1. Presentation to African Renewable Energy Regional Center of Excellence 4 August 2016

2. IPP Office: Role and Mandate
IPP Office was established in November 2010 by the South African Department of Energy (DoE), National Treasury (NT) and the Development Bank of Southern Africa (DBSA) through a Memorandum of Agreement
Memorandum of Agreement governs the relationship between the DoE (Mandate), NT (Funding) and DBSA (Procurement & HR) and provides the IPP Office with its primary mandate
Primary mandate is to secure electrical energy from the private sector for renewable and non- renewable energy sources pursuant to Ministerial Determinations in terms of section 34 of the Electricity Regulation Act
Flowing from the primary mandate, the IPP Office also has a mandate to:
Monitor, Evaluate and Contract Manage IPP Project Obligations in terms of the Implementation Agreement
Pursue regional IPP procurement collaboration and capacity support
Provide advisory services to the Department of Energy in support of an enabling environment for private sector investment
IPP Office is self funded through a development fee cost recovery mechanisms
Mandate instructions are received from the Department of Energy and performance oversight over the IPP Office is also conducted by the Department
10 November 2018

3. Policy Context of the Role of the IPP Office
NDP
The National Development Plan (NDP) identifies the need for South Africa to invest a strong network of economic infrastructure.
Energy infrastructure is a critical component.
IRP
The Integrated Resource Plan (IRP) 2010 developed the preferred energy mix with which to meet the electricity needs over a 20 year planning horizon to 2030.
Determinations
The following determinations have been made since:
MW RE
2 500 MW coal-fired plants
1 800 MW cogeneration
3 126 MW gas-fired power plants
2 609 MW imported hydro
1 500 MW Solar Park Strategic Partner
600 MW Gas Strategic Partner
IPPPP
The Independent Power Producer Procurement Programme (IPPPP), as managed by the IPP Office is a key vehicle for securing electricity capacity from the private sector for renewable and non-renewable energy sources as determined by the Minister of Energy
10 November 2018

4. World Acclaimed Procurement Methodology
Enabling Policy and Regulatory Environment – section 34 of the Electricity Regulation Act, 2006 enabling ministerial determination of new generation capacity and identifying the designated procurer and designated buyer
Competitive tender process vs REFIT and Direct Negotiations – five rolling bid rounds to date producing better price outcomes with each bid round
High quality and bankable documentation and contracts
Fairness, transparency and trust building with the private sector- evaluations conducted under strict security conditions, thorough review process and strong communication with the private sector
Appropriate allocation of risk with Government Support for both IPPs and Eskom
…”it (REIPPPP) has already established a flagship public-private partnership model for South Africa, and indeed the rest of Africa, and in the process is helping alleviate Eskom’s current power crisis while also reducing greenhouse gas emissions.”
- Enabling Renewable Energy in South Africa: Assessing the REIPPPP, WWF, August 2014
10 November 2018

5. Ramp-up of electricity capacity, energy mix and private sector participation
IRP 2010 Required future capacity (renewables and other)
MW Procured in REIPPP BW 1 – 4 |
MW Operational 7
1522
2144
Already determined capacity (29 110MW) MW from Peakers
Renewable Energy
Implemented through IPPPP
Non-renewable Energy
Implemented through IPPPP
Following on the National Policy Conference directives, we have accelerated the IPP Procurement Programmes to meet IRP targets
In line with the national commitment to transition to a low carbon economy, 17,800 MW of the 2030 new build target in the IRP are expected to be from renewable energy sources
Of this, 13,225 MW is targeted to be procured from Independent Power Producers (IPPs)
IRP planning requirements further include MW new build electricity capacity to supply for base load and medium-term risk mitigation (MTRM) plans by 2030.
In the short term the IRP had planned for approximately MW of this electricity capacity to be procured from IPPs and be operational towards the end of 2025.
To date, we have determined over 30,000 MW to be procured from IPPs for which procurement plans are either underway or in development
The IPP Office is responsible for the implementation of all these determinations, except for the Nuclear determination made in December 2015.
An Additional information slide on the IPPPP contribution to security of energy supply is provided at Annexure Pack Slide 25
Nuclear
9 600 MW
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6. IPPPP garners investor confidence

7. 93% Renewable programme bringing electricity online quickly...
megawatts operational
as at 31 March 2016
It is clear that the REIPPP is bringing electricity online quickly
In just two years, we have demonstrated that Renewable energy is time responsive with short construction periods of 2 – 3 years therefore being able to deliver green energy capacity on-line quicker
The first Renewable Energy IPPs have consistently contributed new capacity to the network since the end of At March 2016, 93% of IPPs scheduled to be operational have started commercial operations. The average lead time for these 43 projects to complete has been 1.8 years.
93%
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8. Delivering Increased investment
Projection for 2023
(based on MW)
Commitment for MWs procured
Note that data includes BW 1, 2, 3, 3.5, 4 and smalls
If extrapolated for the complete IPPP programme2:
Planned Investment
Total Project Costs1 committed for IPP development
R194.1 billion
R654 billion ~
of which:
R53.4 bn
from foreign sources
The IPP Programmes have attracted R194 billion in investment since inception.
Of this, R53.4 billion (27.5%) is from foreign financiers and investors across the globe. This is equivalent to 86.1% of the total FDI attracted into South Africa during 2014 (R62 billion).
If we continue at current projections and pace, the total investment for the IPP Programmes by 2023 could be around R654 billion
R139.4 bn
from domestic financial institutions3

9. Black industrialists are participating meaningfully
Not only are we seeing an investment in BBBEE increasing, we are also increasing active participation of black South Africans in the management and operation of IPPs. 29% average shareholding by black South Africans in IPPs has been secured across the value chain in Bid Windows 1-3. People in local communities currently own 11% of the IPP Projects that have reached financial close under Bid Windows 1 and 2
Projection for 2023
(based on MW)
Commitment for MWs procured
Note that data includes BW 1, 2, 3, 3.5, 4 and smalls
Planned BBBEE commitment
If extrapolated for the complete IPPP programme2:
R103 billion
R342 billion ~
BBBEE commitments of R55 million have been achieved on the IPP Programmes to date.
If we extrapolate this at current pace this would result in R342 billion of investment in black industrialists through the IPP Programmes
Not only are we seeing an investment in BBBEE increasing, we are also increasing active participation of black South Africans in the management and operation of IPPs. Shareholding by black South Africans in IPPs has been secured across the value chain. People in local communities currently own 11% of the IPP Projects that have reached financial close under Bid Windows 1 and 2
R34.5 billion achieved
…intending to increase BBEEE participation in new programmes
and addressing funding with PIC, DBSA and IDC

10. Substantial private sector investment in broad-based empowerment …
The IPPPP is making a substantial private sector investment in broad based empowerment from IPP Community Trust Dividends, and ED and SED commitments
In terms of Community Trust Dividends
The total commitment over the life-cycle of the existing projects is just over R29 billion.
On average, just over R1.46 million per year is contributed to local community development under the current IPP projects.
In Socio-Economic Development
A total of R22.7 billion in SED commitments in Bid Windows 1-4 and Smalls are currently planned over the 20 years life-cycle of the IPPs.
By March 2016, we have achieved R171 million in socio-economic development commitments from 43 IPPs that have come into operation since August 2014
If extrapolated at the current procurement pace, we could see this SED contribution increase to R64 billion over the next 7 years
In Enterprise Development
A total of R6.99 billion have been committed by current IPPs over the life-cycle of the current operational IPPs
By March 2016, we have already achieved R53 million in planned contributions from the first 43 operational IPPs
If we extrapolate this at current pace and in line with the procurement plan over the next 7 years, we could see this contribution increase to R20 billion.
Working with national, provincial and local government to optimise the impact of investments, for example in education

11. Localisation – a new industry is emerging in South Africa
Local content targets
Real industrial effect
Trend of exports of photo-voltaic cells & assembled PV panels).
Planned Local Content
R65.7 billion
Achieved Local Content
R30 bn
Procured
Achieved
achieved
A total of R30bn local content spend has been achieved in IPP Programmes.
Since the IPP programme started, a significant increase of South African based product exports can be observed on the export data as reported by SARS. Although coming off a low base, these exports create and sustain valuable jobs as well as to contribute to the country’s foreign reserves - crucial in the current economic climate.
58% of exports for 2014 and 2015 were destined for Europe,
35% to North America and
5% to Africa.
In the first 3 months of current year (2016), 91% of exports are destined for North America

12. Jobs for the people-Jobs for youth
Projection for 2023
(based on MW)
Commitment for MWs procured
Note that data includes BW 1, 2, 3, 3.5, 4 and smalls
Planned Employment SA citizens
If extrapolated for the complete IPPP programme:
Cumulative construction and operations employment ~
Job years2
Job years2
jobs for youth (more than 46% of total SA citizen jobs).
R90 million committed to Education and Skills Development.
In only three years, the IPP Programmes have created just under construction jobs from the 3 active bid windows.
If extrapolated at current pace this could result in over job years created by 2023
24 965
job years achieved since end 2013 to 31 March 2016
(bid windows 1, 2 and 3)

13. Harnessing regional energy stability
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Harnessing regional energy stability
Regional engagement framework being developed for South Africa’s collaborative role in regional capacity building, investment and trade in energy:
Hydro: The Grand Inga Treaty obliges SA to negotiate an off-take agreement for MW of hydroelectricity from the Inga Hydro Project - Capacity support to be provided for the INGA Project Management Unit
Coal: A MW determination gazetted in May 2016 for procurement of Coal IPPs in the region
Gas: Significant opportunities identified for gas supply and gas- to-power projects in Mozambique
Renewables: Sharing experiences (bilaterally and on demand) with African countries seeking to roll-out their RE strategies, for example current support to Namibia CSP and Botswana PV RFP
The prosperity of the regional electrical energy sector is not only profoundly important for the economic development and growth of SADC and its comprising member states, but it also has direct positive implications for the South African economy.
The increased demand for South African goods and services that emanate from a more prosperous regional economy and regional electricity trade options will be the main growth drivers.
Recognising this, the Department is currently developing a regional engagement framework for South Africa to play a collaborative role in regional capacity building, energy investment and trade in Energy
We are embarking on a number of advisory and capacity development activities, mostly focused on renewable energy development with countries in the region, including Botswana, Namibia, Malawi and Kenya
A key focus is the operationalisation of the off-take agreement for MW of hydroelectricity from the Inga Hydro Project.
A prefeasibility study was conducted to investigate and assess different transmission solutions to deliver the MW power allocated to South Africa. The prefeasibility study has recommended a preferred Inga 3 transmission solution with one alternative option.
South Africa has also had engagement with the transit governments to discuss the process to conclude cooperation agreements and specific development agreements for the transmission line during the June SADC Energy Officials and Ministers Meeting in Botswana.
We will also provide capacity support to the Inga Project Management Unit through the appointment of a South African Energy Attaché at the South African Embassy in Kinshasa - appointment will be finalised very soon.