By Marubini Raphulu, CEO of Hulisani, a JSE-listed energy investment company
Monday, 1 April 2019: Energy minister Jeff Radebe indicated last week that he may use his legislative powers to facilitate the introduction of private electricity supply alternatives to reduce the threat of load-shedding by Eskom in the short- to medium-term. He also revealed that he had approached the Independent Power Producer (IPP) Office to remove obstacles to the development of projects bid in 2015 as part of the so-called ‘Expedited Bid Window’ of the Renewable Energy Independent Power Producer Procurement Programme.
Hulisani, a JSE-listed energy investment company, welcomes the willingness of the minister to intervene. With political will, South Africa’s IPPs are able to solve a short-term energy shortage to ease load shedding in the country, while ensuring long term sustainability through the use of compliant renewable energy methods and companies.
During the ‘Expedited Bid Window’, the founders of Hulisani bid on 675MW solar PV projects with the Mulilo and Total Consortium, as well as 244MW wind projects with Mulilo, which are 100% locally owned. These bids are fully developed with the necessary consents and authorisations and are still valid.
We agree with the minister that the remaining obstacles preventing the award of projects in the ‘Expedited Bid Window’ should be removed to supply quick and efficient power into the Eskom grid. We are confident that we are able to reach financial close for the bids within four to six months and together with the other bidders, can have between 1000 and 3000MW available between 2020 and 2021 at bid prices of as low as 52 cents per Kwh for some of our bids. This is – attractive pricing which is much lower than the current Eskom prices.
We believe strongly that ‘Expedited Bid Window’ projects should be awarded to quickly help alleviate the shortage of power and can be fed directly into the grid between 2020 and 2021. Renewable energy is environmentally compliant, quick to deploy and has the added benefit of creating jobs in manufacturing, construction and during the operational phases of the projects.
These projects come with other benefits, such as the promotion of black industrialists, stimulation of local content and socio-economic development in the areas where the plants are located and can form an integral part of the $100 billion investment drive championed by President Cyril Ramaphosa.
With our experienced management team and our reputable partners, Total and Mulilo, we see this as a win-win situation for the country and we are geared to take advantage of growth opportunities for the company and enhance meaningful participation for local communities.
For South African consumers, unlocking remaining obstacles makes it possible to have stable power supply at lower rates – the signing of a 20-year power purchasing agreement (PPA) by the IPPs commits the power producers to a static tariff, adjusted annually for inflation only thereby always realising a ‘real’ return.
IPP projects are obliged to incorporate minimum levels of economic and socio-economic development in the construction and operation phases of the power plants and must exceed the minimum targets. Local community initiatives taken on by the power plants include creating new businesses, creating feeding schemes and providing bursaries for local students, among others. In our view, this is true impact investing.
Hulisani’s investment strategy is a long-term value creation and yield strategy. As such, we have no doubt that renewable energy offers benefits to the economy and advantages for South African consumers as well as sustainability and environmental value.
Hulisani’s IPP investments
Red Cap Energy – Kouga Wind Farm: a renewable energy project in the Eastern Cape. Commercial operation of the wind farm commenced in March 2015. Kouga Wind Farm has 32 turbines and delivers 80 megawatts of grid-connected.
Rustmo1 PV Solar Farm: Rustmo is a 7MW solar PV plant located in Rustenburg. Rustmo1 was one of the 18 solar PV power plants constructed in the first round of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). Rustmo1 commenced commercial operations ahead of schedule in November 2013. With an installed capacity of 7MW, Rustmo is capable of generating more than 12.5 million kWh of clean solar power annually.
The Khanyisa power project involves the building of a 450MW power generation plant, located on the site of Anglo American Thermal Coal’s Kleinkopje colliery, in Mpumalanga. It will be fuelled by discarded coal from Anglo American Thermal Coal and will function as an independent power producer.
The Avon and Dedisa plants have signed 15-year PPAs with Eskom with the option to renew for another 15 years. The investment ensures enhanced black participation in the operation of the biggest IPP in South Africa, as well as opportunities for further industrialisation in the gas economy. This plant has the potential to convert to gas, thereby moving South Africa towards a low carbon energy production asset. It has a plant life that is close to double that of the 15 years in the PPAs, with the potential to renew the agreement for a further 15 years.
uMhlaba identifies, funds and commercialises land leases underlying the projects that are operational in the REIPPPP. The investment mandate is to procure the long-term cash flows underlying a portfolio of land leases. The opportunity is realised through either a purchase of the lease or the purchase of the land. The land lease income is an income diversification strategy and provides a longer-term position in the renewables sector.
- Marubini Raphulu, CEO of Hulisani, is a former investment banker and admitted attorney with extensive deal-making experience in the energy sector in South Africa and elsewhere on the continent. Hulisani is a black-managed African investment company listed on the JSE. Hulisani is focused on all forms of energy projects, from renewable energy in the form of solar, wind, hydro and biomass energy plants to coal and gas.
A photograph of Marubini Raphulu, CEO of Hulisani is available here: https://drive.google.com/file/d/0B3wp-ExYb5cBLVZRMVlQX19fdE0/view?usp=sharing
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