Stalled South African Power Projects for 1,850 MW Risk Losing Grid Access

(Bloomberg) -- Companies yet to complete financing arrangements to build 1,850 megawatts of power-generation capacity in South Africa in terms of a government tender in 2021 may lose the right to connect to the national grid at the end of this month. 

The access for projects by Karpowership, Acwa Power Co. and others relating to contracts for 2,000 megawatts awarded more than two years ago expires on July 31, national power utility Eskom Holdings SOC Ltd. said in an emailed response to questions. Scatec ASA has achieved so-called financial close for its 150 megawatts of projects. 

The emergency-power program has been beset by delays. Karpowership, the provider of gas-fired plants mounted on ships that won about 60% of the tender, has seen its plans thwarted by lawsuits and environmental challenges. A surge in construction costs globally has also complicated attempts by the bid winners to make financial arrangements. 

Grid access is in short supply in South Africa. The amount of transmission capacity is insufficient, and in the wrong part of the country, for the swath of renewable energy projects being erected in a race to alleviate the country’s worst-ever blackouts. In December, a government award for 3,200 megawatts of wind energy failed because there was no grid connection available.

The amount of electricity that could be affected this month is equivalent to peak demand for Cape Town in winter. 

Eskom is in talks with the Independent Power Producer Office, which ran the tender, to decide on whether to extend the access, the company said.

The Department of Minerals Resources and Energy didn’t respond to requests for comment. The Development Bank of Southern Africa referred questions to the IPPO, which referred queries back to the department. The department and the DBSA oversee the independent producer authority.

If they lose entry to the grid, the companies will need to reapply, potentially incurring further delays to a process that was supposed to see electricity provided by August last year. It’s not clear whether new rules related to access, which will increase the amount of money developers must spend before they know whether they can access the network, will apply. 

The IPPO has extended the deadline for financial close for the projects to Dec. 31 from the end of June, two people familiar with the decision said, declining to be identified as the decision isn’t public. 

In addition to Karpowership and Acwa, companies that hold stakes in winning bid consortiums include TotalEnergies SE and Electricite de France SA.

©2023 Bloomberg L.P.