Kubayi: Eskom must sign IPP agreements by end of October

Johannesburg – Energy Minister Mmamoloko Kubayi on Friday announced that Eskom must sign the independent power producer (IPP) power purchase agreements (PPAs) by the end of October.

This followed a stakeholder engagement between the Department of Energy and the Department of Public Enterprises. Eskom refused to sign the agreements in 2016, because it said it had an over supply of electricity and would be paying for more electricity it did not need.

Kubayi said the tariffs have to be renegotiated and can't be more than 77 cents per KWh, as she said the current prices are unaffordable for Eskom.

"All future programmes to be put on hold until a proper review is done and to allow the IEP (Integrated Energy Plan) and IRP (Integrated Resource Plan) to be concluded that will give indication of the capacity we need," she said.

This process is expected to be finalised before the 2018 Budget tabled by Finance Minister Malusi Gigaba.

"With regard to the review of the pace and scale of rollout under the current circumstances of over capacity up to 2021, the departments agree to give feedback on concerns before the date of signing."

She said Eskom's current excess generation would continue until 2021.

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There are 26 preferred bidders across a range of technologies, none of which has reached financial close due to Eskom’s refusal to sign further PPAs.

President Jacob Zuma said the PPAs would be signed shortly after his State of the Nation address in early 2017, but a Cabinet reshuffle delayed that process.

Last week, the South African Wind Energy Association (Sawea) welcomed Kubayi’s announcement on the progress in unlocking the PPAs.

Sawea CEO Brenda Martin told Fin24 that the association welcomed Kubayi’s confirmation that clarity will soon be provided on the date for the conclusion of duly procured outstanding power purchase agreements.

“The thousands of South Africans employed by the industry, the many rural communities surrounding current and prospective wind farms who have been waiting for almost two years for this impasse to be resolved, will be appreciative of the leadership the minister demonstrates in this area,” she said.

“Concluding the outstanding PPAs will ensure that the necessary jobs, investments and developmental objectives intended by the Department of Energy when it initiated SA’s utility scale renewable programme, can be realised.”

Martin previously said the projects represent a combined value of R50bn in investment into the country that has been put on hold.

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