Developers in the dynamic renewable-energy sector of South Africa face high development costs and a complex and stringent bidding process under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), which includes the non-negotiability of the project agreements, states corporate and commercial law firm Cliffe Dekker Hofmeyr projects and infrastructure practice director and national head Kieran Whyte.

Possible solutions to these issues should be proposed and discussed at the 2014 Africa Energy Indaba, he notes.

Cliffe Dekker Hofmeyr advises on solar photovoltaic (PV), concentrated solar power (CSP), onshore wind, hydropower, biomass and landfill gas projects. The firm has advised on 34 REIPPPP bids – 17 successful bids in the first round and seven in the second round – with seven of the bidders that the firm advised receiving preferred bidder status in round three.

“This indaba will be an exciting one for the renewable-energy sector, in general, in South Africa and on the continent. South Africa’s pioneering REIPPPP is something to be proud of,” Whyte says, adding that the issues addressed and lessons learnt through the implementation of this programme will be of key importance.

Although the renewable-energy sector faces financial challenges, South African commercial bank Absa’s Corporate & Investment Banking (CIB), a member of Barclays, will provide R10.8-billion of debt funding for six projects in the third round of the REIPPPP.

This funding follows the announcement of the preferred bidders by the Department of Energy (DoE) in October last year.

This is about a third of the total debt funding that is being committed by South Africa’s commercial banks, positioning Absa as one of the largest funders for the third round.

Last month, the DoE announced that 17 projects across various technologies achieved preferred bidder status in the third round of bidding. These projects are expected to produce about 1 472 MW of renewable energy a year.

Absa CIB acts as a mandated lead arranger and lender to projects totalling a combined yearly power output of 635 MW, including 360 MW of onshore wind, 200 MW of CSP and 75 MW of solar PV power.

“This represents a significant commitment from the bank to establish a renewable- energy sector in South Africa,” says Absa CIB head of resource and project finance Theuns Ehlers.

“We will be ready to disburse funding as soon as all documentation is finalised and hedges are closed. We are pleased that we will finance three out of the seven wind projects – the two CSP projects and one PV project.”

The debt commitment shows that there is still a significant appetite from developers and banks to invest in renew- able-energy projects in South Africa, says Ehlers, noting that Absa started working closely with several local and international independent producers (IPPs) since government launched the REIPPPP in August 2011.

“The successful conclusion of the third procurement process has been very exciting and a big step forward in attracting local and international private players to South Africa’s energy mix. We are encouraged by this having been a highly competitive and open bidding process. Hopefully, this success will also be a catalyst for other programmes, such as cogeneration and cross-border IPPs,” says Ehlers.

All successful bidders are expected to sign project agreements with the DoE by July 30, bringing South Africa’s third round of the REIPPPP , which began almost a year ago, to a close. Developers will have about one month from the date of signature in which to finalise all documentation and foreign currency hedging, after which the projects can be rolled out.

The fourth bidding round is expected to start in July and should be finalised a year later. A portion of the remaining 2 808 MW of the original 3 725 MW allocated to the REIPPPP could be allocated in the fourth round.