In December 2014, the Department of Energy (DoE) released the Coal Baseload Independent Power Procurement Programme Request for Qualification and Proposals (RFP). We highlight some of the key features of the RFP.
The RFP provides for more than one bid submission phase. The first bid submission date is 8 June 2015. The DoE anticipates running more than one bid submission phase per year. Projects submitted in the first bid submission phase must be capable of beginning commercial operation by no later than 31 December 2021.
Allocation of Megawatts
The RFP has been designed to procure the allocation of 2500MW of energy. The first bid submission phase has an allocation of 1000MW for projects that are located in South Africa and 600MW for cross border transactions. Each project is limited to a maximum contracted capacity of 600MW.
The DoE has set a cap of 82c/KWh on the tariff for the first bid submission phase. There will also be a cap on the tariff for subsequent bid submission phases.
Term of Power Purchase Agreement, Coal and Limestone Supply Agreements
The RFP provides for a 30 year term for the Power Purchase Agreement (PPA) from the date of scheduled commercial operation and a minimum of a 10 year term for the coal supply agreement and any limestone supply agreement.
Projects that are awarded preferred bidder status are entitled to undertake a refinancing of the project at any time during the 30 year term of the PPA if the project has obtained the prior written consent of the DoE to do so.
The RFP does not prohibit projects being funded in foreign currency. The RFP does limit the DoE’s exposure to foreign currency.
The DoE will only pay the preferred bidder an amount equal to the debt, where the debt has been advanced in a foreign currency, based on the lower of the exchange rate prescribed by National Treasury as at the date of execution of the PPA and the exchange rate prevailing at the date of termination of the PPA together with any hedging breakage costs.
Any prepayment penalties that are payable to lenders for the early termination of the finance agreements are excluded.
Bid and Preferred Bidder Guarantee
Bidders are required to provide a bid guarantee of R150 000 and a preferred bidder guarantee of R200 000 per MW of the contracted capacity of a project.
A preferred bidder will be required to pay a development fee of 1.75% of the total project value to the DoE within 20 business days of signing the Implementation Agreement.