South Africa: Renewable Energy Project Developers And Their Legal Personality Change In Control: What Does It All Mean?

Last Updated: 6 March 2012
Article by Happy Masondo

During December 2011, the Department of Energy (DOE) selected 28 project developers as preferred bidders under their Renewable Energy Programme to produce part of the initial 3,725 MW of renewable energy between 2012 and 2016. The preferred bidders have until 19 June 2012 for their projects to reach financial close and conclude all of the project agreements with the DOE and Eskom Holdings SOC Limited (Eskom).

The project agreements include, amongst other agreements, the Power Purchase Agreement (PPA). A selected project company, as the producer and seller of renewable energy, has to conclude a PPA with Eskom as the buyer of the produced renewable energy. In addition, the selected project company also has to sign and execute the Implementation Agreement (IA) with the DOE. The role of the DOE goes beyond the mere qualification and selection of the project developers and extends to the monitoring of any change to both the legal personality of the project company as well as their holding company.

The prior written consent of the DOE

From the release of the Request for Proposal (RFP), the DOE has made it clear that it has to give its prior written consent for any change to the membership or structure of the project developers. The original position taken by the DOE at the very outset of the RFP in August 2011, and throughout the updates of the RFP through briefing notes up to and including the release of briefing note 8 on 2 February 2012, has not changed.

The provisions of clause 20.2 of Part A of the RFP state as follows –

"No change is permitted to the membership or structure of any Bidder and its Members (including but not limited to a Change in Control), other than in respect of a listed company, after submission of Bid Response by a Bidder in respect of a Bid Submission Phase without the prior written consent of the Department. A change in any Bidder's membership or structure will include a change to the percentage of membership in the Bidder by each Member or the intended percentage or shareholding in the Project Company by each Shareholder (including but not limited to a Change in Control) or a change in the identity of the Bidder's Members, Contractors or Lenders.)1

The broad language of clause 20.2 above makes it clear that the DOE is not only concerned with change in control as that concept is used in the Companies Act 71 of 2008 (Companies Act).

Under the Companies Act, control is directly linked to the ability of a person to control the majority of the voting rights of that company, or the appointment of the directors who control a majority of the votes at a meeting of the board of directors.

The provisions of the RFP go further than the Companies Act and include a change in the actual membership or structure including, but not limited to, a change in control, regardless of whether the change has an effect on the majority of the voting rights or the appointment of directors of the company who control a majority of the votes at a meeting of the board of directors.

The project developer selected by the DOE has to immediately notify the DOE, in writing, of any change contemplated by the project developer, with full details of the reason for the change, the parties involved and the impact on the project developer. The DOE requires the project company to submit information in respect of such a new party.

Impact of any changes

The DOE has reserved for itself the right to require the project company to supply all necessary information as requested by the DOE in connection with the change contemplated by the project company. The request for additional information is for the DOE to consider holistically the impact of such a change to the project company and whether the project company maintains the status it sought to portray at the time of the submission of the bid response.

If the project company undergoes any change without the prior written approval of the DOE, the DOE may allow a reasonable amount of time for the project company to propose a restructuring of the project company, to the satisfaction of the DOE. In the alternative, the DOE may, in its sole and absolute discretion, disqualify the project company from participating any further in the relevant bid submission phase or to allow the project company to continue in the procurement programme at all.

At the time of submission of the bid response by the project developer it also has to accept the terms and conditions of the IA including clause 16 which repeats the provisions of the RFP.

Clause 16(2) provides that from the commercial operation date of the facility of the project developer and for the duration of a three year period, the project developer has to ensure that there is no dilution, sale, assignment, cession, transfer, exchange, renunciation or other disposal of the whole or any part of the equity or issued share capital of a shareholder.

In addition, clause 16(3) provides that, for the period of 20 years, the project company has to ensure that no dilution, sale, assignment, cession, transfer, exchange, renunciation or other disposal of the whole or any part of the equity which results in the project company being in breach of the undertakings with regard to the ownership element obligations under the IA and/or the shareholder loans of any black person or black enterprise. Through the RFP as well as the provisions of clauses 16(2) and 16(3) of the IA, the DOE seeks to know the legal personality of the project company and the entities that control the project company at all times.

The DOE seeks to have full knowledge of the entities with which the project company enters into contracts directly or indirectly. In terms of clause 16(1) of the IA, the prohibition of a change in control without the prior written consent of the DOE is not limited to the change in control of the project company but extends to the holding company of the project company.

Accordingly, the DOE will also need to give its prior written consent for changes at the level of a company of which the project company is a subsidiary.

Socio-economic development under the RFP

Typically, parties to a contract will agree to an immediate termination of a contract where a breach of the terms of the contract in the form of an act or omission is so egregious as to go to the essence of the agreement and is not capable of any remedial action. The breach of any of the socio-economic obligations under the RFP and the IA also attracts the same consequences, immediate termination of the IA and other project agreements. It comes as no surprise that the DOE insists on having full knowledge about the control of the project company and the holding company of the project company.

The DOE has to grant its prior written approval to the project company and the entities with which the project company contracts, particularly where the ownership element obligations under the socio-economic development requirements set out in the IA schedule are not complied with.

In terms of clause 18.3 of the PPA, it is a seller default warranting immediate termination of the PPA (without a remedy period afforded to the project company) by Eskom where the project company fails to comply with the economic development obligations.

The DOE's position is that throughout the life of the PPA and the IA the project company is obliged to fulfill and comply with the socioeconomic development requirements and the DOE has to have full knowledge of that status at all times.

Failure to do so will result in the immediate termination of the PPA and thus of the IA and other related project documents. Project developers have no option but to ensure that they comply with their socio-economic obligations at the bid submission phase and throughout the 20 year period of the project.


The DOE has refused to disclose any information on the criteria it will use to evaluate the submissions or applications for prior written approval in respect of any change contemplated by the project company or the company in which the project company is a subsidiary.

The DOE is dealing with bidders and preferred bidders in addressing matters associated with socio-economic development matters, including, amongst others, local content procurement, skills and black economic development in an uncharacteristically stringent manner.

It has to be said this is one of many ingenious ways in which the DOE can control changes in control and monitor any potential fronting by project developers. In so doing the DOE appears to be ahead of the curve in implementing the principles espoused by the Department of Trade Industry (DTI) in the proposed amendment to the Broad-Based Black Economic Empowerment (B-BBEE) Amendment Bill 2011 (B-BBEE Amendment Bill).2


1 The Department of Energy Request for Proposals for Independent Power Producers under the Renewable Energy Procurement Programme, August 2011.

2 See General Notice 893 of 2011, issued and signed by the Minister of the DTI on 7 December 2011 (Government Gazette No 34845).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions