S Africa seeks shorter Karpowership contract

  • : Natural gas
  • 23/06/14

South Africa wants to reduce the duration of a proposed power purchase agreement with Turkey's Karpowership — for emergency power supply from gas-fired power ships — to five years from 20 years.

Recently appointed electricity minister Kgosientsho Ramokgopa said a shorter contract makes more sense because South Africa is likely to close its power deficit in the interim.

The longer the contract period, the lower the tariff would have been, the minister conceded.

Karpowership's controversial 20-year contract award, estimated to be worth over R200bn ($12.5bn), was beset by allegations of corruption and government interference.

Karpowership was selected as a preferred bidder to provide nearly two thirds of the emergency power sought at the tender.

The firm proposes permanently anchoring gas-fired power ships at Richards Bay in KwaZulu-Natal, Ngqura (Coega) in Eastern Cape and Saldanha Bay in Western Cape.

Karpowership's bid received a boost last month after it emerged the transport minister had granted it access to all three ports for 20 years. The directive will enable "unencumbered development of the Karpowership projects", as Transnet National Ports Authority (TNPA) must by law "take all necessary steps to give effect" to it, Karpowership said.

But Karpowership is still struggling to obtain approval from the Department of Forestry, Fisheries and the Environment (DFFE) for its projects. DFFE refused to authorise its Ngqura (Coega) project on the basis that the vessels' location would conflict with a planned port development, which includes a liquid bulk terminal.

Karpowership says it is in discussions with the TNPA to resolve the impasse. The parties agree the location is feasible for an initial 5-7 years, after which Karpowership says it will relocate at its own cost.

The appeal deadline was 28 March, but it emerged last month that DFFE had allowed extra time outside the mandatory 20-day period and Karpowership has since lodged an appeal.

On 23 May, DFFE also rejected Karpowership's application for environmental authorisation of its Saldanha Bay project — on the basis it was "fatally flawed." It declined to give Karpowership more time to submit documents — another decision Karpowership is appealing.

A coalition of civil justice and environmental law organisations last month appealed DFFE's decision to grant Karpowership an extra 60 days to submit an environmental impact assessment (EIA) for its Richards Bay project.

They said it was procedurally unfair that interested and affected parties were not given an opportunity to comment on Karpowership's application, that DFFE's mandate to grant the extension had expired, and that allowing Karpowership to further amend its EIA was an abuse of process.

They also noted that a copy of Karpowership's application for an extension and DFFE's decision were not made available, which they argue stops interested parties from meaningfully participating in the appeals process.

The deadline for emergency power projects to obtain authorisations and reach financial close was originally 31 July 2021. But this has been extended numerous times, with the latest deadline being 14 July 2023.

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