Eskom ponders its options

Eskom may resume issuing budget quotes for connecting renewable energy projects to the grid, if its board accepts a proposal drafted by the Department of Public Enterprises, the Department of Energy, National Treasury and Eskom officials.

This came as the bid deadline for an independent power project (IPP) for coal generation passes with little more than a week before the submission date for expedited bids in the renewable energy procurement process.

Top of mind

Uncertainty about Eskom’s ability to connect IPPs to the grid and its willingness to issue budget quotes, which are a prerequisite for financial close, would be top of mind for these bidders.

Details of the proposed solution were not available at the time of publication. Department of Energy deputy director-general Ompi Aphane said a solution had been found and the department was awaiting confirmation from Eskom.

Eskom spokesperson Khulu Phasiwe said: “Eskom is currently following internal approval processes that will enable it to start issuing budget quotes for renewable energy projects.”

This is an apparent reference to the need for board approval of whatever assurance was given to Eskom that it will have the necessary funds to strengthen the electricity grid to connect the IPPs and pay for the electricity they produce.

Budget quotes are a pre-requisite for financial close and issuing them obliges Eskom to purchase IPP power. Eskom wanted a guarantee from energy regulator Nersa that it would be granted the revenue to enable it to meet its obligations towards the IPPs.

Nersa dismissed this. A legal advisor close to the IPP process said several round four projects had ground to a halt due to Eskom’s decision.

Financial close

If the Eskom board accepts the proposal, these should be able to resume progress towards financial close. It is not clear when the board will consider the proposal.

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