Karpowership races to make South African bid deadline

Turkish firm Karpowership is pulling out all the stops to meet a tight deadline for its three proposed offshore gas-fired power projects in South Africa to reach financial close, but it seems unlikely to succeed.

Karpowership was selected in March as one of the preferred bidders to provide emergency power under a government scheme that will fast-track 2GW to alleviate South Africa's electricity crisis.

The Department of Mineral Resources and Energy (DMRE) set 31 July 2021 as the deadline for all projects under its Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) to reach financial close.

The DMRE has confirmed to Argus that this deadline still stands, despite hints from DMRE minister Gwede Mantashe earlier this month that the previously non-negotiable timeline could be eased. "If it is emergency procurement, we should deal with as if it's an emergency," he said.

But according to the DMRE, "all preferred bidders are [still] expected to meet the deadline" and Karpowership told Argus that it was still working towards achieving this.

The firm was appointed to provide 1.22GW — nearly two thirds of the overall tender — over 20 years using gas-fired power ships berthed at Richards Bay in Kwazulu-Natal, Coega in Eastern Cape and Saldanha in Western Cape.

But last month the Department of Forestry, Fisheries and the Environment (DFFE) refused to grant it the necessary environmental permission, having earlier suspended the firm's application. On 13 July, Karpowership lodged an appeal against the DFFE's decision based on multiple grounds.

It argues that its projects are "vital" for easing South Africa's load-shedding crisis by offering the country access to the "cleaner, more reliable electricity needed to… create a more inclusive economy."

Karpowership refutes the claim that it did not conduct a proper public participation process, and says the fact that nearly 48 local organisations came out in support of its projects is testament to this.

It further dismisses the DFFE's complaint that it did not conduct a thorough study of the impact of its ships' underwater noise on the marine environment. Karpowership says it is impossible to study the impact of a vessel that is not yet in place and, instead it submitted a "rigorous study" of an identical ship in a similar fishing environment in Ghana, on which it then modelled its South African project proposals.

Karpowership's selection as preferred bidder has been heavily criticised by environmental campaigners and other groups.

Apart from Karpowership's plea, the DFFE is currently also considering appeals from other interested and affected parties, who had until 19 July to submit their petitions. Once this has been done, the DFFE has 20 days to respond to appellants. After this, the appeal administrator will draft recommendations to the minister of forestry, fisheries and the environment, Barbara Creecy.

Given that the DFFE could decide Karpowership's appeal as late as September, the firm is unlikely to make the deadline for its projects to reach financial closure.

Nevertheless, the DMRE declined to explicitly say if Karpowership would be disqualified as preferred bidder if it missed the crucial deadline, saying that "the matter is still in court and as such it would be sub-judice".

The DMRE, alongside Karpowership, is currently fighting a lawsuit that was launched by South African LNG importer DNG Energy, which claims that the bid process was rigged in favour of the Turkish firm. DNG is seeking an urgent court interdict to have the appointment reviewed and set aside.

At the same time, Karpowership is facing a probe by the national prosecution agency.

The DFFE's environmental management inspectors known as the Green Scorpions on 15 June referred Karpowership to the Director of Public Prosecutions North Gauteng after investigating the circumstances that led to the authorisation of the firm's project last year. The department revoked its permission after it transpired that Karpowership used Covid-19 emergency provisions to bypass environmental assessment requirements.

The Green Scorpions' referral of the matter to the national prosecution agency indicates that they uncovered prima facie evidence of an offence by Karpowership.

Despite all these challenges, Karpowership still appears determined to win a share of the RMIPPPP tender. "We have confidence in South Africa's institutions, look forward to the next steps, and are eager to get to work generating cleaner, reliable electricity for South Africa," it told Argus.

By Elaine Mills