Submission by OUTA to NERSA - In response to applications by Karpowership for generation licences for floating power plants at Richards Bay, Coega ...
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Submission by OUTA to NERSA In response to applications by Karpowership for generation licences for floating power plants at Richards Bay, Coega and Saldanha Bay Prepared by: OUTA Presented by: Chris Yelland Energy advisor to OUTA 19 August 2021
OUTA and its position OUTA is a proudly South African non-profit civil action organisation, comprising of and supported by people who are passionate about improving the prosperity of our nation. We envision a prosperous country, with an organised, engaged and empowered civil society that ensures responsible use of tax revenues. Part and parcel to OUTA’s mission is the challenging of legislation and regulatory environment where necessary. This includes participating and engaging with government where public interest is concerned, as is the case with Karpowership’s pending applications. OUTA strongly opposes the applications by Karpowership, its subsidiaries and/or associate companies for generation licences for powerships and floating storage and regasification units at Richards Bay, Coega and Saldanha Bay.
Summary • Lack of transparency in respect of the business case • Environmental authorisation has been denied • No evidence of port authority permits included • No evidence of gas pipeline authorisation included • No evidence that Eskom’s board will agree to PPAs included • Criminal investigation by DFFE underway • Legal challenge by DNG Energy underway • Parliamentary investigation underway • Financial closure may never be achieved
Lack of transparency • Major imported components - LNG fuel and lease costs • Lack of transparency on price variation • Exposure to US$ LNG price; US$/Rand exchange rate; Carbon price • Possible exposure to other exchange rate(s) • Lack of transparency in respect of the business case • Significant portions of licence applications have been redacted • Public in no position to understand or comment on the business case • How does the kWh tariff rate compare with that of other bidders over the 20 year contract?
NATIONAL ENERGY REGULATOR O F SOU TH A fRICA CUTA
ORGANISATION U NDO IN G TAX AB US E
PERMITTING & TECHNICAL INFO
• All the permits should accompany the licence application such as :
./ Land acquisition through purchase or lease or any land usage agreement
./ Environmental Impact Assessment (EIA)
./ Record of Decision (ROD) for Environmental Authorization
./ Permits from South African Civil Aviation Authority
./ Water rights
• Technical information of the project that include the following amongst others:
./ Technology used
./ Technical feasibility studies e.g. radiation studies for Solar projects or wind studies for
Wind projects
./ Connection to the grid arrangements/ wheeling agreements where applicable
./ Single line diagrams of the network connection as well as single line diagrams of the
generation station
./ Fuel to be used and the concluded fuel supplyEnvironmental authorisation denied • Applications for environmental authorisation have been denied by the DFFE • Internal appeals have been lodged • No indication of when internal appeals they will be heard • No indication when the final decision by DFFE will be announced • Whatever the final DFFE ruling, the matter will be taken on review in the courts • Environmental authorisation will drag on for many months, even years
Evidence of port authority permits not included • No evidence provided that port authorities have agreed, or will agree, to provide permits • For mooring of powerships and FSRUs in the harbours of Richards Bay, Coega and Saldanha Bay for 20 years • Nersa's own generation licensing procedures require evidence of permits from port authorities • Significant differing legal opinions have been given by major legal companies Bowman Gilfillan and Pinsent Masons • In respect of the powers of Transnet National Ports Authority (TNPA) to grant such permits • Port authorisations likely to face a barrage of legal challenges, likely to only be finally clarified in the courts
Evidence of gas pipeline authorisation is not included • Nersa itself is the gas pipeline regulator in South Africa • No evidence is provided that Nersa has agreed or will agree to provide gas pipeline licences or permits • In respect of pipelines to transport LNG from shipping tankers to the FSRUs in South African waters • And for pipelines to transport gas from FSRUs to floating powerships in South African habours • Nersa’s own generation licensing procedures require evidence of gas pipeline licences or permits
Evidence that Eskom’s board will agree to PPAs not included • No evidence provided that Eskom board has agreed or will agree to onerous PPAs for 20 years • PPAs for 20 years for gas-to-power operating at high load factors are indeed onerous • Eskom is expressing deep reservations about entering into such PPAs the next 20 years • Nersa's own generation licensing procedures require evidence of PPAs with Eskom • Or at least agreement by Eskom board that Eskom as off-taker will enter into PPAs
Criminal investigation by DFFE underway • Green Scorpions currently investigating potentially criminal conduct • Relating to extraordinary environmental authorisation granted in June 2020 • Exempting Karpowership from undertaking environmental EIAs for its projects • Just before the RMIPPP tender was announced • Supposedly the emergency power was to combat the Covid-19 pandemic • DFFE has now revoked the exemption on the basis that DFFE was misled • The matter is now the subject of a criminal investigation by Green Scorpions
Legal challenge by DNG Energy underway • DNG Energy is conducting a legal action • Against the award of preferred bidder status to Karpowership • DNG Energy alleges procedural irregularities, conflicts of interest and corrupt activities • Allegedly resulted in irregular award of preferred bidder status to Karpowership projects • The court hearing was to take place in the middle of July 2021 • But has since been set down for 9, 10 and 13 September 2021
Parliament’s Minerals & Energy Committee investigation underway • The Parliamentary Committee on Minerals and Energy has taken legal opinion • In respect of its right to initiate a Parliamentary inquiry / investigation into the RMIPPP programme • Parliament’s legal advisors indicate that Parliamentary Committee on Minerals and Energy has this right • The Parliamentary Committee on Minerals and Energy now intends to conduct such an investigation
Summary • Lack of transparency in respect of the business case • Environmental authorisation has been denied • No evidence of port authority permits included • No evidence of gas pipeline authorisation included • No evidence that Eskom’s board will agree to PPAs included • Criminal investigation by DFFE underway • Legal challenge by DNG Energy underway • Parliamentary investigation underway • Financial closure may never be achieved
Conclusions • The Karpowership projects are far from ready for financial closure • There is every likelihood that financial closure may never be achieved • The licence applications themselves are far from complete • a number of serious and far-reaching investigations are still underway • Entertaining or granting Karpowership licence applications now is premature and irrational • Considering the licence applications now is inconsistent with Nersa’s own processes and past practices • Any one of the issues detailed should disqualify the licence applications • Considering the objections collectively, it is astounding Nersa is entertaining the licence applications
Thank you! Submission prepared by: OUTA Submission presented by: Chris Yelland Energy advisor to OUTA 19 August 2021
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