09/07/2021 | News release | Distributed by Public on 09/07/2021 08:12
South African LNG import firm DNG Energy has asked for its court challenge of an emergency power contract awarded to Turkish firm Karpowership by the Department of Mineral Resources and Energy (DMRE) to be postponed to the end of November.
The Independent Power Producer (IPP) Office - which manages the DMRE's Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) - received a court application from DNG on 28 April asking for Karpowership to be disqualified from the programme. The RMIPPPP aims to alleviate South Africa's near-term electricity supply crisis by fast-tracking 2GW of new generation capacity.
Karpowership was selected as one of the preferred bidders to provide 1.22GW - nearly two-thirds of the overall tender - over 20 years using gas-fired power ships. But DNG argued that the bid process was rigged in favour of the Turkish firm and it wants to be appointed as preferred bidder instead.
DNG claims that some DMRE representatives met with DNG in an attempt to influence the tendering process. The DMRE asked DNG to provide the names of the individuals concerned, but DNG failed to do so, the IPP Office's head, Bernard Magoro, said.
Magoro confirmed that two DMRE officials did meet with DNG, but said that their version of events differed from that of the firm.
The case was scheduled to be heard in the High Court on 9, 10 and 13 September. But the DMRE received court papers on 31 August whereby DNG asked for the hearing to be postponed to the end of November.
DNG said it wants to await the outcome of an inquiry by the Parliamentary Portfolio Committee on Mineral Resources and Energy into the DMRE's award of the contract to Karpowership, which will have 'an obvious direct and material bearing' on its lawsuit.
It also wants an investigation by the national prosecution agency, also known as the Hawks, into potential criminal conduct by Karpowership last year to be concluded first. Karpowership allegedly obtained authorisation from the Department of Forestry, Fisheries and the Environment (DFFE) for its project by using Covid-19 emergency provisions to bypass environmental rules. The DFFE subsequently revoked its permission. The DFFE is yet to decide on Karpowership's appeal against its refusal to grant the firm environmental permission for its project.
Karpowership said in its appeal against the refusal that its proposal has become subject to 'attacks at a multiplicity of levels, most of which are uninformed and needlessly adversarial... The complaints are designed to cause maximum delay in the overall RMIPPPP procurement timeline to financial close, all while the republic is in the grips of an energy crisis.'
In addition, DNG wants public hearings of Karpowership's application for a generation licence by South African energy regulator Nersa to be finalised.
But according to Magoro, the parliamentary inquiry and Nersa process are 'totally unrelated to the court process'. It is quite strange and seemed 'opportunistic' that the DMRE received the application for a postponement after it had filed all its court papers, he said. 'As if DNG is looking for more information that may, for example, come out of the inquiry, whereas I would have thought that the application would be able to stand on its own,' Magoro said.
DNG said it had no concerns about the merits of its case, but its decision to ask for a postponement was 'purely legalistic and pragmatic' so it could 'provide the court with full and accurate evidence'.
The IPP Office received an offer from DNG's legal representative on July seeking an out-of-court settlement based on 'very unacceptable conditions', which was rejected, Magoro said.
DNG refused to reveal the terms of its proposal on the grounds that all settlement negotiations between parties were 'without prejudice and off the record'.
The DMRE is opposing DNG's application to delay the hearing as it wants the RMIPPPP tendering process to be concluded as early as the end of September.
Originally, the deadline for all projects under the RMIPPPP to reach financial close was 31 July. But the DMRE has extended this to 30 September to allow for the finalisation of regulatory processes.
Projects submitted under the RMIPPPP are required to reach commercial operation within 12-18 months after financial close.
The court will decide on 9 September whether to postpone the hearing of DNG's lawsuit or not.