South African Renewable Energy Independent Power Producer Procurement Programme (REIPPPP): Salient Features Of And Changes To The Bid Window 4 RFP For Purposes Of The 1800MW Expedited Bid Submission Window

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Briefing Note 23 and Parts A, B and C of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) Request for Qualification and Proposals (RFP) Expedited Bid Submission Window (EW) dated June 2015 have been released. The salient features and changes from the Fourth Bid Submission Window RFP are set out in this note.

We wish all Bidders success in the EW.

Briefing Note 23 and Parts A, B and C of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) Request for Qualification and Proposals (RFP) Expedited Bid Submission Window (EW) dated June 2015 have been released.  The RFP was first issued in August 2011, reissued in May 2013 and updated for the Fourth Bid Submission Date in May 2014.  The salient features and changes from the Fourth Bid Submission Window RFP are set out below.

Important Dates

  • 29 June 2015 - 10 July 2015 – Registration of Interest Phase.  Registration of interest is done via the REIPPPP website (www.ipprenewables.co.za) and the information required will focus on the location, Technology, MW and grid connection of the relevant Project. Submitting a Registration of Interest form is not compulsory and is not a pre-requisite for the submission of a Bid Response.  The Department’s purpose for the Registration of Interest is an information collecting exercise, particularly in relation to grid connection planning.
  • 3 July 2015 – Release of the EW RFP Volumes.
  • 8 September 2015 – Bid Registration Date.  This is distinct from and in addition to the Registration of Interest Phase.
  • 6 October 2015 – Expedited Bid Submission Date (between 10h00 and 20h00).
  • 11 December 2015 – Announcement of Preferred Bidders in respect of the EW.
  • 31 July 2016 – Signing of PPA, IA, Connection Agreements, Direct Agreements and Financial Close (anticipated to be staggered subject to Government approvals having been obtained).
  • The Scheduled Commercial Operation Date proposed by a Bidder must fall before 31 December 2019.

Headline Observations

The EW will be open to all Projects that are ready for submission within the required timelines, and not only to Projects which were unsuccessful in previous Bid Submission Phases.  The Minister has allocated 1800 MW to be allocated during the EW.  However, the Department is not obliged to allocate all 1800 MW during the EW.  As with previous bid windows, concerns regarding the impact of the REIPPPP on the ZAR funding market may influence the Department to limit the number of MW available to Bidders in the EW and subsequent bid windows.

It is anticipated that the Minister will issue a Third Determination pursuant to section 34 of the Electricity Regulation Act, 2006 that will provide for the procurement of a further 6300 MW to be generated from renewable energy sources.  The EW RFP is one of the various procurement processes that the Government will develop to procure this further generation capacity from renewable energy sources.

The allocation of MW will be subject to the discretion of the Department and confirmation from the Eskom Grid Access Unit that there are no constraints on the available capacity of the substation or the relevant transmission or distribution lines that would hinder connection of the affected Projects.

The Contributor Status Levels of entities will be measured as provided for in the B-BBEE Codes.

Part A

  1. Removed Appendices.  The EW RFP does not require submission of Appendix F (Resolution of Lead Member or Bidder), Appendix G (Resolution of each Member), Appendix R6 (Letter of Confirmation Template relating to Equity Finance to be provided by an individual) and Appendix R8 (Letter of Indicative Support Template from Alternative Funders).  Appendices F and G previously dealt with, inter alia, the authorisation of the Bidder to participate in the REIPPPP by submitting the relevant Bid Response, agreement to enter into a shareholders’ agreement amongst the Members and the Project Company upon the Bidder being designated a Preferred Bidder, and the Members’ confirmation that they will provide the necessary Equity Finance.  These have been removed as Bid Submission requirements under Part B of the EW RFP.
  2. MW available to Bidders in the EW.  The MW available to Bidders in respect of the EW are:

Technology

Maximum MW to be allocated in the EW

Onshore Wind

650 MW

Solar PV

520 MW

CSP

450 MW

Biomass

100 MW

Landfill Gas

15 MW

Small Hydro

40 MW

Biogas

25 MW

Total

1800 MW

  1. Price Caps per Technology.  The Price caps per Technology have been updated.  Notably the Department has elected once more to impose a Price cap on Onshore Wind and Solar PV technologies.  Previously, the Price cap was removed for these Technologies. The new Price caps are as follows (using  base date for CPI adjustment of 1 April 2015):

Technology

Commercial Energy Rate

Onshore Wind

R 760/MWh

Solar PV

R 870/MWh

CSP

R 1370/MWh

Biomass

R 1 475/MWh

Landfill Gas

R 990/MWh

Small Hydro

R 1 117/MWh

Biogas

R 1 475/MWh

  1. Upper limit for foreign exchange exposure to the Department.  As was the case in the Fourth Bid Submission Phase, the Price offered in the Bid Response will be adjusted at Financial Close as a result of movement in the spot foreign exchange rates between those rates in the Bid Response Financial Model and the equivalent rates at Financial Close, such that the Department’s foreign currency exposure will be capped at the lower of: (i) 60% of the Capital Expenditure of the Project (excluding hedging costs and contingencies); or (ii) the actual foreign exchange exposure, in respect of Capital Expenditure (excluding hedging costs and contingencies).
  2. Fully-indexed Price.  In the EW, the Bidder is required to offer one Price only, based on full CPI indexation of the Price.  A partially indexed Price will not be accepted.  The base date for the CPI rate will be 1 April 2015.
  3. Increased Contracted Capacity for CSP.  The maximum Contracted Capacity for a Project utilising CSP technology has been increased to 150 MW.  However, a Bidder will be permitted to submit an environmental authorisation for a Project with a Contracted Capacity up to 100MW in its Bid Response.
  4. Self-build for shallow connection works.  Bidders are to set out their Projects on the basis that all shallow connection works will be completed on a self-build basis to the extent that the Grid Provider’s policies permit.  Bidders are encouraged to approach the relevant Grid Provider to obtain further information on policies and requirements and whether self-build is permissible.
  5. Grid Solution Opinion.  In addition to the cost estimate letter from the Grid Provider, the Bidder may include in its Bid Response an opinion from an independent engineer which confirms the feasibility of an alternative grid solution (Grid Solution Opinion).  The purpose of the Grid Solution Opinion is to assist the Department in deciding whether any Competing Bidders, whose Compliant Bids would rank lower than those which take up the available capacity at the common substation or on the common transmission or distribution lines, could also be appointed as Preferred Bidders. The Department will engage the Eskom Grid Access Unit on the feasibility of the alternative grid connection solution proposed in the Grid Solution Opinion.
  6. Eskom Cost Estimate Letters.  All Eskom cost estimate letters submitted as part of Bid Response must be dated after 25 June 2015.
  7. Leeway as regards non-Compliant Bid Guarantees. The Department may, in its sole discretion, afford a Bidder who has submitted a non-Compliant Bid Guarantee the right to submit a compliant Bid Guarantee within a specified period, failing hich its Bid Response shall be rejected from further consideration.

Part B

Returning Compliant Bidders

  1. Returning Compliant Bidders are exempted from responding to the Land Acquisition and Land Use Criteria and Evaluation and the Environmental Consent Criteria and Evaluation Criteria.  This exemption is premised on the Returning Compliant Bidder submitting a Bid Response:
  • in the EW in respect of a Project which was the subject of a Bid Response submitted in an earlier Bid Submission Phase and such Bid Response was found to be compliant but by virtue of Part C did not become a Preferred Bidder (the unsuccessful Bid Response);
  • using the same Technology as the unsuccessful Bid Response;
  • having the same Contracted Capacity as the unsuccessful Bid Response;
  • that locates the Project on substantially the same Project Site as the unsuccessful Bid Response (any differences in Project Site to be tabled in Appendix AA);
  • that includes a completed Project Site scale drawing; and
  • that includes a completed Appendix AA.

Land Acquisition and Land Use Criteria and Evaluation

  1. Bidders are no longer required to submit proof that all necessary applications have been made to secure the lawful right to use the Project Site.  Bidders are required to identify, through written explanation thereof, any restrictive conditions in the title deeds pertaining to their Project Sites. If restrictive conditions are identified, the Bidder must submit proof to the satisfaction of the Department that the restrictive conditions are capable of being resolved.

Environmental Consent Criteria and Evaluation

  1. A Bidder is required to pass both the general and technology specific criteria detailed in paragraph 2.4 of Part B of the RFP.
  2. Legal Opinion. Across all technologies, if the Bidder believes no EA is required, the Bidder may submit a Legal Opinion addressed to the Department confirming that no environmental authorisation is required in relation to the activities contemplated.

Financial Criteria and Evaluation

  1. Fully-indexed Price.  Bidders are no longer required to submit a partially-indexed Price. Bidders must ensure that their Bid Response includes a fully-indexed Price equal to or below the Price cap applicable to the Technology.
  2. Financial Standing requirements reduced.  The submission requirements in relation to Corporate Finance and Equity Finance have been reduced.  The Bidder is no longer required to include in its Bid Response the audited financial statements of the “guarantor” and or the “ultimate provider”, and the “guarantor” or the “ultimate provider’s” compliance with either the net asset test or the track record test.

Technical Criteria and Evaluation

  1. Eligible Technology.  The eligible/proven technology requirement is no longer required.  This is applicable across all Technologies.
  2. Contracting Company Capability. The Bidder is no longer required to evidence the track record of the contractors responsible for the installation and commissioning of the relevant Technology, and the management of subcontractors.  This is applicable across all Technologies.

Economic Development Criteria and Evaluation

  1. Contributor Status.  Bidders are required to achieve a Contributor Status Level of 5 using the Contributor Status Levels provided for in the B-BBEE Codes.
  2. B-BBBEE Verification Certificate.  For the EW it is immaterial whether any B-BBEE verification certificate was issued in terms of the B-BBEE Codes or the Amended B-BBEE Codes.

Value for Money

  1. Bidders are required to demonstrate Value for Money, as defined in Regulation 9 of the New Generation Capacity Regulations.

Part C

The two evaluation criteria remain Price and Economic Development, noting that the evaluation of Price will involve the evaluation of a fully-indexed Price only.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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