Page 8 - Energize June 2022
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        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,,
           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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