On 4 June 2015, the South African Department of Energy (the Department) issued the much anticipated request for bids (the RFB) for the Cogeneration Independent Power Producer Procurement Programme (the Cogen IPP Procurement Programme). In order to download the RFB, prospective bidders are required to register at http://www.ipp-cogen.co.za and pay a non-refundable documentation fee of ZAR14,500 exclusive of VAT.

Key points of the RFB are highlighted below. 

BACKGROUND

  • The Department will procure electricity from three technologies:

Waste to Energy – the primary permitted fuels are waste heat, process furnace off-gas and any other nonrenewable energetic waste emitted from an industrial process. However waste or discard coal is not a permitted primary fuel for a Waste to Energy project under the Cogen IPP Procurement Programme;

Combined Heat and Power (CHP) – the primary permitted fuels for CHP projects are coal, waste or discard coal, natural gas and primary liquid fuels; and

Industrial Biomass – the primary permitted fuels for this technology are sugar bagasse; field trash and other sugar related renewable wastes associated with the host facility process; mill wastes, including chips, saw dust, shavings, soaps, methanol, sludges, bark and black liquor; and agricultural or forestry residue including alien vegetation clearing.

  • The Cogen IPP Procurement Programme has two common characteristics across all the technologies. First, the fuel and / or energy source originates from an underlying industrial process and secondly, the cogeneration facility is coupled to the industrial process of a host plant.
  • The total megawatts available for bidding in the first bidding window are 800 MW, to be allocated across the technologies as follows:

Click here to view table.

  • Each project must have a contracted capacity of between 1 MW and 50 MW.
  • The price caps set for each technology under the first bidding window are as follows:

Click here to view table.

KEY DATES

  • Š It is anticipated that there will be approximately four bidding windows under the Cogen IPP Procurement Programme. The first bid submission date will be 10 August 2015 with the announcement of preferred bidders expected to be made on 17 September 2015. 
  • Bidders must notify the Department on or before 22 July 2015 of their intention to submit a bid response for the first bid submission date.
  • Projects bid for in the first round must be capable of beginning commercial operation before 17 November 2016.
  • After the first bid submission date, the Department will determine the total megawatts available at the next bid submission date and advise bidders by way of a briefing note.
  • Š It is anticipated that the second bid submission date will be 1 September 2015, the third bid submission date will be 27 October 2015 and the fourth bid submission date will be 23 November 2015.

BIDDING PROCESS

  • The Cogeneration IPP Procurement Programme will be undertaken in accordance with the provisions of the Preferential Procurement Policy Framework Act (PPPFA) and the PPPFA regulations.
  • Accordingly, the assessment of bid responses is conducted in two stages. In the first stage of assessment each bid response is assessed against certain compliance and functionality criteria. A bid response that does not meet all the criteria on an absolute basis (100 per cent compliance) will not proceed to the second stage.
  • In the second stage of evaluation, all compliant bids are evaluated on the requirements of price and Contributor Status Level on a 90 / 10 points system as required by the PPPFA and the PPPFA regulations.
  • In terms of the compliance and functionality criteria, a bidder is required to demonstrate, compliance with certain simplified legal, technical and financial criteria. This is a significant departure from the other IPP procurement programmes which have detailed and complex bidding rules and requirements.
  • Bids will be required to remain open and capable of acceptance for four months from bid submission.
  • The government-side project documents comprise the Power Purchase Agreement and the Implementation Agreement only. As with the other IPP procurement programmes, these documents have been issued on a take-it-or-leave-it basis and may not be negotiated or marked-up.

Overall, the release of simplified bidding documents will be welcomed by investors who have been preparing to participate in cogeneration projects. This is also an important step in ensuring the diversification of the country’s energy mix and introducing much needed new electricity generation capacity, in order to help alleviate South Africa’s electricity crisis and contribute to economic growth and development for decades to come.