given the chaos on The Group report that the cumbersome policy relating to commercial closure range
the global manufacturing and logistics across a number of departments, which are battling to issue permits and consents timeously.
markets, as well as inevitable process The sector has noted that the Department of Water and Sanitation has certain capacity
delays, it is not entirely surprising that challenges, which are being addressed to improve turnaround times.
there has been a postponement to signing Adding his voice to the conversation, SAWEA CEO Niveshen Govender said in closing,
the agreements with the state utility and “I estimate that a period of around 12 months is a more realistic timeframe, which should
government departments, and achieving be incorporated into the procurement process to reduce the public perception of delays;
financial close where funds can be drawn however, considering that we are dealing with billion Rand projects that require in excess of
down to fund the construction of these sixty applications, licences, permits, agreements and regulatory compliance processes, this is
renewable energy projects,” said Kai never going to be a simple task.”
Howie: Chair, SAWEA Policy and Markets
Working Group. Contact SAWEA, Phone 010 007-5655, admin@sawea.co.za, https://sawea.org.za
BW5 preferred bidders are now
expected to reach financial close by the
end of next month, or late September
2022, pushed out from end-April, which
was just six months after the bidders
announcement in October last year. Whilst
it isn’t certain which of the preferred
bidders are earmarked for commercial
and financial close for the two allocated
deadlines, as the discussions between the
preferred bidders and Eskom are generally
confidential, Howie explains that the
original timeframe was actually very tight.
He also explained the complexity around
setting an ideal timeframe, considering the
policies and pricing requirements.
“The ideal timeframe for these

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