A R5-billion contract to privately build and operate two turbine gas stations was cancelled because the bidder was unwilling to commit to the agreed terms of the tender, the Department of Minerals and Energy Affairs said on Thursday.
In a statement, department spokesperson Bheki Khumalo said the tender with the consortium, led by United States power producer AES, was cancelled after it failed to meet commitments in respect of price, commercial terms and the dates for the generation of power.
The two privately owned and operated open-cycle turbine gas stations — with a combined capacity of 1 000 megawatts — were to be located in the Eastern Cape and KwaZulu-Natal and were expected to be operational by the end of 2009.
”However, it transpired that the AES consortium was unwilling to enter into the project agreements on the basis of the commitments made in its bids, submitted in response to the request for proposals (including commitments in respect of price, commercial terms and the dates for the generation to come on stream),” Khumalo said.
”Introducing IPP peaking power generation in South Africa has not yielded the desired result due to the failure by the preferred bidder, the AES consortium, to proceed with the project on the basis of the bids submitted,” Khumalo said.
The department however was still committed to the country’s electricity supply needs.
”Despite the setback … we remain fully committed to implementing the government’s policy of introducing IPPs [independent power producers] in South Africa to contribute to the country’s generation capacity needs.”
He said the department would soon embark on a new process to procure the generation capacity envisaged under the specific tender.
AES was appointed the preferred bidder in September last year, and in November at its own request was granted a three-month extension to the deadline to enter into project agreements, said Khumalo.
It was hailed as a boost to the establishment of IPPs in South Africa.
Earlier on Thursday, Business Day newspaper reported that AES Consortium was to have posted a bid bond of R20-million by the end of March.
AES spokesperson Robin Pence told the paper that the company had been content for the contract to lapse because the project was no longer viable.
The project has been seen as a pioneering project to start private sector electricity generation.
The aim was to have 30% of the country’s power generated by the private sector while Eskom would generate the remaining 70%.
Eskom was not immediately available for comment. – Sapa