Karpowerships: No permits, no clarity, no value, no thanks 

OUTA has submitted a formal objection to the National Energy Regulator (NERSA) over the Karpowership applications for generation licences for three floating storage and regasification units (FSRUs) in South African harbours.

“OUTA strongly opposes the applications by Karpowership, its subsidiaries and/or associate companies for generation licences for the three FSRUs at Richards Bay, Coega and Saldanha Bay,” says OUTA’s submission to NERSA.

In March 2021, the Department of Mineral Resources and Energy (DMRE) named Karpowership as the preferred bidder to provide 1 220 MW power in the Risk Mitigation Independent Power Producers Procurement Programme (RMI4P), through floating storage and regasification power plants anchored at Richards Bay, Coega and Saldanha Bay. The Karpowership deal would be for 20 years and could cost as much as R218 billion.

OUTA’s reasons for opposing the applications include:

• The environmental authorisations were refused by the Department of Forestry, Fisheries and the Environment (DFFE).

• There are no port authority permits in the applications.

• There are no gas pipeline permits in the applications, to service the FSRUs.

• There is no evidence in the applications that Eskom has agreed or will agree to buy the power.

• The DFFE’s Green Scorpions are reportedly investigating potentially criminal conduct relating to the extraordinary environmental authorisation granted in June 2020 (and later revoked), just before the RMI4P process was announced.

• There is a legal challenge to the bidding process by unsuccessful bidder DNG Energy, which claims there were procedural irregularities, conflicts of interest and corruption in the process.

• Parliament’s Portfolio Committee on Mineral Resources and Energy is planning an inquiry into the awarding of preferred bidder status to Karpowership.

• The Karpowership projects have not reached financial closure, despite the “non-negotiable” date of 31 July 2021.

• There is insufficient clarity on the tariffs with concern that 60% of the tariff rate is indexed to the US dollar market price of gas, the dollar exchange rate and the carbon price, and significant lack of transparency.

• If NERSA approves these applications, South Africans will be burdened with these costs, plus possibly expensive litigation costs, for two decades.

• These plants will impact negatively on the electricity price in South Africa, and on climate change, air pollution, water pollution and noise pollution in sensitive coastal eco-systems.

“The Karpowership licence applications are incomplete, so NERSA should not even be considering them. OUTA calls on NERSA to reject the Karpowership licence applications,” says OUTA in the submission.

The DMRE has now extended the RMI4P closing date for regulatory processes from 31 July to 30 September, claiming this is not due to the bidders’ failure but to the lack of readiness of government and the buyer (expected to be Eskom). OUTA regards this as yet another questionable step in this procurement.