Monday, January 24

South African banks resist backing emergency power bidders

A court case brought by a losing bidder in South Africa’s emergency power program threatens to delay electricity supplies for months, as banks refuse to provide funds due to the risk of adverse judgment.

Officials for three of the seven preferred bidders selected to provide power in August 2022 said the lenders are refusing to approve the projects until the court case is completed. They asked not to be identified because the conversations are confidential.


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The case brought in the South African High Court by DNG Energy, alleging corruption by government officials, was postponed earlier this month until November 30. The deadline for the financial closing of the projects proposed by the seven preferred bidders was set for September 30 by the government, and a delay from an initial requirement of July 31.

The delays mean there will be little imminent relief from intermittent power outages imposed by state power company Eskom. The disruptions have hampered the performance of the South African economy and damaged investor confidence since 2005.

In addition to Turkey’s Karpowership, which secured around 60% of the contracts to provide 2,000 megawatts of electricity, the winning groups include some of the world’s leading energy companies. TotalEnergies SE, Electricite de France SA, Scatec ASA and ACWA Power are involved.

DNG, in its court documents, demanded that it replace Karpowership as the preferred bidder and had previously sought to have all other bidders barred from reaching financial close. He later dropped the second lawsuit.

Absa, Investec and the Southern African Development Bank were interested in backing Karpowership’s offer, a person familiar with the situation told Bloomberg in May. The other bidders attracted several different financial backers.

“We are supporting the program and are committed to financing various projects,” said Nedbank, South Africa’s fifth-largest lender by market value, in response to inquiries. The bank is not sure whether the court case will affect Eskom and the government’s ability to enter into agreements with preferred bidders, he said.

Investec said it supports the emergency power program, without commenting further. Rand Merchant Bank declined to comment, and DBSA and Absa did not immediately respond to requests for comment.

One of the bidders said that depending on when the judgment on the case is rendered, and assuming it does not derail the program, the financial close could be reached in February or March and the energy produced by the end of 2022.

DNG, in response to inquiries, said it does not believe that its court case is holding back the program because there are no legal impediments to prevent bidders from achieving financial closure. He also said there are other challenges for some of the projects besides the court case.

“All we want is an honest bidding process and a level playing field,” said DNG. “The Department of Mineral Resources and Energy had the opportunity to make sure this was done early on, and we may have already been moving forward to build the new power plants that the country desperately needs.”

The department did not respond to a request for comment from Bloomberg.

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