DNG Energy’s court case sets back power production plans
Three of the seven preferred bidders chosen to provide power by August 2022 say banks are refusing to sign off on the projects until the court case is complete
A court case filed by a losing bidder in SA’s emergency power programme threatens to delay the provision of the electricity by months, as banks balk at providing funding because of the risk of an adverse judgment.
Officials at three of the seven preferred bidders selected to provide power by August 2022 said the lenders were refusing to sign off on the projects until the court case was complete. They asked not to be identified because the talks are confidential.
Earlier in September, the case filed in the High Court by DNG Energy, which alleges corruption by government officials, was postponed until November 30. The deadline for financial close of the projects proposed by the seven preferred bidders has been set at September 30 by the government, already a delay from an initial July 31 requirement.
The delays mean there will be little imminent relief from load-shedding imposed by Eskom. The outages have hindered the performance of the SA economy and damaged investor confidence since 2005.
In addition to Turkey’s Karpowership, which secured about 60% of the contracts to provide 2,000MW of electricity, the winning groups include some of the world’s leading energy companies. TotalEnergies, Electricite de France, Scatec and ACWA Power are all involved.
DNG has, in its court documents, demanded that it replace Karpowership as a preferred bidder and had earlier attempted to have all the other bidders interdicted from reaching financial close. It later dropped the second demand.
Absa, Investec and the Development Bank of Southern Africa were interested in backing Karpowership’s bid, a person familiar with the situation told Bloomberg in May. The other bidders attracted a number of different financial backers.
“We are supporting the programme and are committed to funding several projects,” Nedbank, SA’s fifth-biggest lender by market value, said in response to queries. The bank is unsure whether the court case will affect the ability of Eskom and the government to enter into agreements with the preferred bidders, it said.
Investec said it supports the emergency power programme, without commenting further. Rand Merchant Bank declined to comment and DBSA and Absa didn’t immediately respond to requests for comment.
One of the bidders said that depending on when the judgment on the case is made, and assuming it doesn’t derail the programme, financial close could be reached by February or March and power produced by the end of 2022.
DNG, in a response to queries, said it did not believe its court case was slowing down the programme because there were no legal impediments to stop the bidders from achieving financial close. It also said there were other challenges to some of the projects other than the court case.
“All we want is an honest tender process and a level playing field,” DNG said. “The department of mineral resources and energy had an opportunity to ensure this was done from the outset, and we could already have been moving ahead to build the new power stations the country desperately needs.”
The department did not respond to a request for comment from Bloomberg.
Bloomberg News. More stories like this are available on bloomberg.com
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