Karpowership Slates South African Government Over Project Delays

The Turkish company in March last year won the right to supply South Africa with 1,220 megawatts of electricity, or more than 60% of a so-called emergency tender designed to ease intermittent power outages. The 20-year deal was valued at 218 billion rand ($14 billion) at the time. 

It’s yet to get environmental approvals or permission to use port space, faces an indemnity demand from state power utility Eskom Holdings SOC Ltd., and is embroiled in court cases with environmental activists and a rival. While another bidder concluded power-purchase agreements with the energy department on Thursday, Karpowership has been told it won’t be signing at this stage.

There are “notable examples of authorities whose conduct isn’t aligned with the purpose” of the power program, Karpowership said, citing a lack of transparency and urgency. “We expect the government to work together cohesively to unblock the few remaining bottlenecks preventing the delivery of our projects,” it said in a statement sent to Bloomberg.

Its projects will entail 20 billion rand of investment and create several hundred jobs, the company said, adding it has already spent 400 million rand on applications and established an office in Johannesburg. 

Karpowership listed the obstacles as follows: 

• The failure by the Department of Environmental Affairs to rule on a July 13 appeal filed against its June 23 refusal to grant Karpowership environmental clearance. Karpowership said the appeal process should have legally been completed within 120 days but it has been told a decision can’t be expected before July 1.
• The departments of transport and public enterprises have yet to make a decision on whether the company’s ships will be allowed to moor at the nation’s ports. An application was made on May 12, 2021.
• Eskom on March 23 demanded that Karpowership sign a “wide-reaching, open-ended indemnity agreement” that “potentially renders the projects unbankable.” Karpowership hasn’t received a response to a proposal it submitted to Eskom. The other bidders weren’t asked to do the same.
• A High Court decision allowing DNG Power Holdings Ltd. to appeal a ruling dismissing its allegations that Karpowership’s contract was tainted by corruption.
• Separate court cases filed by the Organisation Undoing Tax Abuse and The Green Connection against the National Energy Regulator of South Africa, or Nersa, for granting Karpowership generation permits on the last day they were legally permitted to oppose the award.

The Department of Environmental Affairs said its adjudication of the appeal was delayed because the National Treasury had placed a moratorium on the issuing of government tenders, preventing it from appointing an external expert. The order was subsequently lifted and the expert was due to submit findings on May 31, the department said by email, without saying whether that had happened. It denied breaking the law and said it had been “completely transparent.”

Eskom and the departments of transport and public enterprises didn’t immediately respond to requests for comment. Stefanie Fick, head of legal affairs at Outa, and Liziwe McDaid, a board member at The Green Connection, denied coordinating their lawsuits, saying they had weighed whether it was worth the expense of filing cases.

Karpowership said it worked well with the Department of Mineral Resources and Energy, Nersa and Transnet National Ports Authority.

Activists say Karpowership’s plants will damage the environment and affect fishing. They also allege that the use of natural gas, especially over 20 years, will undermine South Africa’s aim of cutting greenhouse-gas emissions. 

Other companies that won emergency power supply contracts include TotalEnergies SE, Electricite de France SA, Scatec ASA and Acwa Power Co. The project TotalEnergies is backing also uses liquefied natural gas. Scatec, which won three bids to provide a combined 150 megawatts of solar and battery storage electricity, signed power-purchase agreements on Thursday, the only company to do so. 

Karpowership said it received no reply from the government to its offer to have senior management make presentations explaining its projects, which were initially supposed to begin producing power in August. It said it had won all necessary approvals and will start delivering 563 megawatts of power in Brazil in July, 10 months after winning a similar bid in that country.

(Updates with environment department’s comment below bullet points)

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