South Africa Judgment Removes Obstacle to Additional Power

(Bloomberg) -- A key obstacle to an emergency program to supply 2,000 megawatts of power to South Africa’s grid has been removed with the dismissal of a legal challenge to the process by a losing bidder. 

DNG Energy Ltd., which was seeking to supply power from gas-fired plants, had its application to halt the process dismissed and was ordered to pay legal costs, according to a judgment distributed by South Africa’s High Court on Sunday.

DNG had alleged that corruption involving government officials had led to Turkey’s Karpowership, which supplies electricity from gas-fired plants on ships, winning the bulk of the emergency power contract. The government countered that DNG’s bids didn’t meet its requirements and rejected the allegations made against it.

“The demonstrable reason for DNG’s unsuccessful bids was because it failed to meet a myriad” of qualification criteria, Judge Joseph Raulinga said in his judgment. The company also submitted additional documents without getting the correct permission from the court, he said. 

DNG had demanded that its bids replace those of Karpowership.

“I believed in the merits of our case and we will study the judgment,” DNG Chief Executive Officer Aldworth Mbalati said in an interview. “If we believe there are merits for an appeal we will appeal.”

The judgment brings to an end a legal saga that had stopped Karpowership and other successful bidders including Scatec ASA, Acwa Power Co. and Electricite de France SA from concluding financing arrangements with banks on their projects. 

Still, while the first contracts were awarded in March 2021 and power was expected to be supplied by August this year, the delays caused by the lawsuit mean that deadline is now likely to be missed. That could prolong the intermittent power outages that South Africans have been experiencing for more than a decade because the state power utility Eskom Holdings SOC Ltd. can’t meet demand. Those outages hit a record last year.

While the government-imposed deadline for concluding the financing arrangements was set for Monday, it has now been extended until the end of March.

Karpowership, which won the rights to supply 1,220 megawatts of power for 20 years at a cost of 218 billion rand ($14 billion), is yet to get environmental authorization for its plans. It also needs to conclude agreements with Eskom and the state ports company.

While Karpowership would burn gas to supply power, some of the other bids included solar power projects in addition to using diesel and gas.

Karpowership has been “convincingly vindicated by the ruling,” the company said in a response to a query. “Today, we are one very significant step closer” to commercial closing and the implementation of the company’s three projects.

(Updates with extension of financial close in fourth last paragraph)

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