Economy / 19 February 2019, 10:30am / Kabelo Khumalo
JOHANNESBURG – Business magnate Patrice Motsepe yesterday hit back at claims that he is unduly benefiting from the recently signed independent power producers’ contracts and said that the appointment of his brother-in-law and Energy Minister Jeff Radebe had been for his energy businesses.
Motsepe, however, admitted that his company, African Rainbow Energy and Power (Arep) had stakes in companies that were awarded the contracts.
The billionaire, who serves as Arep’s chairperson, said the company's share in the Department of Energy’s (DOE) Renewable Energy Independent Power Producer Procurement (Reippp) round 4 amounted to less than 10percent or R800million out of the programmes R8.6billion outlay.
“Having relatives in very high positions in government justifiably raises perceptions of favouritism or improper conduct particularly in the context of the Reippp when there is a relationship with the minister of Energy,” Motsepe said.
“When the minister (Radebe) was appointed I told Brian Dames (Arep chief executive) that “we now have a major and serious perception problem, Arep has to fundamentally strengthen its governance and ethical requirements and procedures.”
Arep said it did not participate in DOE’s Reippp projects relating to the provision of electricity to Eskom under rounds 1, 2, 3 and 3.5 which has a budget of R47.2bn.
President Cyril Ramaphosa, who is also Motsepe’s brother-in-law, last year appointed Radebe as the political head of DOE.
In April 2018, Radebe signed an R56bn Reippp contract with 27 independent renewable energy independent power producers (IPPs) to add 2300MW of electricity to the national grid over the next five years.
The procurement process stalled in 2016 after Eskom announced that it would no longer conclude power purchase agreements with IPPs owing to its return to a generation surplus.
Arep’s exposure to the IPP’s is constituted of a 15percent stake in SunEdison it bought from Old Mutual, a 30percent stake in Ngodwana Biomas Project from Fusion Energy, an 11.25percent share in Kangnas and Perdekraal East projects from Mainstream Renewable Power.
The DOE has to approve any transfer of equity or shares under the Reippp programme.
Dames, who previously served as Eskom’s chief executive, said the company had acted ethically in getting stakes in the IPPs.
“It is patently clear that every single one of the 9 Reippp projects that Arep is currently participating in and has a minority interest shareholding, were acquired from privately owned companies and not from the DOE,” Dames said.
Motsepe added that Arep will not exit its current IPP contracts, saying that there are now legal obligations they have to consider.
Last week the DOE told legislators that the first two bid windows of Reippp contracts would be renegotiated.
Peter Attard Montalto, the head of capital markets research at Intellidex, said that the idea of renegotiating IPP costs was somehow to lessen the burden on Eskom, or to make room in the tariff for larger Eskom tariff increases by reducing compensation for IPPs.
“Renegotiation is certainly possible, but the incentive to do so is minimal, given that the feed-in tariffs are guaranteed by the National Treasury (and are a separate line item to Eskom guarantees),” Montalto said.
“Also a significant proportion, maybe around a third of IPP debt from banks has been securitised we believe, and so a renegotiation would be exceedingly complex.”