"Build it and they will come." It’s not just divine direction in the story of Noah’s Ark; it’s also an investment mantra that has seen many business ventures crash and burn.
But for some, like Karpowership, it’s been extraordinarily successful. The Turkish emergency power barge provider has won bids for three projects to supply power to SA.
This will mean power barges — ships that convert liquefied natural gas into electricity — will dock at the ports of Saldanha Bay, Coega and Richards Bay, to supply 320MW, 450MW and 450MW of power to the national grid.
Collectively, they account for more than 60% of the nearly 2,000MW of emergency power the government has procured through its risk mitigation independent power producer procurement programme, which aims to help bridge SA’s yawning electricity supply gap.
The government boasts that the power projects will together bring R45bn in investment to SA, boost local development and create 17,000 "job hours". But the Council for Scientific & Industrial Research estimates the Karpowership deals alone will end up costing SA R218bn.
For the company, of course, it’s a nice gig. However, this costly outsourcing has raised alarm over SA’s poor energy planning.
Along with five other projects, the average weighted cost of this emergency power is R1.57/kWh. That may compare favourably with the diesel-guzzling open-cycle gas turbines (R3.42/kWh) — but it’s pretty pricey against the most recent renewable energy bid round (71c/kWh).
When quizzed in parliament about the programme recently — and about the barges in particular — the department of mineral resources & energy defended the tender, claiming it was Eskom’s system operator that set the parameters for the bids (in other words, that the power be dispatchable).
The procurement also aims to minimise the necessity of using the diesel peaking plant — a major expense for a bankrupt Eskom.
But a common concern is the duration of the programme.
In a panel discussion with Karpowership directors last week, independent energy expert Ted Blom said his main gripe is that the agreements will run for 20 years.
"I think it’s really overkill in terms of timelines and expense," he said. "Why have we got a 20-year emergency? Why do we have a 20-year power barge programme, which is guaranteed by you and me, not by the government? This is an extraordinary cost on us as taxpayers. The government has sold our children’s future."
In addressing the same criticism in parliament, the department’s deputy director-general Jacob Mbele said the programme is not intended to pursue short-term options. A 20-year agreement was built into the risk mitigation tender so investors can recover capital and operating costs at a rate that is affordable for the buyer, he said.
Karpowership won’t have to deploy much capital as far as the ships are concerned — they’ve already been built. But Mbele said that makes no difference.
"We had an open bidding process where the requirements were put out, and they were equally put out to everybody," he said. "The procurement process doesn’t allow that, after people have bid, you change your mind and pick and choose [different arrangements with different bidders]."
Besides, he said, the request for proposals was developed by financial advisers, and the assessment was done by an independent team to ensure a fair process.
Of the 28 bids received, 17 met the functional criteria and minimum threshold requirements; 11 of those were deemed eligible in terms of the technical specification.
When counted against the eight winning projects, Karpowership’s Coega and Richard’s Bay solutions were the second-and third-most cost-effective, according to Karpowership director Sechaba Moletsane.
Mineral resources & energy director-general Thabo Mokoena has stressed that no contracts have yet been entered into. Eskom can only sign contracts once bidders have complied with regulatory requirements and reached "financial close".
To do so, the projects need to obtain the necessary environmental authorisations from the relevant authorities. For power barges, this includes the ports and maritime safety authorities, among others.
They have until the end of July to do this — though SA’s regulatory authorisation system is hardly a well-oiled machine.
As it stands, a number of civil society organisations are expected to use the public consultation process relating to the permits to oppose the barges.
The Green Connection, for one, says the barge projects shouldn’t be endorsed. There’s simply too much data missing, says Liziwe McDaid, strategic lead for the nonprofit.
For a start, too many negative effects — on SA and the environment — have been brushed over and not given the required level of scrutiny, she says. "It’s almost as though the government doesn’t want to know the full impact of its projects, so that it can go ahead with a clean conscience."
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