PPC-Energy:Update on Window 1 RE-IPP

Procurement Programme.

07 June 2012

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Presentation Content Introduction.

RE-IPP Procurement Process Background.

Overview of Evaluation Process (bid window 1).

Sequence of event.

Evaluation Composition.

Preferred Bidder Results and MW allocation.

Financial Evaluation.

Bid Window 2 progress.

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Introduction

• The procurement documents were released on the 03 of August 2011 and compulsory bidders conference for the first and second window on the 14 of September 2011.

• The document provides for procurement of 3725MW in five different rounds subject to the availability of the MW

• The Department, under bid window one:– Received 53 Bids by the 4th of November– Announced 28 preferred bidders in December 2011

• With regards to bid window two:– Received 79 bids on the 5th of March 2012– These bids amount to 3255MW whilst the cap was 1275MW

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Procurement documents:

• Part A: General Requirements and Rules• Part B: Qualification Criteria• Part C: Economic Development

Request for Proposals

• Wind PPA• Solar PPA• Small hydro PPA• CSP PPA…….etc

Power Purchase Agreement

•Contract between the IPP and the Department•Obligation for IPP to deliver on economic development•In buyer default – Department to pay the IPP

Implementation Agreement

Procurement Process Background

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Procurement Process Background:

IPP

GovernmentEskom

Government Framework Support Agreement

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Contractual Arrangement

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Request for Proposal (RFP)

• Requirements• Rules

RFP Part A

Procurement Process Background

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PART C EVALUATION

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Price70 %

30 %Economic Dev

Job creation Socio -Economic Local content Preferential Procurement

Project costRand/MW

OVERVIEW OF EVALUATION PROCESS(BID WINDOW 1)

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Event Date

Ministerial determination (in consultation with National Energy Regulator of South Africa)• 3, 725 MW of new generation capacity required by 2016

Q2 of 2011

Programme launch• DoE issued a Request for Proposals

31 July 2011

Procurement uploaded on DoE website• Interested Bidders requested to register on a dedicated

programme site: www.ipp-renewables.co.za

03 August 2011

Compulsory Bidders’ Conference• Interested Bidders taken through the bidding process• Drew interest from across the globe

14 September 2011

Close of 1st Bidding Window• Evaluations ensued from 04 to 28 November 2011• Conducted by international and local financial, technical and

legal experts

04 November 2011

Announcement of Preferred Bidders• 28 preferred out of 53• Projects need to reach financial close by June 2012

07 December 2011

Sequence of Events: Bid Window 1

Evaluation team:

• International reviewers• Legal review – Linklaters (UK)• Technical review – Blueprint consult • Financial review – cross-moderation between the

two Financial Advisory firms• Governance review – Ernst & Young

• Legal evaluation team• Bowman Gilfillan• Edward Nathan Sonneberg• Ledwaba Mazwai• Webber Wentzel• BKS

• Technical evaluation team• Mott Macdonald

• Financial evaluation team• Ernst & Young• PWC

Evaluation Streams:

• Legal Environment• Environmental Authorization

• Legal Land• Land right• Notarial lease registration• Proof of land use application

• Legal Commercial• Acceptance of the PPA• Project structure

• Economic Development• Contributor status level 5• Compliance with threshold

• Financial• Full and partial price

indexation

• Technical• Eligibility• Energy resource

Evaluation Composition

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Renewable Energy IPP’s: Window 1 Preferred Bidder

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Allocation to Preferred Bidders: Window 1

Allocation per Determination Still Available MW allocation

per Determination

MW Percentage MW PercentageSolar PV 631.53 43.6% 818.47 56.4% 1450.00Solar CSP 150.00 75.0% 50.00 25.0% 200.00Wind 633.99 34.3% 1216.01 65.7% 1850.00Biomass 0.00 0.0% 12.50 100.0% 12.50Biogas 0.00 0.0% 12.50 100.0% 12.50Landfill gas 0.00 0.0% 25.00 100.0% 25.00Small Hydro 0.00 0.0% 75.00 100.0% 75.00Total MW 1415.52 39.0% 2209.48 61.0% 3625.00 Total Capacity - Bids Received 2127.66 Percentage Preferred Bidders 66.5%

Number of Passing Bids 28

Contracted Number of Jobs: Window 1 & Window 2 Compared.

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Jobs during construction Jobs during operations

First Round 13 908 874

Second Round 22 590 1 371

FINANCIAL EVALUATION(BID WINDOW 1)

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Introduction

• Majority of bids to a generally high standard;• No bidder submitted a fully compliant Part B submission;• Significant number of “failures” related to non-material

omissions and inconsistencies perhaps reflecting tight timeframe for bid preparation;

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Financial Evaluation

Key areas of shortcoming included:• Letters of support not provided by parent company &/or

funders;• Rationale and quantum of success fees not fully described;• Limited information on hedging strategies;• Incomplete financial accounts for equity participants• Calculation of partial/fully indexed tariffs not done

comprehensively.

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Financial evaluation results

Results post-clarification:

Solar PV Wind CSP Hydro TotalPass (MW) 682 701 150 0 1533

No. Projects 21 10 2 0 33

Fail (MW) 357 233 0 4 594

No. Projects 16 3 0 1 20

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Financial Analysis – Tariffs

• Majority of bidders have priced at or just below the applicable technology price cap;

• Similarly most bidders have shown a strong preference for a fully indexed tariff;

• This may reflect bidder expectation that Round 1 would be undersubscribed.

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Bidding Price Differential: Window 1 & Window 2 Compared.

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Technology2nd Round Average

1st Round Average Difference Price Cap

Solar Photovoltaic R 1 993.20 R 2 662.00 -25.1% R 2 850.00

Onshore Wind R 1 005.30 R 1 134.00 -11.3% R 1 050.00

Small Hydro R 1 030.00 R 1 030.00 0.0% R 1 030.00

Concentrated Solar Power

R 2 512.00 R 2 686.00 -6.5% R 2 850.00

Landfill Gas R 840.00     R 840.00

OVERVIEW OF EVALUATION PROCESS(BID WINDOW 2)

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Financial Investment: Bid Window 2 Number of Projects Net Capacity

(MW) Total Project Cost

(R' 000 000) Concentrated Solar Power

Northern Cape 1 50 R 4 483 Landfill Gas

Gauteng 1 14 R 237KwaZulu Natal 1 3 R 52

Onshore Wind Eastern Cape 10 619 R 12 812Northern Cape 2 238 R 4 853Western Cape 10 599 R 12 202

Solar Photovoltaic Eastern Cape 6 190 R 5 382Free State 4 145 R 4 558Gauteng 3 136 R 3 139Limpopo 4 127 R 4 559Mpumalanga 1 9 R 248North West 3 67 R 2 376Northern Cape 23 799 R 22 745Western Cape 7 221 R 6 708

Small Hydro Free State 2 8 R 202Northern Cape 1 10 R 498

Grand Total 79 3 233 R 85 054

Preferred BiddersGeographic Distribution

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Thank You

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