Karpowerships


                                  Karpowership: Not as simple as plug-and-play

                                  Government is still promoting Karpowership as the solution to South Africa’s energy crisis.

                                  OUTA believes that the energy crisis is due mainly to historical poor decision-making by government and Eskom and that the Karpowership proposal is out of touch with reality. The unaffordability and secrecy around the proposed deal, plus our politicians’ lack of credibility, raises ongoing questions about this deal. We are concerned that unscrupulous politicians are promoting a scheme to the detriment of the public.

                                  What are powerships and how do they generate electricity?

                                  • The Karpowership powerships are floating power plants, which would anchor permanently (for 20 years) in South African ports. They use gas as fuel to generate electricity, which is then fed into the electricity grid.

                                  • Liquified natural gas (LNG) is imported on purpose-built LNG carrier ships. They offload LNG via pipelines to floating storage and regasification units (FSRUs), where LNG is heated and converted to gas, and fed via pipelines as fuel for the gas engines on the powership. The power generated by the powerships is fed by transmission lines to substations on the shore, where the electricity is fed into the grid.

                                  • The FSRUs use seawater to heat up the LNG to change it from liquid to gaseous state, so they discharge cold water, while the powerships use seawater for cooling and so discharge warm water.

                                  • See the illustration below.


                                  Who owns Karpowership?

                                  • The Karpowership independent power producers are private entities, owned 51% by the Turkish energy company Karadeniz Holdings and 49% by the South African company Powergroup SA.

                                   

                                  Would Karpowership end load shedding?

                                  • In 2020, Karpowership was awarded a bid for the generation of 1 220 MW from gas-to-power plants with additional vessels with floating storage and regasification plants. This is enough to eliminate one stage of loadshedding. It is estimated that our country needs approximately 5 000 to 6 000 MW of additional generation capacity to break even. This means that even if Karpowership would hypothetically generate electricity tomorrow, there would still be a short fall of around 4 000 to 5 000 MW of electricity. Karpowership alone will not end loadshedding.


                                  How long will it take Karpowership to start generating electricity?

                                  • The time for power to grid is unknown and could be a year or more, depending on availability of all authorisations including environmental, a power purchase agreement with Eskom, the availability of FSRUs (which are in very short supply as a result of demand from Europe), the pipeline infrastructure, and the time required for building the substation bays and connections to the Eskom grid.
                                  • Karpowership is responsible for construction and payment of all infrastructure from ship to FSRUs to powerships to grid connection.


                                  How long will South Africa be tied to Karpowership if the deal goes through?

                                  • Our government plans a 20-year agreement with Karpowership. Karpowership has previously assisted Asian, African and South American countries hit by natural disasters, unrest and conflict, but these were usually short-term contracts.
                                  •  Karpowership can alleviate an energy crisis, by about one stage of loadshedding only, but this is a short-term solution only.


                                  What will the impact on the environment be?

                                  • The regasification units use seawater to heat up the liquid gas to gas, so discharge cold water, while the powerships use seawater for cooling and so discharge warm water. This leads to patches of hot and cold water, which may affect marine life. For example, nurseries for juvenile fish species, wit stumpnose, could be affected, negatively impacting of livelihoods of local fishers.
                                  • The powerships will be noisy. The ships are expected to operate for 16 hours a day for 20 years and the impact of the chronic noise could cause negative impacts both on the marine world and for terrestrial life. The World Health Organization has set an annual average of 40 dB as a maximum background noise level during sleep, but ambient powership noise would be enough to exceed this in several of the proposed locations.


                                  Has Karpowership got the necessary environmental authorisations to generate electricity?

                                  • Organisations including the Green Connection and the Eastern Cape Environmental Network and community fishers submitted objections. The Green Connection also submitted a complaint against the consultant. In June 2021, the Department of Forestry, Fisheries and the Environment refused Karpowership’s application for environmental approvals. Karpowership appealed, and Green Connection and others objected again, and Karpowership’s appeal was refused and it was told to go back and redo parts of the environmental impact assessment. NGOs and communities including the Green Connection once again submitted objections, with concerns raised over the reduction of risks in the updated EIA, and the decision is expected in March 2023.


                                  How much will a Karpowership deal cost?

                                  • The full 20-year contract for all three powerships is projected to cost more than R200 billion (see here).

                                   

                                  What will it cost the public per kWh of Karpowership electricity?

                                  • The Karpowership bid price in April 2020 was about R1.50/kWh and NERSA said this would be up to R2.80/kWh from April 2022, but an independent consultant estimates the price (as at April 2022) was close to R5/kWh, roughly two to three times the cost of alternative generation methods (see the founding affidavit in OUTA’s application against NERSA, paragraphs 86-102 here). The price of LNG varies day to day depending on the dollar market price of LNG and the rand/dollar exchange rate. Compare this to Eskom’s current average price to standard tariff customers of R1.4648/kWh, which goes up to R1.7380/kWh on 1 April 2023 (see here).


                                  How will the price of gas and a Karpowership deal affect the consumer?

                                  • The deal is linked to the international gas price, which is expected to rise due to the international energy crisis. As with all power plants, the loans need to be repaid and the costs will be passed on to South Africa through our electricity tariffs and possibly taxes. Higher gas prices mean even higher electricity tariffs.

                                   

                                  One alternative: All those solar PV systems on business rooftops

                                  • The fastest, cheapest solution is for Eskom and functioning municipalities to buy power from industrial, commercial and even residential consumers who have installed their own generation solutions.
                                  • The City of Cape Town recently announced that it will pay cash for power fed into the local electricity grid by the City’s businesses and residents who self-generate. NERSA approved a rate of 78.98c/kWh for the City to pay power sellers and the City is adding a 25c/kWh incentive tariff on top of this, and expects this to start operating for businesses from June 2023 and for residents soon after. This is cheaper than the rate at which Eskom will have to buy power from Karpowership, and this is a scheme which other metros should also consider.
                                  • Vietnam created a 25-fold increase in rooftop solar power to more than 101 000 systems in a single year in after a policy decision in April 2020 to offer feed-in tariffs guaranteed for 20 years, adding about 7 400 MW to the grid (see here and here).


                                  What is the benefit to Eskom if Karpowership plugs in at South Africa’s ports?

                                  • The only tangible benefit to Eskom would be that Eskom itself would not be responsible for the generation of the contracted electricity of 1 220 MW. There will be no physical power station (generation capacity) owned or handed over to Eskom, and only the off-take infrastructure would be left.

                                  • The LNG carrier ships, FSRUs and powerships remain Karpowership’s property, while the three locally registered Karpower entities merely generate and sell the electricity to Eskom.


                                  What happens if there is insufficient gas available?

                                  • The current conflict between Ukraine and Russia has escalated the price of gas. Should the import market collapse or sanctions be implemented prohibiting the export of LNG and LPG, little to no electricity would be generated. A desire for access to Russian gas could partly explain South Africa’s current cosying up to Russia.

                                   

                                  Who will be responsible if Karpowership is unable to generate electricity?

                                  • Eskom will use a power purchase agreement to access the electricity generated by Karpowership and then distribute it through the grid. If Karpowership fails to deliver, Eskom may have the right to terminate the agreement and be compensated. Eskom may be left with some monetary compensation, but no means to generate the 1 220 MW. Karpowership can simply pack up and leave.


                                  What will happen if Karpowership packs up and leaves?

                                  • There is no fixed infrastructure offered by floating powerships, aside from shore-based terminals which then connect to the national electricity grid.


                                  Why did OUTA institute legal action against NERSA and Karpowership?

                                  • NERSA’s process of approving generation licences to Karpowership (the three local entities registered in South Africa) has been flawed by a lack of transparency.

                                  • Amongst other things, OUTA argues that the law requires that NERSA acts in the best interests of the country, but OUTA believes that NERSA has failed to do so. The Electricity Regulation Act, which empowers NERSA to issue the licences, requires a fair balance between the interests of customers and end-users, licencees, investors and the public. The National Energy Regulator Act requires that every decision by NERSA be “in the public interest” and “based on reason, facts and evidence”.

                                  • Under these circumstances, the approval of the three generation licences issued by NERSA is a far cry from being in the public interest. NERSA is not being transparent about the reasoning behind granting the generation licences. OUTA has since launched an application to compel the production of the full record for NERSA’s decision (see here). At the time Karpowership applied for generation licences and at the time when OUTA launched its application, various legal, financial and environmental processes were still outstanding, rendering the process flawed from the start.

                                  • For a full summary of OUTA’s relief and grounds for approaching the court, see the section “April 2022: OUTA’s legal challenge” on this page.



                                  Karpowership is not the solution. If we proceed with that option, that will mean South Africa is tied to the agreement for 20 years. Karpowership buys gas (to generate electricity) in US dollars, and the dollar-rand exchange rate fluctuates. So South Africa will be tied financially to whatever the rate is. 

                                  If the agreement falls through, Karpowership can simply pack up and leave, leaving South Africa with no infrastructure to generate electricity (though we would have spent a lot of money by then). At the time when the preferred bidders were nominated, the reasoning was that the power ought to be procured as a matter of urgency. The emergency has since passed, yet Karpowership is STILL on the table.

                                  NERSA's process of licencing the Karpowerships has been flawed by a lack of transparency.

                                  OUTA finds it inexplicable that NERSA granted the Karpowership generation licences while there are so many questions over the process and the Karpowership projects.

                                  OUTA's concerns

                                  On 13 August 2021, OUTA made a formal submission to NERSA, objecting to the Karpowership licences. Our submission is straight forward and sets out why NERSA ought not entertain the application(s) in the first place as many factors and processes are still pending and not yet finalised. We were assisted by energy expert, Chris Yelland. Read the summary and our full submission here.

                                  The concerns we raised include:

                                  • Environmental authorisations were been refused by the Department of Forestry, Fisheries and the Environment (DFFE);

                                  • An internal appeal process by Karpowership is still underway challenging the decision by DFFE;

                                  • The absence of fuel supply agreements;

                                  • The absence of fuel pipeline licences;

                                  • The absence of port authorisations;

                                  • Eskom has not agreed to enter into power purchase agreements;

                                  • There is a possibility of appeal proceedings in the DNG court case challenging the bid awards.

                                  The Karpowerships are to be anchored in Richards Bay, Saldanha Bay and Coega, and are supposed to  between them provide 1 220 MW using gas to power plants with additional vessels with  floating storage and regasification plants. At prices when the deal was agreed, the  20-year deal could cost up to R218bn. 

                                  However, as the deal will be linked to the international gas price, this price is going to rise.  As with all power plants, the loans need to be repaid and the costs will be passed on to the people of south Africa through our electricity tariffs. OUTA foresees that the only means for our government to finance such venture is for this load to be carried by the consumer – meaning that we will see even greater electricity tariffs in order to fund this.

                                  18 February 2020: the Minister of Mineral Resources and Energy (DMRE) issues a Determination on the need to procure 2 000 MW of generation capacity from a range of energy technologies, through the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP).

                                  25 May 2020: The National Energy Regulator of South Africa (NERSA) concurs with the Minister's Determination.

                                  June 2020: Karpowership is awarded an exemption from having to undertake an environmental impact assessment, under an emergency provision, but in August this is revoked and the Green Scorpions start a criminal investigation into an attempt to bypass the law.

                                  7 July 2020: The Determination is gazetted, with a deadline for connection to the grid of December 2021. The procurer of the new generation capacity is the DMRE, and the buyer is Eskom.

                                  24 July 2020: Minister of Public Works and Infrastructure Patricia de Lille gazettes the list of projects designated by the Presidential Infrastructure Coordinating Commission as Strategic Integrated Projects (SIPS). The energy projects include the RMIPPPP, listed as "Emergency/Risk Mitigation Power Purchase Procurement Programme (2000 MW)". The gazetted notice is here. The issuing of this notice was announced three days later by Minister de Lille and Dr Kgosientsho Ramokgopa, who was at the time the Head of Investment and Infrastructure in the Presidency. Their announcement is here. (Ramokgopa was appointed to this position in November 2019, see here, and appointed on 6 March 2023 as Minister of Electricity, see here, and on 6 May 2023 granted the authority to determine new generation capacity and type of generation needed, see here).

                                  24 August 2020: DMRE issues a Request for Proposals for new generation capacity under the RMIPPPP, with commercial operation required by June 2022, and 28 bids are submitted. See here.

                                  18 March 2021: DMRE nominates Karpowership SA Coega, Karpowership SA Richards Bay and Karpowership SA Saldanha Bay as preferred bidders to supply the country with 1 220 MW power of the total RMIPPPP capacity of 2 000 MW. They are three of the eight preferred bidders. Another three preferred bidders are added later.

                                  13 April 2021: Karpowership applies to NERSA for three generation licences for Coega, Saldanha Bay and Richards Bay, with 31 August 2022 as the commissioning date. The applications were revised and resubmitted in May 2021. Karpowership’s applications can be found here: Coega, Richards Bay and Saldanha Bay. NERSA subsequently called for public comments on the applications.


                                  June 2021: The Green Scorpions referred a docket to the Director of Public Prosecutions (DPP) of North Gauteng. It was reported that the Green Scorpions recommended criminal charges against Karpowership for its alleged attempt to bypass environmental impact assessment (EIA) studies required in terms of the National Environmental Management Act.

                                  June 2021: Karpowership SA was selected as a preferred bidder by the DMRE but, prior to NERSA’s decision to grant the generation licences, the EIAs for all three the Karpowership RMIPPP projects were refused by the Department of Forestry, Fisheries and the Environment (DFFE).

                                  July 2021: Karpowership lodged an internal appeal with DFFE pertaining to the refusal of the respective environmental authorisations.

                                  August 2021: Parliament's oversight committee on mineral resources and energy voted to launch a probe into the RMIPPPP. Unfortunately, Parliament withdrew its initial decision to initiate an inquiry and to investigate the award of preferred bidder status to Karpowership for the three projects under the RMIPPP project.


                                  13 August 2021 : OUTA makes formal submission to NERSA, objecting to the Karpowership licences. Our submission is straight forward and sets out why NERSA ought not entertain the application(s) in the first place as many factors and processes are still pending and not yet finalised. We were assisted by energy expert, Chris Yelland. Read our submission here.


                                  19 August 2021: The public hearings to consider generation licence applications of the successful bidders were scheduled by NERSA. These hearings continued despite OUTA’s objections and the objections of several other interest groups.

                                  21 September 2021 : NERSA approves all three Karpowership generation licences, but fails to provide the reasons for the decisions. See OUTA’s comments here.

                                  30 September 2021: DMRE’s extended deadline for RMIPPPP regulatory processes.


                                  29 October 2021 : NERSA publishes the reasons for decisions on the generation licences: see here, here and here. OUTA believes that NERSA applied its mandate too narrowly and did not consider all the factors that ought to inform its decisions, rendering the decisions reviewable in terms of the Promotion of Administrative Justice Act.

                                  December 2021 : NERSA publishes adverts calling for comments on Karpowership applications for gas operation licences. The timelines are botched and not enough information is given to the public. OUTA decides not to make a formal submission to NERSA on these applications as our contentions were listed in our August 2021 submission. However, OUTA writes to NERSA to express concern about the inadequate public participation process.


                                  30 November 2021 to 2 December 2021: Bidder DNG Energy’s application against the DMRE, contesting the award process, was heard.

                                  30 January 2022: The Pretoria High Court dismissed DNG Energy’s application with costs. See                                   here.

                                  27 January 2022: DMRE’s further extended deadline for RMIPPPP regulatory processes.

                                  30 January 2022: Court dismisses attempt by losing bidder DNG to overturn Karpowership award; DNG had alleged tender irregularities and corruption.
                                  3 February 2022 : OUTA writes to NERSA and complains about the botched public participation process on the Karpowership gas licence applications, seeking clarity. OUTA's letter is                                   here. No response was received from NERSA.


                                  31 March 2022: DMRE’s further extended deadline for RMIPPPP regulatory processes; an indefinite extension is now in place.

                                  1 April 2022: DNG was granted leave to appeal to the Supreme Court of Appeal on its failed review application. It's not clear if an appeal was pursued.


                                  26 April 2022: OUTA files an application in the Pretoria High Court to review and overturn NERSA’s decision to award generation licences to the Karpowerships.

                                  6 December 2022: Minister of Public Works and Infrastructure Patricia de Lille gazettes an update to the projects designated by the Presidential Infrastructure Coordinating Commission as Strategic Integrated Projects (SIPS). The energy update includes the Oil and Gas National Program. The gazetted notice is                                   here.

                                  August 2023: Karpowerships reportedly offered to cut the original 20-year contract down to five year; costs remained secret. See                                   here.

                                  17 November 2023: Minister of Electricity Kgosientsho Ramokgopa told parliament's Adhoc Committee on Energy Crisis that the Karpowership contract had been shortened from 20 years to three years although this would mean a higher tariff. See                                   here.

                                  31 December 2023: The DMRE's final extended deadline for financial and legal closure for RMIPPPP projects. The Karpowership IPPs failed to meet this deadline. Eskom subsequently said that the grid access for those projects expired on 31 December and no further extensions would be granted, so Karpowership lost its grid access.

                                  8 November 2024: Minister of Electricity and Energy, Kgosientsho Ramokgopa, told Parliament in a written reply that his department was no longer pursuing the three Karpowership projects as they had failed to reach legal and commercial close by the deadline of 31 December 2023 so their preferred bidder status was terminated. "The Department is not pursuing any projects that failed to reach Legal and Commercial Close under RMIPPPP as this programme is now closed," said the Minister. The reply is                                   here.

                                  OUTA applies to the high court to overturn NERSA's decisions to licence the Karpowerships

                                  On 26 April 2022, OUTA filed an application for the review and setting aside of the decisions by the National Energy Regulator of South Africa (NERSA) to grant the three Karpowership independent power producer (IPP) generation licences.

                                  OUTA’s application was filed in the Pretoria High Court. The respondents are NERSA, four Karpowership companies, the Minister of Mineral Resources and Energy, the Minister of Forestry, Fisheries and the Environment, and Eskom. The Karpowership companies are Karpowership SA (the holding company) and its wholly owned subsidiaries Karpowership SA Coega, Karpowership SA Saldanha Bay and Karpowership SA Richards Bay. OUTA’s action is directed against NERSA, while the other parties are cited due to their interest in the matter.

                                  This is an application in terms of the Promotion of Administrative Justice Act.

                                  OUTA is asking the high court to review and set aside NERSA’s decisions to award generation licences to the three Karpowership IPPs, and order NERSA to reconsider these decisions.

                                  The application is supported by an affidavit by OUTA Executive Director Advocate Stefanie Fick and a confirmatory affidavit from a specialist consultant supporting the views on the negative economic impact and lack of consideration of far more viable alternatives.

                                  OUTA believes that the normal public procurement processes for new generation capacity and private procurements by electricity customers themselves are now overtaking the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), the so-called “emergency” process.

                                  “It is submitted that NERSA has displayed a cavalier attitude towards statutory compliance and public concerns throughout its decision-making process to award generation licences to Karpowership. By doing so, it has failed to properly exercise its mandate in terms of the ERA [Electricity Regulation Act] and fulfil its oversight functions of regulator without the necessary independent checks and balances to ensure that the interests of electricity suppliers are balanced with the interests of customers, the public and the South African economy,” says OUTA’s Advocate Stefanie Fick in an affidavit supporting the application.

                                  “The decisions to award the licences to Karpowership for generation at Coega, Saldanha Bay and Richard’s Bay respectively were irrational, unreasonable, and taken without regard to relevant considerations or with regard to irrelevant circumstances.”

                                  OUTA’s court papers call NERSA’s decisions procedurally unfair, irrational and unlawful


                                  Fick’s affidavit supporting OUTA’s application includes these points:

                                  • NERSA’s decision-making was procedurally unfair. The process was premature and lacking in transparency, with significant portions of the licence applications redacted.

                                  • The law requires that NERSA acts in the best interests of the country, but OUTA believes that NERSA has failed to do so. The Electricity Regulation Act, which empowers NERSA to issue the licences, requires a fair balance between the interests of customers and end-users, licensees, investors and the public. The National Energy Regulator Act requires that every decision by NERSA be “in the public interest” and “based on reason, facts and evidence”. This Act also provides for the judicial review of NERSA decisions in terms of the Promotion of Administrative Justice Act.

                                  • NERSA granted the generation licences for the Karpowership IPPs prematurely, without the relevant facts before it, and conducted the public participation process without providing the public with the necessary facts on which to comment, including pricing aspects. “The lack of transparency points to a decision that was procedurally unfair as the public was not informed of and able to comment on and submit relevant facts and evidence to NERSA on the costs involved over the next 20 years,” says Fick.

                                  • In its reasons for the decisions, NERSA failed to provide a meaningful response to the public concerns and objections, effectively undermining the public participation process. Instead, NERSA “simply brushed aside” the public objections, says Fick.

                                  • In August 2021, OUTA made a formal submission to NERSA objecting to the granting of generation licences to the Karpowerships. Many of these objections still stand and have not been addressed.

                                  • At the time when the applications for generation licences by the Karpowership IPPs were considered by NERSA, the regulator did not take into account that the Karpowership IPPs failed to meet certain legal and regulatory requirements, including NERSA’s own prescribed requirements for generation licence applications to be considered. These include failure to obtain environmental authorisations, port authorisations, water licences, emissions licences, waste management licences, various gas infrastructure construction, operating and trading licences, fuel supply agreements and power purchase agreements.

                                  • NERSA’s lack of transparency on the financial information raises concern about the effect on the public. “It failed to deal with the issue of price variation in circumstances where prices over the next 20 years will be dependent on the US dollar price. This causes uncertainty and may come at tremendous costs for the South African public,” says Fick.

                                  • NERSA appeared to prioritise the interests of the Karpowership IPPs over the public. Fick says that “it is of great concern that NERSA, a South Africa public body using public funding, expresses concern about the financial affairs of a private Turkish majority-owned company, thereby creating the distinct impression that the financial well-being of Karpowership should enjoy preference above that of the South African public.”

                                  • Eskom has not signed power purchase agreements with the Karpowership IPPs and there is no certainty that it will do so, which is an important factor when considering the granting of generation licences.

                                  • Despite the DMRE having repeatedly extended the deadline for RMIPPPP preferred bidders to obtain the requisite regulatory approvals and authorisations necessary for financial closure, the Karpowership IPPs have still failed to provide these.

                                  • NERSA accepted the “plans” by the Karpowership IPPs to comply with environmental legislation as actual compliance.

                                  • NERSA failed to take value-for-money considerations into account, including consideration of more cost-effective options.

                                  Fick’s affidavit refers to input from OUTA’s independent consultant:

                                  • There are faster and substantially cheaper generation project options available to eliminate loadshedding in the short-term, so the Karpowership projects are not needed.

                                  • The Karpowership projects will impose unnecessary financial, economic and environmental costs on South Africa and the 20-year contracts carry a significantly greater risk to customers, the public and the economy than the available alternatives.

                                  • NERSA has failed to conduct a proper analysis of the project costs and cost risk, and appears to have misconstrued the issues surrounding the electricity pricing formulas (in particular the gas pricing components). This includes the price being significantly exposed to variations in the US dollar / rand exchange rate and global gas prices.

                                  • The Karpowership bid price in April 2020 was about R1.50/kWh and NERSA said this would be up to R2.80/kWh from April 2022, but the independent consultant estimates the current price is close to R5/kWh, roughly two to three times the cost of alternative generation methods.

                                  • The pricing methodology is such that the Karpowership IPPs could receive “windfall” profits.

                                  • NERSA failed to consider the climate impact of 20-year generation licences for the Karpowership IPPs (which run on fossil fuels) when cleaner, cheaper and faster electricity supply options are available. “High capacity factor gas power as proposed by Karpowership, will mostly not displace CO2 emitting coal power as claimed by NERSA in the RfD [reasons for decision], but will rather displace the amount of future renewable energy that will be built. It will thus result in a higher emitting power sector than what would otherwise have been the case, thereby undermining the country’s efforts to decarbonise its economy,” says Fick.

                                  • Contrary to NERSA’s assertion in its reasons for decision for granting the Karpowership IPPs’ generation licences, renewable energy solutions provide more employment opportunities on a per kWh basis than will be provided by the Karpowership projects.


                                  On 28 April 2022, OUTA announced the legal action against NERSA over the Karpowerships licence decisions. A link to the media briefing on this is                                   here.

                                  Pretoria High Court case 23017/2022: The court papers of 28 April 2022

                                  OUTA's papers
                                  OUTA's notice of motion is                                   here.
                                  The founding affidavit by Adv Stefanie Fick is                                   here.
                                  The annexures are here:                                   Annex FA1, Annex FA2-4, Annex 5, Annex 6, Annex 7-11, Annex 12-14, Annex 15-17, Annex 18. 

                                  Respondents
                                  18 May 2022: NERSA notice of intention to oppose OUTA's application is                                   here.
                                  20 May 2022: Eskom files notice of intention to abide by the decision of the high court. However, Eskom reserves its right to oppose this application at any stage. This notice is                                   here.
                                  20 May 2022: The Karpowership independent power producers (respondents 2 to 5) file a joint notice to oppose OUTA's application. This notice is                                   here.

                                  Getting copies of documents for the case
                                  28 April 2022: OUTA's notice of motion in the application of 28 April 2022 called for NERSA to provide within 15 days copies of all documents relating to the decisions to grant Karpowership the generation licences, together with the reasons for the decisions.
                                  19 May 2022: The full record that OUTA requires from NERSA was due on 19 May but was not provided.
                                  24 May 2022: Karpowership proposes that OUTA agree to "a confidentiality regime" before receiving the record. This would mean a redacted copy of the record would be provided, with the judge allowed to see the fuller record and, subject to undertakings, the lawyers for the parties. However, OUTA would not have access to the full record. OUTA refuses to agree to this without knowing what information Karpowership wanted to keep confidential and why.
                                  17 June 2022: NERSA provides a redacted record.
                                  12 December 2022: OUTA files a notice in terms of Rule 30A calling on NERSA to produce the full record of its decision in terms of Rule 53. A copy of the notice can be found                                   here.
                                  23 January 2023: OUTA files an                                   application to compel NERSA to produce the full and unredacted record in the review proceedings. A copy of the application can be found here.
                                  30 January 2023: The first to fifth respondents (NERSA and Karpowership) file notice of intention to oppose OUTA's application to compel. The notices are                                   here (NERSA) and here (Karpowership).
                                  21 February 2023: NERSA files its answering affidavit to OUTA's application to compel. This affidavit is                                   here.
                                  6 March 2023: OUTA files a notice in terms of Rule 35(12) and (14) in the application to compel, calling for a copy of NERSA's policy and guidelines on the treatment of confidential information. The notice is                                   here.
                                  28 March 2023: Karpowership files its answering affidavit to OUTA's application to compel. This affidavit is                                   here and the annexures here.
                                  21 April 2023: Karpowership files a signed notice of counter application. A copy is                                   here.
                                  25 April 2023: OUTA files a second notice in terms of Rule 35(12) and (14) in the application to compel. A copy is                                   here.
                                  9 May 2023: NERSA files a reply to OUTA's notice in terms of Rule 35(12) and (14). See                                   here.
                                  24 May 2023: OUTA files a replying affidavit in the application to compel. See                                   here and the annexures here, here, here and here.
                                  4 December 2023: The Pretoria High Court issues a directive setting down the hearing for OUTA's application to compel for 4 to 6 June 2024. The OUTA application will be heard with The Green Connection's case against NERSA and Karpowerships. OUTA must file heads of argument by 31 January 2024. Any supplementary heads are due by 19 April 2024. Respondents heads of argument are due by 30 April 2024. See                                   here.
                                  31 January 2024: OUTA files its heads of argument in the application to compel NERSA to produce the complete record of the decisions to grant the licences. A copy of OUTA's heads is                                   here. "These are review proceedings. An applicant in review proceedings is in principle entitled to the complete record," says OUTA in the heads. "The decision-maker, NERSA, has a duty in terms of rule 53(1)(b) and in terms of the Constitution, 1996, to disclose the full record to the applicant in review proceedings. It does not have the right or power to refuse full disclosure or to impose conditions."
                                  28 February 2024: NERSA files heads of argument opposing OUTA's application to compel. A copy is                                   here.
                                  9 May 2024: OUTA files the joint practice note and chronology of events. A copy is                                   here.
                                  20 May 2024: Karpowership services and files notice of withdrawal of opposition to OUTA's case, saying it will abide by the decision of the court. A copy is                                   here.
                                  28 May 2024: Due to Karpowership's withdrawal, a revised joint practice note and chronology of events had to be filed. The revised copy is                                   here.
                                  4 June 2024: OUTA's application to compel NERSA to produce the complete record of its decisions to grant generation licences to Karpowership was in the Pretoria High Court. NERSA's counsel presented a settlement agreement to the parties, in terms of which the parties would receive the full unredacted record, subject to agreeing to a confidentiality regime. OUTA partially accepted the settlement agreement. The agreement, which was made an order of court, is                                   here. OUTA believed that the costs tendered by NERSA on this application were grossly insufficient and proceeded with a cost argument, asking the court to award a punitive cost order against both NERSA and Karpowership due to their conduct in this matter.
                                  27 June 2024: OUTA received the full unredacted record from NERSA of its decisions to grant the Karpowership generation licences. OUTA cannot upload this record for public access due to the confidentiality regime signed.
                                  5 July 2024: Judge L Windell found in favour of OUTA, and specifically ordered that Nersa and Karpowership pay the cost of the application on a punitive scale, including the cost of OUTA’s counsel. A copy of the judgment is                                   here.

                                  ICYMI: Here's a quick irreverent but insightful Karpowership explainers by Politically Aweh. Watch here

                                     

                                  Karpowership is not the solution. If we proceed with that option, that will mean South Africa is tied to the agreement for 20 years. Karpowership buys gas (to generate electricity) in US dollars, and the dollar-rand exchange rate fluctuates. So South Africa will be tied financially to whatever the rate is. 

                                  If the agreement falls through, Karpowership can simply pack up and leave, leaving South Africa with no infrastructure to generate electricity (though we would have spent a lot of money by then). At the time when the preferred bidders were nominated, the reasoning was that the power ought to be procured as a matter of urgency. The emergency has since passed, yet Karpowership is STILL on the table.

                                  NERSA's process of licencing the Karpowerships has been flawed by a lack of transparency.

                                  OUTA finds it inexplicable that NERSA granted the Karpowership generation licences while there are so many questions over the process and the Karpowership projects.

                                  OUTA's concerns

                                  On 13 August 2021, OUTA made a formal submission to NERSA, objecting to the Karpowership licences. Our submission is straight forward and sets out why NERSA ought not entertain the application(s) in the first place as many factors and processes are still pending and not yet finalised. We were assisted by energy expert, Chris Yelland. Read the summary and our full submission here.

                                  The concerns we raised include:

                                  • Environmental authorisations were been refused by the Department of Forestry, Fisheries and the Environment (DFFE);

                                  • An internal appeal process by Karpowership is still underway challenging the decision by DFFE;

                                  • The absence of fuel supply agreements;

                                  • The absence of fuel pipeline licences;

                                  • The absence of port authorisations;

                                  • Eskom has not agreed to enter into power purchase agreements;

                                  • There is a possibility of appeal proceedings in the DNG court case challenging the bid awards.

                                  The Karpowerships are to be anchored in Richards Bay, Saldanha Bay and Coega, and are supposed to  between them provide 1 220 MW using gas to power plants with additional vessels with  floating storage and regasification plants. At prices when the deal was agreed, the  20-year deal could cost up to R218bn. 

                                  However, as the deal will be linked to the international gas price, this price is going to rise.  As with all power plants, the loans need to be repaid and the costs will be passed on to the people of south Africa through our electricity tariffs. OUTA foresees that the only means for our government to finance such venture is for this load to be carried by the consumer – meaning that we will see even greater electricity tariffs in order to fund this.

                                  18 February 2020: the Minister of Mineral Resources and Energy (DMRE) issues a Determination on the need to procure 2 000 MW of generation capacity from a range of energy technologies, through the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP).

                                  25 May 2020: The National Energy Regulator of South Africa (NERSA) concurs with the Minister's Determination.

                                  June 2020: Karpowership is awarded an exemption from having to undertake an environmental impact assessment, under an emergency provision, but in August this is revoked and the Green Scorpions start a criminal investigation into an attempt to bypass the law.

                                  7 July 2020: The Determination is gazetted, with a deadline for connection to the grid of December 2021. The procurer of the new generation capacity is the DMRE, and the buyer is Eskom.

                                  24 July 2020: Minister of Public Works and Infrastructure Patricia de Lille gazettes the list of projects designated by the Presidential Infrastructure Coordinating Commission as Strategic Integrated Projects (SIPS). The energy projects include the RMIPPPP, listed as "Emergency/Risk Mitigation Power Purchase Procurement Programme (2000 MW)". The gazetted notice is here. The issuing of this notice was announced three days later by Minister de Lille and Dr Kgosientsho Ramokgopa, who was at the time the Head of Investment and Infrastructure in the Presidency. Their announcement is here. (Ramokgopa was appointed to this position in November 2019, see here, and appointed on 6 March 2023 as Minister of Electricity, see here, and on 6 May 2023 granted the authority to determine new generation capacity and type of generation needed, see here).

                                  24 August 2020: DMRE issues a Request for Proposals for new generation capacity under the RMIPPPP, with commercial operation required by June 2022, and 28 bids are submitted. See here.

                                  18 March 2021: DMRE nominates Karpowership SA Coega, Karpowership SA Richards Bay and Karpowership SA Saldanha Bay as preferred bidders to supply the country with 1 220 MW power of the total RMIPPPP capacity of 2 000 MW. They are three of the eight preferred bidders. Another three preferred bidders are added later.

                                  13 April 2021: Karpowership applies to NERSA for three generation licences for Coega, Saldanha Bay and Richards Bay, with 31 August 2022 as the commissioning date. The applications were revised and resubmitted in May 2021. Karpowership’s applications can be found here: Coega, Richards Bay and Saldanha Bay. NERSA subsequently called for public comments on the applications.


                                  June 2021: The Green Scorpions referred a docket to the Director of Public Prosecutions (DPP) of North Gauteng. It was reported that the Green Scorpions recommended criminal charges against Karpowership for its alleged attempt to bypass environmental impact assessment (EIA) studies required in terms of the National Environmental Management Act.

                                  June 2021: Karpowership SA was selected as a preferred bidder by the DMRE but, prior to NERSA’s decision to grant the generation licences, the EIAs for all three the Karpowership RMIPPP projects were refused by the Department of Forestry, Fisheries and the Environment (DFFE).

                                  July 2021: Karpowership lodged an internal appeal with DFFE pertaining to the refusal of the respective environmental authorisations.

                                  August 2021: Parliament's oversight committee on mineral resources and energy voted to launch a probe into the RMIPPPP. Unfortunately, Parliament withdrew its initial decision to initiate an inquiry and to investigate the award of preferred bidder status to Karpowership for the three projects under the RMIPPP project.


                                  13 August 2021 : OUTA makes formal submission to NERSA, objecting to the Karpowership licences. Our submission is straight forward and sets out why NERSA ought not entertain the application(s) in the first place as many factors and processes are still pending and not yet finalised. We were assisted by energy expert, Chris Yelland. Read our submission here.


                                  19 August 2021: The public hearings to consider generation licence applications of the successful bidders were scheduled by NERSA. These hearings continued despite OUTA’s objections and the objections of several other interest groups.

                                  21 September 2021 : NERSA approves all three Karpowership generation licences, but fails to provide the reasons for the decisions. See OUTA’s comments here.

                                  30 September 2021: DMRE’s extended deadline for RMIPPPP regulatory processes.


                                  29 October 2021 : NERSA publishes the reasons for decisions on the generation licences: see here, here and here. OUTA believes that NERSA applied its mandate too narrowly and did not consider all the factors that ought to inform its decisions, rendering the decisions reviewable in terms of the Promotion of Administrative Justice Act.

                                  December 2021 : NERSA publishes adverts calling for comments on Karpowership applications for gas operation licences. The timelines are botched and not enough information is given to the public. OUTA decides not to make a formal submission to NERSA on these applications as our contentions were listed in our August 2021 submission. However, OUTA writes to NERSA to express concern about the inadequate public participation process.


                                  30 November 2021 to 2 December 2021: Bidder DNG Energy’s application against the DMRE, contesting the award process, was heard.

                                  30 January 2022: The Pretoria High Court dismissed DNG Energy’s application with costs. See                                   here.

                                  27 January 2022: DMRE’s further extended deadline for RMIPPPP regulatory processes.

                                  30 January 2022: Court dismisses attempt by losing bidder DNG to overturn Karpowership award; DNG had alleged tender irregularities and corruption.
                                  3 February 2022 : OUTA writes to NERSA and complains about the botched public participation process on the Karpowership gas licence applications, seeking clarity. OUTA's letter is                                   here. No response was received from NERSA.


                                  31 March 2022: DMRE’s further extended deadline for RMIPPPP regulatory processes; an indefinite extension is now in place.

                                  1 April 2022: DNG was granted leave to appeal to the Supreme Court of Appeal on its failed review application. It's not clear if an appeal was pursued.


                                  26 April 2022: OUTA files an application in the Pretoria High Court to review and overturn NERSA’s decision to award generation licences to the Karpowerships.

                                  6 December 2022: Minister of Public Works and Infrastructure Patricia de Lille gazettes an update to the projects designated by the Presidential Infrastructure Coordinating Commission as Strategic Integrated Projects (SIPS). The energy update includes the Oil and Gas National Program. The gazetted notice is                                   here.

                                  August 2023: Karpowerships reportedly offered to cut the original 20-year contract down to five year; costs remained secret. See                                   here.

                                  17 November 2023: Minister of Electricity Kgosientsho Ramokgopa told parliament's Adhoc Committee on Energy Crisis that the Karpowership contract had been shortened from 20 years to three years although this would mean a higher tariff. See                                   here.

                                  31 December 2023: The DMRE's final extended deadline for financial and legal closure for RMIPPPP projects. The Karpowership IPPs failed to meet this deadline. Eskom subsequently said that the grid access for those projects expired on 31 December and no further extensions would be granted, so Karpowership lost its grid access.

                                  8 November 2024: Minister of Electricity and Energy, Kgosientsho Ramokgopa, told Parliament in a written reply that his department was no longer pursuing the three Karpowership projects as they had failed to reach legal and commercial close by the deadline of 31 December 2023 so their preferred bidder status was terminated. "The Department is not pursuing any projects that failed to reach Legal and Commercial Close under RMIPPPP as this programme is now closed," said the Minister. The reply is                                   here.

                                  OUTA applies to the high court to overturn NERSA's decisions to licence the Karpowerships

                                  On 26 April 2022, OUTA filed an application for the review and setting aside of the decisions by the National Energy Regulator of South Africa (NERSA) to grant the three Karpowership independent power producer (IPP) generation licences.

                                  OUTA’s application was filed in the Pretoria High Court. The respondents are NERSA, four Karpowership companies, the Minister of Mineral Resources and Energy, the Minister of Forestry, Fisheries and the Environment, and Eskom. The Karpowership companies are Karpowership SA (the holding company) and its wholly owned subsidiaries Karpowership SA Coega, Karpowership SA Saldanha Bay and Karpowership SA Richards Bay. OUTA’s action is directed against NERSA, while the other parties are cited due to their interest in the matter.

                                  This is an application in terms of the Promotion of Administrative Justice Act.

                                  OUTA is asking the high court to review and set aside NERSA’s decisions to award generation licences to the three Karpowership IPPs, and order NERSA to reconsider these decisions.

                                  The application is supported by an affidavit by OUTA Executive Director Advocate Stefanie Fick and a confirmatory affidavit from a specialist consultant supporting the views on the negative economic impact and lack of consideration of far more viable alternatives.

                                  OUTA believes that the normal public procurement processes for new generation capacity and private procurements by electricity customers themselves are now overtaking the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), the so-called “emergency” process.

                                  “It is submitted that NERSA has displayed a cavalier attitude towards statutory compliance and public concerns throughout its decision-making process to award generation licences to Karpowership. By doing so, it has failed to properly exercise its mandate in terms of the ERA [Electricity Regulation Act] and fulfil its oversight functions of regulator without the necessary independent checks and balances to ensure that the interests of electricity suppliers are balanced with the interests of customers, the public and the South African economy,” says OUTA’s Advocate Stefanie Fick in an affidavit supporting the application.

                                  “The decisions to award the licences to Karpowership for generation at Coega, Saldanha Bay and Richard’s Bay respectively were irrational, unreasonable, and taken without regard to relevant considerations or with regard to irrelevant circumstances.”

                                  OUTA’s court papers call NERSA’s decisions procedurally unfair, irrational and unlawful


                                  Fick’s affidavit supporting OUTA’s application includes these points:

                                  • NERSA’s decision-making was procedurally unfair. The process was premature and lacking in transparency, with significant portions of the licence applications redacted.

                                  • The law requires that NERSA acts in the best interests of the country, but OUTA believes that NERSA has failed to do so. The Electricity Regulation Act, which empowers NERSA to issue the licences, requires a fair balance between the interests of customers and end-users, licensees, investors and the public. The National Energy Regulator Act requires that every decision by NERSA be “in the public interest” and “based on reason, facts and evidence”. This Act also provides for the judicial review of NERSA decisions in terms of the Promotion of Administrative Justice Act.

                                  • NERSA granted the generation licences for the Karpowership IPPs prematurely, without the relevant facts before it, and conducted the public participation process without providing the public with the necessary facts on which to comment, including pricing aspects. “The lack of transparency points to a decision that was procedurally unfair as the public was not informed of and able to comment on and submit relevant facts and evidence to NERSA on the costs involved over the next 20 years,” says Fick.

                                  • In its reasons for the decisions, NERSA failed to provide a meaningful response to the public concerns and objections, effectively undermining the public participation process. Instead, NERSA “simply brushed aside” the public objections, says Fick.

                                  • In August 2021, OUTA made a formal submission to NERSA objecting to the granting of generation licences to the Karpowerships. Many of these objections still stand and have not been addressed.

                                  • At the time when the applications for generation licences by the Karpowership IPPs were considered by NERSA, the regulator did not take into account that the Karpowership IPPs failed to meet certain legal and regulatory requirements, including NERSA’s own prescribed requirements for generation licence applications to be considered. These include failure to obtain environmental authorisations, port authorisations, water licences, emissions licences, waste management licences, various gas infrastructure construction, operating and trading licences, fuel supply agreements and power purchase agreements.

                                  • NERSA’s lack of transparency on the financial information raises concern about the effect on the public. “It failed to deal with the issue of price variation in circumstances where prices over the next 20 years will be dependent on the US dollar price. This causes uncertainty and may come at tremendous costs for the South African public,” says Fick.

                                  • NERSA appeared to prioritise the interests of the Karpowership IPPs over the public. Fick says that “it is of great concern that NERSA, a South Africa public body using public funding, expresses concern about the financial affairs of a private Turkish majority-owned company, thereby creating the distinct impression that the financial well-being of Karpowership should enjoy preference above that of the South African public.”

                                  • Eskom has not signed power purchase agreements with the Karpowership IPPs and there is no certainty that it will do so, which is an important factor when considering the granting of generation licences.

                                  • Despite the DMRE having repeatedly extended the deadline for RMIPPPP preferred bidders to obtain the requisite regulatory approvals and authorisations necessary for financial closure, the Karpowership IPPs have still failed to provide these.

                                  • NERSA accepted the “plans” by the Karpowership IPPs to comply with environmental legislation as actual compliance.

                                  • NERSA failed to take value-for-money considerations into account, including consideration of more cost-effective options.

                                  Fick’s affidavit refers to input from OUTA’s independent consultant:

                                  • There are faster and substantially cheaper generation project options available to eliminate loadshedding in the short-term, so the Karpowership projects are not needed.

                                  • The Karpowership projects will impose unnecessary financial, economic and environmental costs on South Africa and the 20-year contracts carry a significantly greater risk to customers, the public and the economy than the available alternatives.

                                  • NERSA has failed to conduct a proper analysis of the project costs and cost risk, and appears to have misconstrued the issues surrounding the electricity pricing formulas (in particular the gas pricing components). This includes the price being significantly exposed to variations in the US dollar / rand exchange rate and global gas prices.

                                  • The Karpowership bid price in April 2020 was about R1.50/kWh and NERSA said this would be up to R2.80/kWh from April 2022, but the independent consultant estimates the current price is close to R5/kWh, roughly two to three times the cost of alternative generation methods.

                                  • The pricing methodology is such that the Karpowership IPPs could receive “windfall” profits.

                                  • NERSA failed to consider the climate impact of 20-year generation licences for the Karpowership IPPs (which run on fossil fuels) when cleaner, cheaper and faster electricity supply options are available. “High capacity factor gas power as proposed by Karpowership, will mostly not displace CO2 emitting coal power as claimed by NERSA in the RfD [reasons for decision], but will rather displace the amount of future renewable energy that will be built. It will thus result in a higher emitting power sector than what would otherwise have been the case, thereby undermining the country’s efforts to decarbonise its economy,” says Fick.

                                  • Contrary to NERSA’s assertion in its reasons for decision for granting the Karpowership IPPs’ generation licences, renewable energy solutions provide more employment opportunities on a per kWh basis than will be provided by the Karpowership projects.


                                  On 28 April 2022, OUTA announced the legal action against NERSA over the Karpowerships licence decisions. A link to the media briefing on this is                                   here.

                                  Pretoria High Court case 23017/2022: The court papers of 28 April 2022

                                  OUTA's papers
                                  OUTA's notice of motion is                                   here.
                                  The founding affidavit by Adv Stefanie Fick is                                   here.
                                  The annexures are here:                                   Annex FA1, Annex FA2-4, Annex 5, Annex 6, Annex 7-11, Annex 12-14, Annex 15-17, Annex 18. 

                                  Respondents
                                  18 May 2022: NERSA notice of intention to oppose OUTA's application is                                   here.
                                  20 May 2022: Eskom files notice of intention to abide by the decision of the high court. However, Eskom reserves its right to oppose this application at any stage. This notice is                                   here.
                                  20 May 2022: The Karpowership independent power producers (respondents 2 to 5) file a joint notice to oppose OUTA's application. This notice is                                   here.

                                  Getting copies of documents for the case
                                  28 April 2022: OUTA's notice of motion in the application of 28 April 2022 called for NERSA to provide within 15 days copies of all documents relating to the decisions to grant Karpowership the generation licences, together with the reasons for the decisions.
                                  19 May 2022: The full record that OUTA requires from NERSA was due on 19 May but was not provided.
                                  24 May 2022: Karpowership proposes that OUTA agree to "a confidentiality regime" before receiving the record. This would mean a redacted copy of the record would be provided, with the judge allowed to see the fuller record and, subject to undertakings, the lawyers for the parties. However, OUTA would not have access to the full record. OUTA refuses to agree to this without knowing what information Karpowership wanted to keep confidential and why.
                                  17 June 2022: NERSA provides a redacted record.
                                  12 December 2022: OUTA files a notice in terms of Rule 30A calling on NERSA to produce the full record of its decision in terms of Rule 53. A copy of the notice can be found                                   here.
                                  23 January 2023: OUTA files an                                   application to compel NERSA to produce the full and unredacted record in the review proceedings. A copy of the application can be found here.
                                  30 January 2023: The first to fifth respondents (NERSA and Karpowership) file notice of intention to oppose OUTA's application to compel. The notices are                                   here (NERSA) and here (Karpowership).
                                  21 February 2023: NERSA files its answering affidavit to OUTA's application to compel. This affidavit is                                   here.
                                  6 March 2023: OUTA files a notice in terms of Rule 35(12) and (14) in the application to compel, calling for a copy of NERSA's policy and guidelines on the treatment of confidential information. The notice is                                   here.
                                  28 March 2023: Karpowership files its answering affidavit to OUTA's application to compel. This affidavit is                                   here and the annexures here.
                                  21 April 2023: Karpowership files a signed notice of counter application. A copy is                                   here.
                                  25 April 2023: OUTA files a second notice in terms of Rule 35(12) and (14) in the application to compel. A copy is                                   here.
                                  9 May 2023: NERSA files a reply to OUTA's notice in terms of Rule 35(12) and (14). See                                   here.
                                  24 May 2023: OUTA files a replying affidavit in the application to compel. See                                   here and the annexures here, here, here and here.
                                  4 December 2023: The Pretoria High Court issues a directive setting down the hearing for OUTA's application to compel for 4 to 6 June 2024. The OUTA application will be heard with The Green Connection's case against NERSA and Karpowerships. OUTA must file heads of argument by 31 January 2024. Any supplementary heads are due by 19 April 2024. Respondents heads of argument are due by 30 April 2024. See                                   here.
                                  31 January 2024: OUTA files its heads of argument in the application to compel NERSA to produce the complete record of the decisions to grant the licences. A copy of OUTA's heads is                                   here. "These are review proceedings. An applicant in review proceedings is in principle entitled to the complete record," says OUTA in the heads. "The decision-maker, NERSA, has a duty in terms of rule 53(1)(b) and in terms of the Constitution, 1996, to disclose the full record to the applicant in review proceedings. It does not have the right or power to refuse full disclosure or to impose conditions."
                                  28 February 2024: NERSA files heads of argument opposing OUTA's application to compel. A copy is                                   here.
                                  9 May 2024: OUTA files the joint practice note and chronology of events. A copy is                                   here.
                                  20 May 2024: Karpowership services and files notice of withdrawal of opposition to OUTA's case, saying it will abide by the decision of the court. A copy is                                   here.
                                  28 May 2024: Due to Karpowership's withdrawal, a revised joint practice note and chronology of events had to be filed. The revised copy is                                   here.
                                  4 June 2024: OUTA's application to compel NERSA to produce the complete record of its decisions to grant generation licences to Karpowership was in the Pretoria High Court. NERSA's counsel presented a settlement agreement to the parties, in terms of which the parties would receive the full unredacted record, subject to agreeing to a confidentiality regime. OUTA partially accepted the settlement agreement. The agreement, which was made an order of court, is                                   here. OUTA believed that the costs tendered by NERSA on this application were grossly insufficient and proceeded with a cost argument, asking the court to award a punitive cost order against both NERSA and Karpowership due to their conduct in this matter.
                                  27 June 2024: OUTA received the full unredacted record from NERSA of its decisions to grant the Karpowership generation licences. OUTA cannot upload this record for public access due to the confidentiality regime signed.
                                  5 July 2024: Judge L Windell found in favour of OUTA, and specifically ordered that Nersa and Karpowership pay the cost of the application on a punitive scale, including the cost of OUTA’s counsel. A copy of the judgment is                                   here.

                                  ICYMI: Here's a quick irreverent but insightful Karpowership explainers by Politically Aweh. Watch here

                                   

                                  18 February 2020: the Minister of Mineral Resources and Energy (DMRE) issues a Determination on the need to procure 2 000 MW of generation capacity from a range of energy technologies, through the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP).

                                  25 May 2020: The National Energy Regulator of South Africa (NERSA) concurs with the Minister's Determination.

                                  June 2020: Karpowership is awarded an exemption from having to undertake an environmental impact assessment, under an emergency provision, but in August this is revoked and the Green Scorpions start a criminal investigation into an attempt to bypass the law.

                                  7 July 2020: The Determination is gazetted, with a deadline for connection to the grid of December 2021. The procurer of the new generation capacity is the DMRE, and the buyer is Eskom.

                                  24 July 2020: Minister of Public Works and Infrastructure Patricia de Lille gazettes the list of projects designated by the Presidential Infrastructure Coordinating Commission as Strategic Integrated Projects (SIPS). The energy projects include the RMIPPPP, listed as "Emergency/Risk Mitigation Power Purchase Procurement Programme (2000 MW)". The gazetted notice is here. The issuing of this notice was announced three days later by Minister de Lille and Dr Kgosientsho Ramokgopa, who was at the time the Head of Investment and Infrastructure in the Presidency. Their announcement is here. (Ramokgopa was appointed to this position in November 2019, see here, and appointed on 6 March 2023 as Minister of Electricity, see here, and on 6 May 2023 granted the authority to determine new generation capacity and type of generation needed, see here).

                                  24 August 2020: DMRE issues a Request for Proposals for new generation capacity under the RMIPPPP, with commercial operation required by June 2022, and 28 bids are submitted. See here.

                                  18 March 2021: DMRE nominates Karpowership SA Coega, Karpowership SA Richards Bay and Karpowership SA Saldanha Bay as preferred bidders to supply the country with 1 220 MW power of the total RMIPPPP capacity of 2 000 MW. They are three of the eight preferred bidders. Another three preferred bidders are added later.

                                  13 April 2021: Karpowership applies to NERSA for three generation licences for Coega, Saldanha Bay and Richards Bay, with 31 August 2022 as the commissioning date. The applications were revised and resubmitted in May 2021. Karpowership’s applications can be found here: Coega, Richards Bay and Saldanha Bay. NERSA subsequently called for public comments on the applications.


                                  June 2021: The Green Scorpions referred a docket to the Director of Public Prosecutions (DPP) of North Gauteng. It was reported that the Green Scorpions recommended criminal charges against Karpowership for its alleged attempt to bypass environmental impact assessment (EIA) studies required in terms of the National Environmental Management Act.

                                  June 2021: Karpowership SA was selected as a preferred bidder by the DMRE but, prior to NERSA’s decision to grant the generation licences, the EIAs for all three the Karpowership RMIPPP projects were refused by the Department of Forestry, Fisheries and the Environment (DFFE).

                                  July 2021: Karpowership lodged an internal appeal with DFFE pertaining to the refusal of the respective environmental authorisations.

                                  August 2021: Parliament's oversight committee on mineral resources and energy voted to launch a probe into the RMIPPPP. Unfortunately, Parliament withdrew its initial decision to initiate an inquiry and to investigate the award of preferred bidder status to Karpowership for the three projects under the RMIPPP project.


                                  13 August 2021 : OUTA makes formal submission to NERSA, objecting to the Karpowership licences. Our submission is straight forward and sets out why NERSA ought not entertain the application(s) in the first place as many factors and processes are still pending and not yet finalised. We were assisted by energy expert, Chris Yelland. Read our submission here.


                                  19 August 2021: The public hearings to consider generation licence applications of the successful bidders were scheduled by NERSA. These hearings continued despite OUTA’s objections and the objections of several other interest groups.

                                  21 September 2021 : NERSA approves all three Karpowership generation licences, but fails to provide the reasons for the decisions. See OUTA’s comments here.

                                  30 September 2021: DMRE’s extended deadline for RMIPPPP regulatory processes.


                                  29 October 2021 : NERSA publishes the reasons for decisions on the generation licences: see here, here and here. OUTA believes that NERSA applied its mandate too narrowly and did not consider all the factors that ought to inform its decisions, rendering the decisions reviewable in terms of the Promotion of Administrative Justice Act.

                                  December 2021 : NERSA publishes adverts calling for comments on Karpowership applications for gas operation licences. The timelines are botched and not enough information is given to the public. OUTA decides not to make a formal submission to NERSA on these applications as our contentions were listed in our August 2021 submission. However, OUTA writes to NERSA to express concern about the inadequate public participation process.


                                  30 November 2021 to 2 December 2021: Bidder DNG Energy’s application against the DMRE, contesting the award process, was heard.

                                  30 January 2022: The Pretoria High Court dismissed DNG Energy’s application with costs. See                                   here.

                                  27 January 2022: DMRE’s further extended deadline for RMIPPPP regulatory processes.

                                  30 January 2022: Court dismisses attempt by losing bidder DNG to overturn Karpowership award; DNG had alleged tender irregularities and corruption.
                                  3 February 2022 : OUTA writes to NERSA and complains about the botched public participation process on the Karpowership gas licence applications, seeking clarity. OUTA's letter is                                   here. No response was received from NERSA.


                                  31 March 2022: DMRE’s further extended deadline for RMIPPPP regulatory processes; an indefinite extension is now in place.

                                  1 April 2022: DNG was granted leave to appeal to the Supreme Court of Appeal on its failed review application. It's not clear if an appeal was pursued.


                                  26 April 2022: OUTA files an application in the Pretoria High Court to review and overturn NERSA’s decision to award generation licences to the Karpowerships.

                                  6 December 2022: Minister of Public Works and Infrastructure Patricia de Lille gazettes an update to the projects designated by the Presidential Infrastructure Coordinating Commission as Strategic Integrated Projects (SIPS). The energy update includes the Oil and Gas National Program. The gazetted notice is                                   here.

                                  August 2023: Karpowerships reportedly offered to cut the original 20-year contract down to five year; costs remained secret. See                                   here.

                                  17 November 2023: Minister of Electricity Kgosientsho Ramokgopa told parliament's Adhoc Committee on Energy Crisis that the Karpowership contract had been shortened from 20 years to three years although this would mean a higher tariff. See                                   here.

                                  31 December 2023: The DMRE's final extended deadline for financial and legal closure for RMIPPPP projects. The Karpowership IPPs failed to meet this deadline. Eskom subsequently said that the grid access for those projects expired on 31 December and no further extensions would be granted, so Karpowership lost its grid access.

                                  8 November 2024: Minister of Electricity and Energy, Kgosientsho Ramokgopa, told Parliament in a written reply that his department was no longer pursuing the three Karpowership projects as they had failed to reach legal and commercial close by the deadline of 31 December 2023 so their preferred bidder status was terminated. "The Department is not pursuing any projects that failed to reach Legal and Commercial Close under RMIPPPP as this programme is now closed," said the Minister. The reply is                                   here.

                                  OUTA applies to the high court to overturn NERSA's decisions to licence the Karpowerships

                                  On 26 April 2022, OUTA filed an application for the review and setting aside of the decisions by the National Energy Regulator of South Africa (NERSA) to grant the three Karpowership independent power producer (IPP) generation licences.

                                  OUTA’s application was filed in the Pretoria High Court. The respondents are NERSA, four Karpowership companies, the Minister of Mineral Resources and Energy, the Minister of Forestry, Fisheries and the Environment, and Eskom. The Karpowership companies are Karpowership SA (the holding company) and its wholly owned subsidiaries Karpowership SA Coega, Karpowership SA Saldanha Bay and Karpowership SA Richards Bay. OUTA’s action is directed against NERSA, while the other parties are cited due to their interest in the matter.

                                  This is an application in terms of the Promotion of Administrative Justice Act.

                                  OUTA is asking the high court to review and set aside NERSA’s decisions to award generation licences to the three Karpowership IPPs, and order NERSA to reconsider these decisions.

                                  The application is supported by an affidavit by OUTA Executive Director Advocate Stefanie Fick and a confirmatory affidavit from a specialist consultant supporting the views on the negative economic impact and lack of consideration of far more viable alternatives.

                                  OUTA believes that the normal public procurement processes for new generation capacity and private procurements by electricity customers themselves are now overtaking the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), the so-called “emergency” process.

                                  “It is submitted that NERSA has displayed a cavalier attitude towards statutory compliance and public concerns throughout its decision-making process to award generation licences to Karpowership. By doing so, it has failed to properly exercise its mandate in terms of the ERA [Electricity Regulation Act] and fulfil its oversight functions of regulator without the necessary independent checks and balances to ensure that the interests of electricity suppliers are balanced with the interests of customers, the public and the South African economy,” says OUTA’s Advocate Stefanie Fick in an affidavit supporting the application.

                                  “The decisions to award the licences to Karpowership for generation at Coega, Saldanha Bay and Richard’s Bay respectively were irrational, unreasonable, and taken without regard to relevant considerations or with regard to irrelevant circumstances.”

                                  OUTA’s court papers call NERSA’s decisions procedurally unfair, irrational and unlawful


                                  Fick’s affidavit supporting OUTA’s application includes these points:

                                  • NERSA’s decision-making was procedurally unfair. The process was premature and lacking in transparency, with significant portions of the licence applications redacted.

                                  • The law requires that NERSA acts in the best interests of the country, but OUTA believes that NERSA has failed to do so. The Electricity Regulation Act, which empowers NERSA to issue the licences, requires a fair balance between the interests of customers and end-users, licensees, investors and the public. The National Energy Regulator Act requires that every decision by NERSA be “in the public interest” and “based on reason, facts and evidence”. This Act also provides for the judicial review of NERSA decisions in terms of the Promotion of Administrative Justice Act.

                                  • NERSA granted the generation licences for the Karpowership IPPs prematurely, without the relevant facts before it, and conducted the public participation process without providing the public with the necessary facts on which to comment, including pricing aspects. “The lack of transparency points to a decision that was procedurally unfair as the public was not informed of and able to comment on and submit relevant facts and evidence to NERSA on the costs involved over the next 20 years,” says Fick.

                                  • In its reasons for the decisions, NERSA failed to provide a meaningful response to the public concerns and objections, effectively undermining the public participation process. Instead, NERSA “simply brushed aside” the public objections, says Fick.

                                  • In August 2021, OUTA made a formal submission to NERSA objecting to the granting of generation licences to the Karpowerships. Many of these objections still stand and have not been addressed.

                                  • At the time when the applications for generation licences by the Karpowership IPPs were considered by NERSA, the regulator did not take into account that the Karpowership IPPs failed to meet certain legal and regulatory requirements, including NERSA’s own prescribed requirements for generation licence applications to be considered. These include failure to obtain environmental authorisations, port authorisations, water licences, emissions licences, waste management licences, various gas infrastructure construction, operating and trading licences, fuel supply agreements and power purchase agreements.

                                  • NERSA’s lack of transparency on the financial information raises concern about the effect on the public. “It failed to deal with the issue of price variation in circumstances where prices over the next 20 years will be dependent on the US dollar price. This causes uncertainty and may come at tremendous costs for the South African public,” says Fick.

                                  • NERSA appeared to prioritise the interests of the Karpowership IPPs over the public. Fick says that “it is of great concern that NERSA, a South Africa public body using public funding, expresses concern about the financial affairs of a private Turkish majority-owned company, thereby creating the distinct impression that the financial well-being of Karpowership should enjoy preference above that of the South African public.”

                                  • Eskom has not signed power purchase agreements with the Karpowership IPPs and there is no certainty that it will do so, which is an important factor when considering the granting of generation licences.

                                  • Despite the DMRE having repeatedly extended the deadline for RMIPPPP preferred bidders to obtain the requisite regulatory approvals and authorisations necessary for financial closure, the Karpowership IPPs have still failed to provide these.

                                  • NERSA accepted the “plans” by the Karpowership IPPs to comply with environmental legislation as actual compliance.

                                  • NERSA failed to take value-for-money considerations into account, including consideration of more cost-effective options.

                                  Fick’s affidavit refers to input from OUTA’s independent consultant:

                                  • There are faster and substantially cheaper generation project options available to eliminate loadshedding in the short-term, so the Karpowership projects are not needed.

                                  • The Karpowership projects will impose unnecessary financial, economic and environmental costs on South Africa and the 20-year contracts carry a significantly greater risk to customers, the public and the economy than the available alternatives.

                                  • NERSA has failed to conduct a proper analysis of the project costs and cost risk, and appears to have misconstrued the issues surrounding the electricity pricing formulas (in particular the gas pricing components). This includes the price being significantly exposed to variations in the US dollar / rand exchange rate and global gas prices.

                                  • The Karpowership bid price in April 2020 was about R1.50/kWh and NERSA said this would be up to R2.80/kWh from April 2022, but the independent consultant estimates the current price is close to R5/kWh, roughly two to three times the cost of alternative generation methods.

                                  • The pricing methodology is such that the Karpowership IPPs could receive “windfall” profits.

                                  • NERSA failed to consider the climate impact of 20-year generation licences for the Karpowership IPPs (which run on fossil fuels) when cleaner, cheaper and faster electricity supply options are available. “High capacity factor gas power as proposed by Karpowership, will mostly not displace CO2 emitting coal power as claimed by NERSA in the RfD [reasons for decision], but will rather displace the amount of future renewable energy that will be built. It will thus result in a higher emitting power sector than what would otherwise have been the case, thereby undermining the country’s efforts to decarbonise its economy,” says Fick.

                                  • Contrary to NERSA’s assertion in its reasons for decision for granting the Karpowership IPPs’ generation licences, renewable energy solutions provide more employment opportunities on a per kWh basis than will be provided by the Karpowership projects.


                                  On 28 April 2022, OUTA announced the legal action against NERSA over the Karpowerships licence decisions. A link to the media briefing on this is                                   here.

                                  Pretoria High Court case 23017/2022: The court papers of 28 April 2022

                                  OUTA's papers
                                  OUTA's notice of motion is                                   here.
                                  The founding affidavit by Adv Stefanie Fick is                                   here.
                                  The annexures are here:                                   Annex FA1, Annex FA2-4, Annex 5, Annex 6, Annex 7-11, Annex 12-14, Annex 15-17, Annex 18. 

                                  Respondents
                                  18 May 2022: NERSA notice of intention to oppose OUTA's application is                                   here.
                                  20 May 2022: Eskom files notice of intention to abide by the decision of the high court. However, Eskom reserves its right to oppose this application at any stage. This notice is                                   here.
                                  20 May 2022: The Karpowership independent power producers (respondents 2 to 5) file a joint notice to oppose OUTA's application. This notice is                                   here.

                                  Getting copies of documents for the case
                                  28 April 2022: OUTA's notice of motion in the application of 28 April 2022 called for NERSA to provide within 15 days copies of all documents relating to the decisions to grant Karpowership the generation licences, together with the reasons for the decisions.
                                  19 May 2022: The full record that OUTA requires from NERSA was due on 19 May but was not provided.
                                  24 May 2022: Karpowership proposes that OUTA agree to "a confidentiality regime" before receiving the record. This would mean a redacted copy of the record would be provided, with the judge allowed to see the fuller record and, subject to undertakings, the lawyers for the parties. However, OUTA would not have access to the full record. OUTA refuses to agree to this without knowing what information Karpowership wanted to keep confidential and why.
                                  17 June 2022: NERSA provides a redacted record.
                                  12 December 2022: OUTA files a notice in terms of Rule 30A calling on NERSA to produce the full record of its decision in terms of Rule 53. A copy of the notice can be found                                   here.
                                  23 January 2023: OUTA files an                                   application to compel NERSA to produce the full and unredacted record in the review proceedings. A copy of the application can be found here.
                                  30 January 2023: The first to fifth respondents (NERSA and Karpowership) file notice of intention to oppose OUTA's application to compel. The notices are                                   here (NERSA) and here (Karpowership).
                                  21 February 2023: NERSA files its answering affidavit to OUTA's application to compel. This affidavit is                                   here.
                                  6 March 2023: OUTA files a notice in terms of Rule 35(12) and (14) in the application to compel, calling for a copy of NERSA's policy and guidelines on the treatment of confidential information. The notice is                                   here.
                                  28 March 2023: Karpowership files its answering affidavit to OUTA's application to compel. This affidavit is                                   here and the annexures here.
                                  21 April 2023: Karpowership files a signed notice of counter application. A copy is                                   here.
                                  25 April 2023: OUTA files a second notice in terms of Rule 35(12) and (14) in the application to compel. A copy is                                   here.
                                  9 May 2023: NERSA files a reply to OUTA's notice in terms of Rule 35(12) and (14). See                                   here.
                                  24 May 2023: OUTA files a replying affidavit in the application to compel. See                                   here and the annexures here, here, here and here.
                                  4 December 2023: The Pretoria High Court issues a directive setting down the hearing for OUTA's application to compel for 4 to 6 June 2024. The OUTA application will be heard with The Green Connection's case against NERSA and Karpowerships. OUTA must file heads of argument by 31 January 2024. Any supplementary heads are due by 19 April 2024. Respondents heads of argument are due by 30 April 2024. See                                   here.
                                  31 January 2024: OUTA files its heads of argument in the application to compel NERSA to produce the complete record of the decisions to grant the licences. A copy of OUTA's heads is                                   here. "These are review proceedings. An applicant in review proceedings is in principle entitled to the complete record," says OUTA in the heads. "The decision-maker, NERSA, has a duty in terms of rule 53(1)(b) and in terms of the Constitution, 1996, to disclose the full record to the applicant in review proceedings. It does not have the right or power to refuse full disclosure or to impose conditions."
                                  28 February 2024: NERSA files heads of argument opposing OUTA's application to compel. A copy is                                   here.
                                  9 May 2024: OUTA files the joint practice note and chronology of events. A copy is                                   here.
                                  20 May 2024: Karpowership services and files notice of withdrawal of opposition to OUTA's case, saying it will abide by the decision of the court. A copy is                                   here.
                                  28 May 2024: Due to Karpowership's withdrawal, a revised joint practice note and chronology of events had to be filed. The revised copy is                                   here.
                                  4 June 2024: OUTA's application to compel NERSA to produce the complete record of its decisions to grant generation licences to Karpowership was in the Pretoria High Court. NERSA's counsel presented a settlement agreement to the parties, in terms of which the parties would receive the full unredacted record, subject to agreeing to a confidentiality regime. OUTA partially accepted the settlement agreement. The agreement, which was made an order of court, is                                   here. OUTA believed that the costs tendered by NERSA on this application were grossly insufficient and proceeded with a cost argument, asking the court to award a punitive cost order against both NERSA and Karpowership due to their conduct in this matter.
                                  27 June 2024: OUTA received the full unredacted record from NERSA of its decisions to grant the Karpowership generation licences. OUTA cannot upload this record for public access due to the confidentiality regime signed.
                                  5 July 2024: Judge L Windell found in favour of OUTA, and specifically ordered that Nersa and Karpowership pay the cost of the application on a punitive scale, including the cost of OUTA’s counsel. A copy of the judgment is                                   here.

                                  ICYMI: Here's a quick irreverent but insightful Karpowership explainers by Politically Aweh. Watch here

                                   

                                  OUTA applies to the high court to overturn NERSA's decisions to licence the Karpowerships

                                  On 26 April 2022, OUTA filed an application for the review and setting aside of the decisions by the National Energy Regulator of South Africa (NERSA) to grant the three Karpowership independent power producer (IPP) generation licences.

                                  OUTA’s application was filed in the Pretoria High Court. The respondents are NERSA, four Karpowership companies, the Minister of Mineral Resources and Energy, the Minister of Forestry, Fisheries and the Environment, and Eskom. The Karpowership companies are Karpowership SA (the holding company) and its wholly owned subsidiaries Karpowership SA Coega, Karpowership SA Saldanha Bay and Karpowership SA Richards Bay. OUTA’s action is directed against NERSA, while the other parties are cited due to their interest in the matter.

                                  This is an application in terms of the Promotion of Administrative Justice Act.

                                  OUTA is asking the high court to review and set aside NERSA’s decisions to award generation licences to the three Karpowership IPPs, and order NERSA to reconsider these decisions.

                                  The application is supported by an affidavit by OUTA Executive Director Advocate Stefanie Fick and a confirmatory affidavit from a specialist consultant supporting the views on the negative economic impact and lack of consideration of far more viable alternatives.

                                  OUTA believes that the normal public procurement processes for new generation capacity and private procurements by electricity customers themselves are now overtaking the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), the so-called “emergency” process.

                                  “It is submitted that NERSA has displayed a cavalier attitude towards statutory compliance and public concerns throughout its decision-making process to award generation licences to Karpowership. By doing so, it has failed to properly exercise its mandate in terms of the ERA [Electricity Regulation Act] and fulfil its oversight functions of regulator without the necessary independent checks and balances to ensure that the interests of electricity suppliers are balanced with the interests of customers, the public and the South African economy,” says OUTA’s Advocate Stefanie Fick in an affidavit supporting the application.

                                  “The decisions to award the licences to Karpowership for generation at Coega, Saldanha Bay and Richard’s Bay respectively were irrational, unreasonable, and taken without regard to relevant considerations or with regard to irrelevant circumstances.”

                                  OUTA’s court papers call NERSA’s decisions procedurally unfair, irrational and unlawful


                                  Fick’s affidavit supporting OUTA’s application includes these points:

                                  • NERSA’s decision-making was procedurally unfair. The process was premature and lacking in transparency, with significant portions of the licence applications redacted.

                                  • The law requires that NERSA acts in the best interests of the country, but OUTA believes that NERSA has failed to do so. The Electricity Regulation Act, which empowers NERSA to issue the licences, requires a fair balance between the interests of customers and end-users, licensees, investors and the public. The National Energy Regulator Act requires that every decision by NERSA be “in the public interest” and “based on reason, facts and evidence”. This Act also provides for the judicial review of NERSA decisions in terms of the Promotion of Administrative Justice Act.

                                  • NERSA granted the generation licences for the Karpowership IPPs prematurely, without the relevant facts before it, and conducted the public participation process without providing the public with the necessary facts on which to comment, including pricing aspects. “The lack of transparency points to a decision that was procedurally unfair as the public was not informed of and able to comment on and submit relevant facts and evidence to NERSA on the costs involved over the next 20 years,” says Fick.

                                  • In its reasons for the decisions, NERSA failed to provide a meaningful response to the public concerns and objections, effectively undermining the public participation process. Instead, NERSA “simply brushed aside” the public objections, says Fick.

                                  • In August 2021, OUTA made a formal submission to NERSA objecting to the granting of generation licences to the Karpowerships. Many of these objections still stand and have not been addressed.

                                  • At the time when the applications for generation licences by the Karpowership IPPs were considered by NERSA, the regulator did not take into account that the Karpowership IPPs failed to meet certain legal and regulatory requirements, including NERSA’s own prescribed requirements for generation licence applications to be considered. These include failure to obtain environmental authorisations, port authorisations, water licences, emissions licences, waste management licences, various gas infrastructure construction, operating and trading licences, fuel supply agreements and power purchase agreements.

                                  • NERSA’s lack of transparency on the financial information raises concern about the effect on the public. “It failed to deal with the issue of price variation in circumstances where prices over the next 20 years will be dependent on the US dollar price. This causes uncertainty and may come at tremendous costs for the South African public,” says Fick.

                                  • NERSA appeared to prioritise the interests of the Karpowership IPPs over the public. Fick says that “it is of great concern that NERSA, a South Africa public body using public funding, expresses concern about the financial affairs of a private Turkish majority-owned company, thereby creating the distinct impression that the financial well-being of Karpowership should enjoy preference above that of the South African public.”

                                  • Eskom has not signed power purchase agreements with the Karpowership IPPs and there is no certainty that it will do so, which is an important factor when considering the granting of generation licences.

                                  • Despite the DMRE having repeatedly extended the deadline for RMIPPPP preferred bidders to obtain the requisite regulatory approvals and authorisations necessary for financial closure, the Karpowership IPPs have still failed to provide these.

                                  • NERSA accepted the “plans” by the Karpowership IPPs to comply with environmental legislation as actual compliance.

                                  • NERSA failed to take value-for-money considerations into account, including consideration of more cost-effective options.

                                  • Fick’s affidavit refers to input from OUTA’s independent consultant:

                                  • There are faster and substantially cheaper generation project options available to eliminate loadshedding in the short-term, so the Karpowership projects are not needed.

                                  • The Karpowership projects will impose unnecessary financial, economic and environmental costs on South Africa and the 20-year contracts carry a significantly greater risk to customers, the public and the economy than the available alternatives.

                                  • NERSA has failed to conduct a proper analysis of the project costs and cost risk, and appears to have misconstrued the issues surrounding the electricity pricing formulas (in particular the gas pricing components). This includes the price being significantly exposed to variations in the US dollar / rand exchange rate and global gas prices.

                                  • The Karpowership bid price in April 2020 was about R1.50/kWh and NERSA said this would be up to R2.80/kWh from April 2022, but the independent consultant estimates the current price is close to R5/kWh, roughly two to three times the cost of alternative generation methods.

                                  • The pricing methodology is such that the Karpowership IPPs could receive “windfall” profits.

                                  • NERSA failed to consider the climate impact of 20-year generation licences for the Karpowership IPPs (which run on fossil fuels) when cleaner, cheaper and faster electricity supply options are available. “High capacity factor gas power as proposed by Karpowership, will mostly not displace CO2 emitting coal power as claimed by NERSA in the RfD [reasons for decision], but will rather displace the amount of future renewable energy that will be built. It will thus result in a higher emitting power sector than what would otherwise have been the case, thereby undermining the country’s efforts to decarbonise its economy,” says Fick.

                                  • Contrary to NERSA’s assertion in its reasons for decision for granting the Karpowership IPPs’ generation licences, renewable energy solutions provide more employment opportunities on a per kWh basis than will be provided by the Karpowership projects.


                                    On 28 April 2022, OUTA announced the legal action against NERSA over the Karpowerships licence decisions. A link to the media briefing on this is                                     here.

                                    Pretoria High Court case 23017/2022: The court papers of 28 April 2022

                                    OUTA's papers
                                    OUTA's notice of motion is                                     here.
                                    The founding affidavit by Adv Stefanie Fick is                                     here.
                                    The annexures are here:                                     Annex FA1, Annex FA2-4, Annex 5, Annex 6, Annex 7-11, Annex 12-14, Annex 15-17, Annex 18. 

                                    Respondents
                                    18 May 2022: NERSA notice of intention to oppose OUTA's application is                                     here.
                                    20 May 2022: Eskom files notice of intention to abide by the decision of the high court. However, Eskom reserves its right to oppose this application at any stage. This notice is                                     here.
                                    20 May 2022: The Karpowership independent power producers (respondents 2 to 5) file a joint notice to oppose OUTA's application. This notice is                                     here.

                                    Getting copies of documents for the case
                                    28 April 2022: OUTA's notice of motion in the application of 28 April 2022 called for NERSA to provide within 15 days copies of all documents relating to the decisions to grant Karpowership the generation licences, together with the reasons for the decisions.
                                    19 May 2022: The full record that OUTA requires from NERSA was due on 19 May but was not provided.
                                    24 May 2022: Karpowership proposes that OUTA agree to "a confidentiality regime" before receiving the record. This would mean a redacted copy of the record would be provided, with the judge allowed to see the fuller record and, subject to undertakings, the lawyers for the parties. However, OUTA would not have access to the full record. OUTA refuses to agree to this without knowing what information Karpowership wanted to keep confidential and why.
                                    17 June 2022: NERSA provides a redacted record.
                                    12 December 2022: OUTA files a notice in terms of Rule 30A calling on NERSA to produce the full record of its decision in terms of Rule 53. A copy of the notice can be found                                     here.
                                    23 January 2023: OUTA files an                                     application to compel NERSA to produce the full and unredacted record in the review proceedings. A copy of the application can be found here.
                                    30 January 2023: The first to fifth respondents (NERSA and Karpowership) file notice of intention to oppose OUTA's application to compel. The notices are                                     here (NERSA) and here (Karpowership).
                                    21 February 2023: NERSA files its answering affidavit to OUTA's application to compel. This affidavit is                                     here.
                                    6 March 2023: OUTA files a notice in terms of Rule 35(12) and (14) in the application to compel, calling for a copy of NERSA's policy and guidelines on the treatment of confidential information. The notice is                                     here.
                                    28 March 2023: Karpowership files its answering affidavit to OUTA's application to compel. This affidavit is                                     here and the annexures here.
                                    21 April 2023: Karpowership files a signed notice of counter application. A copy is                                     here.
                                    25 April 2023: OUTA files a second notice in terms of Rule 35(12) and (14) in the application to compel. A copy is                                     here.
                                    9 May 2023: NERSA files a reply to OUTA's notice in terms of Rule 35(12) and (14). See                                     here.
                                    24 May 2023: OUTA files a replying affidavit in the application to compel. See                                     here and the annexures here, here, here and here.
                                    4 December 2023: The Pretoria High Court issues a directive setting down the hearing for OUTA's application to compel for 4 to 6 June 2024. The OUTA application will be heard with The Green Connection's case against NERSA and Karpowerships. OUTA must file heads of argument by 31 January 2024. Any supplementary heads are due by 19 April 2024. Respondents heads of argument are due by 30 April 2024. See                                     here.
                                    31 January 2024: OUTA files its heads of argument in the application to compel NERSA to produce the complete record of the decisions to grant the licences. A copy of OUTA's heads is                                     here. "These are review proceedings. An applicant in review proceedings is in principle entitled to the complete record," says OUTA in the heads. "The decision-maker, NERSA, has a duty in terms of rule 53(1)(b) and in terms of the Constitution, 1996, to disclose the full record to the applicant in review proceedings. It does not have the right or power to refuse full disclosure or to impose conditions."
                                    28 February 2024: NERSA files heads of argument opposing OUTA's application to compel. A copy is                                     here.
                                    9 May 2024: OUTA files the joint practice note and chronology of events. A copy is                                     here.
                                    20 May 2024: Karpowership services and files notice of withdrawal of opposition to OUTA's case, saying it will abide by the decision of the court. A copy is                                     here.
                                    28 May 2024: Due to Karpowership's withdrawal, a revised joint practice note and chronology of events had to be filed. The revised copy is                                     here.
                                    4 June 2024: OUTA's application to compel NERSA to produce the complete record of its decisions to grant generation licences to Karpowership was in the Pretoria High Court. NERSA's counsel presented a settlement agreement to the parties, in terms of which the parties would receive the full unredacted record, subject to agreeing to a confidentiality regime. OUTA partially accepted the settlement agreement. The agreement, which was made an order of court, is                                     here. OUTA believed that the costs tendered by NERSA on this application were grossly insufficient and proceeded with a cost argument, asking the court to award a punitive cost order against both NERSA and Karpowership due to their conduct in this matter.
                                    27 June 2024: OUTA received the full unredacted record from NERSA of its decisions to grant the Karpowership generation licences. OUTA cannot upload this record for public access due to the confidentiality regime signed.
                                    5 July 2024: Judge L Windell found in favour of OUTA, and specifically ordered that Nersa and Karpowership pay the cost of the application on a punitive scale, including the cost of OUTA’s counsel. A copy of the judgment is                                     here.

                                  ICYMI: Here's a quick irreverent but insightful Karpowership explainers by Politically Aweh. Watch here

                                   

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