South African Power Tender Threatened With Interdict

(Bloomberg) -- A losing bidder in a South African tender for the provision of 2,000 megawatts of power is seeking to interdict the winners from completing their agreements.

The application to South Africa’s High Court by DNG Energy Ltd. threatens to halt the provision of electricity needed to ease recurrent outages in Africa’s most industrialized economy and imperils investment estimated by the government at at least 45 billion rand ($3.3 billion).

The request for the interdict came in the form of an amendment to relief sought in an earlier application by DNG to have its losing bids substituted for those of Karpowership, a Turkish company that was awarded preferred bidder status for the provision of 1,220 megawatts of energy. DNG has also proposed that it could replace bidders other than Karpowership.

The South African company had initially sought to have the entire bid process halted, but then agreed to seek to replace Karpowership to allow the court case to be resolved more urgently. Most of the winning bidders have until the end of July to reach financial close on their agreements.

DNG has alleged that the bidding process was tainted by corruption. That allegation has been rejected by the government and the winning bidders.

“Due to confidentiality, which seeks to protect all parties involved, DNG believes that the information, which is currently available, does not give a full picture up until such time the court allows us air the issues,” said Nto Rikhotso, a spokeswoman for DNG.

Corruption Allegations

Scatec ASA of Norway, which won preferred bidder status to supply 150 megawatts of solar energy this month, has been added as a respondent. The other successful bidders were given that status in March. The winning consortiums include companies such as Saudi Arabia’s ACWA Power and Electricite de France SA.

In addition to DNG’s court case, the tender faces other obstacles.

A South African business organization commissioned a legal opinion that argues South Africa’s transport minister can’t compel the national port authority to allow Karpowership’s floating power plants to moor in the country’s ports.

Karpowership has now commissioned a rival report from its own lawyers, Pinsent Masons, that argues that it can.

The award to Karpowership has also been challenged by environmentalists.

(Updates with additional respondents in 7th paragraph, legal opinion on ports in 10th)

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