You will recall that the department published an RFP on 3 August 2011 requesting Independent Power Producers to submit a proposal in accordance with the proposed windows on the RFP. All bidders intending to bid for the first and the second window were required to attend a compulsory bidder’s conference held at Gallagher Convention Centre on 14 September 2011.
The RFP is aligned with the Integrated Resource Plan (IRP), which provides for 3725MW of renewable energy up to 2016.The launch of the renewable energy IPP Programme (“the Programme”), on 3 August, was in line with the determination by the Minister in concurrence of the regulator.
This programme will give the department an opportunity to engage the level of interest from the private sector to invest in South Africa, especially in renewable energy. It is important to note that private sector will alleviate the pressure from government in building electricity infrastructure such as power stations. This will give government an opportunity to invest on other social activities which are also of priority at this stage.
I am sure you are aware that the programme is divided into five windows, of which the first window closed on 31 August. According to the information received from the bidders on 31 August 2011 as per the requirement of the IRP, there was a huge interest from the developers to participate in the first window. However, some notified the department of their intention to change from the first window to the second window because they could not meet the readiness criteria as per the RFP.
The RFP requires projects that are ready in terms of Environmental Authorisation, land rezoning and ownership, finance and other qualification requirements. These requirements are of utmost importance in reaching financial close at least by 2014 and 2016. Remember, according to the IRP, we need this MW by 2014 and 2016 and it is crucial to select projects with the potential to deliver the required MW into the grid on time or in accordance with the IRP.
I would like to believe that our documents (RFP, PPA, and other related documents) were robust enough to support a bidder to submit a bid that can reach financial close. We provided bidders with an opportunity to request clarity on our documents by issuing six briefing notes to date in response to queries from the bidders. We have also responded with over 2000 emails sent through the IPP email address.
As mentioned above, the bid submission date was 4 November but bidders were given an opportunity to submit their bids as early as the morning of 3 November 2011. The department received a total of 53 bids.
It is too early to tell you about the content of the bids or the evaluation outcome, although we can indicate that we have different advisory teams looking at different aspects of the bids. The teams are divided into legal, financial, technical and economic development. Each and every aspect of each bid is receiving special attention.
I have noticed that most people are concerned about local content; consequently, I would like to indicate that economic development is of significance to the department. The PPPFA requires that upon evaluation of bids of this nature, the price must 90 percent whilst local content must be 10 percent during the scoring. The department had to request exemption from the PPPFA to ensure maximization of the local content element of the RFP. As a result of the exemption, the RFP provides for 70 percent price and 30 percent economic development.
With regards to the 30 percent for economic development, bidders are required to comply with different thresholds for BEE ownership, job creation, local content, preferential procurement and socio-economic development.
There are minimum economic development qualification criteria which the project company bidding needs to comply with before its bid is evaluated. The project company needs to have a 40% South African participation and a minimum status level 5, in terms of the DTI BB-BEE Codes.
As indicated above in terms of the 70/30 split, the table below gives a high level overview of the 30% portion. Note that job creation and local content take 25% each of which is a substantial proportion of the allocation.
| Economic Development Elements | Weighting |
| Job Creation | 25% |
| Local Content | 25% |
| Ownership | 15% |
| Management Control | 5% |
| Preferential Procurement | 10% |
| Enterprise Development | 5% |
| Socio-Economic Development | 15% |
| Total | 100% |
| Total points | 30 points |
It should also be noted that there are minimum thresholds which have to be met by the bidder in relation to Job Creation, Local Content, Black Ownership and Socio-Economic Development. These thresholds are weighed against targets which the department has in place for each element.
Targets for local content per technology are as follows:
- Wind 25%
- Solar Photovoltaic 35%
- Concentrated Solar Photovoltaic 35%
- Biomass 25%
- Landfilled Gas 25%
- Small Hydro 25%
These targets were developed after consultation with the DTI on the information available regarding the current state of manufacturing within South Africa. These targets may be improved over time depending on how these industries grow locally. It is not the intention of the department to place difficult targets on the bidders which, with the available information from the DTI, cannot be met by local content. The bidders are aware that exceeding these targets will place them in a higher competitive position.
Please note that the department is currently preparing documentation for the small projects (with MW between 1 and 5). We understand that small developers may not have the capacity to meet the requirement of the current RFP hence we will provide a much simpler RFP for the small projects. The experience gained in this programme will play a significant role in the finalisation of the documents for the small projects.
I would like to believe that the processes will continue to improve, as we roll-out the IPP programme, in accordance with the IRP. We will continue to work closely with other government departments who have a critical role in this programme to ensure alignments.
