Subscribe

Power office moved to troubled Central Energy Fund

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 22 May 2017
Energy minister Mmamoloko Kubayi.
Energy minister Mmamoloko Kubayi.

The Independent Power Producer (IPP) office, widely credited for SA's successes on the renewable energy front, is set to become a subsidiary of the troubled Central Energy Fund (CEF).

This was announced by new energy minister Mmamoloko Kubayi in her maiden Budget Vote speech on Friday.

The incorporation of the IPP office into CEF comes at a time when the renewable energy industry has been lamenting Eskom's continuous delays in signing new power purchase agreements (PPAs).

Kubayi said the IPP office was facing financial problems that she believes will be solved once the office is integrated in to CEF. However, two CEF companies ? PetroSA and the Strategic Fuel Fund ? are facing serious financial and governance problems.

The minister noted the CEF is set to implement a restructuring process which will see the African Exploration Mining and Finance Corporation, currently a subsidiary of the CEF, being transferred to the Department of Mineral Resources, along with the Petroleum Agency of SA, hitherto under the authority of the Department of Energy (DOE).

"We will, in the coming months, be embarking on restructuring of the CEF group and create a model that makes it easy for accountability and ensures the entity operates efficiently and in a professional manner," said Kubayi.

The IPP programme attracted close to R200 billion in investment between 2011 and 2015. However, momentum stalled after Eskom opposed the signing of further PPAs with producers.

The IPP office, although part of the DOE, largely worked autonomously, with its offices housed at the Development Bank of SA.

Following the announcement, the South African Renewable Energy Council (SAREC) said it is concerned about the IPP office falling under CEF as the parent organisation is facing serious governance challenges.

"We are not exactly sure how this will impact the industry but the IPP office has had an outstanding track record of success and had gained so much trust from the industry. There has been a lot of confidence in the office," says Brenda Martin, chairperson of SAREC.

"By comparison, the CEF does not have a fantastic track record in regards to governance. There have been several problems at CEF which has led the minister to take decisions to restructure the entity. For the IPP office to go in there right now, it is a little bit concerning because we are not sure what this means.

"We are looking to get a new date on the signing of new PPAs. The programme has been stalled in the past two years and there is no certainty on when it will proceed," Martin says.

Meanwhile, Kubayi has reiterated renewable energy is still part of government's energy mix. She said renewables remain one of the key areas for the country to achieve its mandate of energy security.

"We need to acknowledge there was uncertainty around the independent power producer programme. We will need to evaluate whether or not the programme is assisting us to achieve our objective as initially outlined.

"We need to reflect what are the lessons learned so far and what needs to be improved. We will look at the final report from the two teams of the Department of Public Enterprises and Department of Energy and will act accordingly," she said.

The minister said renewables are one of the most critical tools for government to achieve radical economic transformation.

This, she said, will be done by ensuring that instead of discussing shareholding by black business, efforts are made to ensure ownership patterns are changed.

"We need to look at how best to assist SMMEs [small, medium and micro enterprises], which are interested in participating in this programme. We will need to ensure conducive conditions are created to see them grow and not condemned to debt. We will engage National Treasury to ensure the guarantees we sign are for securing and supporting the participation of SMMEs."

Share