Second round of renewable energy bids 'more competitive'
by SISEKO NJOBENI,
2012-08-08 08:23:24.0
COMPANIES vying for a slice of the renewable energy capacity that the government is buying from the private sector had started competing aggressively on price, Standard Bank head of power finance Alastair Campbell said yesterday.
This is indicative of private-sector interest in electricity generation in SA through the independent power producer procurement programme. The second bid window of the programme closed on Monday, three months after the first bid window closed in November.
Mr Campbell described the second opportunity to tender as having been more competitive.
"The second bidding window has resulted in a lot of bidders being aggressive in the pricing of their bids. We expect to see those bidders that secure preferred bidder status, coming in materially below the tariff caps that were set," he said.
Developers had been able to do this through, among other things, the introduction of mezzanine funding instruments, the "tightening" of engineering, procurement and construction, and the shortening of construction periods, he said. Funding margins from banks also shrank.
"The lower tariffs that are being suggested by the bidders will obviously have a very beneficial outcome for end users and have longer-term benefits for the South African economy," he said.
Another difference between the first and the second bid windows was the increased focus on local content. The government had pushed up its local content requirements, which required bidders to focus more on job creation and the use of local skills to complete and run projects.
Ntlai Mosiah, director and head of power and infrastructure advisory at Standard Bank, said localisation was a major factor in the evaluation of the bids.
Mr Campbell said the renewable energy projects were labour-intensive during the construction phase but it would be difficult to create a meaningful number of jobs in the operational phase.
The Department of Trade and Industry wanted the projects to create jobs.
"The challenge that most of our developers have is that when they become operational . they are creating social upliftment and jobs in the area," he said.
Mr Campbell said Standard Bank had underwritten more than R19bn of renewable energy bids at the close of the second bid day.
" While we expect (the second bid window) to be heavily oversubscribed, Standard Bank did have enough appetite and capacity to fund all the renewable energy projects in the latest bidding process," he said.
Standard Bank had underwritten more than R8bn of debt on wind and solar mandates at the close of the first bid window in November.
The Department of Energy requires the projects that have been selected in the first bid window to reach financial close by end-June.
njobenis@bdfm.co.za
COMPANIES vying for a slice of the renewable energy capacity that the government is buying from the private sector had started competing aggressively on price, Standard Bank head of power finance Alastair Campbell said yesterday.
This is indicative of private-sector interest in electricity generation in SA through the independent power producer procurement programme. The second bid window of the programme closed on Monday, three months after the first bid window closed in November.
Mr Campbell described the second opportunity to tender as having been more competitive.
"The second bidding window has resulted in a lot of bidders being aggressive in the pricing of their bids. We expect to see those bidders that secure preferred bidder status, coming in materially below the tariff caps that were set," he said.
Developers had been able to do this through, among other things, the introduction of mezzanine funding instruments, the "tightening" of engineering, procurement and construction, and the shortening of construction periods, he said. Funding margins from banks also shrank.
"The lower tariffs that are being suggested by the bidders will obviously have a very beneficial outcome for end users and have longer-term benefits for the South African economy," he said.
Another difference between the first and the second bid windows was the increased focus on local content. The government had pushed up its local content requirements, which required bidders to focus more on job creation and the use of local skills to complete and run projects.
Ntlai Mosiah, director and head of power and infrastructure advisory at Standard Bank, said localisation was a major factor in the evaluation of the bids.
Mr Campbell said the renewable energy projects were labour-intensive during the construction phase but it would be difficult to create a meaningful number of jobs in the operational phase.
The Department of Trade and Industry wanted the projects to create jobs.
"The challenge that most of our developers have is that when they become operational . they are creating social upliftment and jobs in the area," he said.
Mr Campbell said Standard Bank had underwritten more than R19bn of renewable energy bids at the close of the second bid day.
" While we expect (the second bid window) to be heavily oversubscribed, Standard Bank did have enough appetite and capacity to fund all the renewable energy projects in the latest bidding process," he said.
Standard Bank had underwritten more than R8bn of debt on wind and solar mandates at the close of the first bid window in November.
The Department of Energy requires the projects that have been selected in the first bid window to reach financial close by end-June.
njobenis@bdfm.co.za
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