South Africa: Project Developers Can Look Forward To Investing In And Developing Solar Projects In Uganda

Last Updated: 24 March 2014
Article by Sasha Singh, Alexander Kibandama and Leahandra Pollard

Most Read Contributor in South Africa, September 2018

1. INTRODUCTION

The last few years have seen project developers and sponsors investing in and developing renewable energy projects in emerging markets. This has particularly been the case in South Africa, following the successful Renewable Energy Independent Power Producer Programme initiated by the Government of South Africa, as well as the Small Projects Independent Power Producer Programme which is now also in progress.

Project developers can now look forward to investing in and developing solar projects in Uganda, with the advent of the Global Energy Transfer Feed-In-Tariff "GET FiT" Uganda Programme (the "Programme"), which is aimed at providing clean energy to East African nations. The Programme seeks to facilitate a reduction in CO2 emissions and to increase electricity access to households within Africa. While the concept of a feed-in tariff was applied to other technologies in this Programme, this component of the Programme is based on the concept of a combination of a competitively bid tariff and a feed-in tariff "premium". This follows on from the successful example set by the renewable energy programmes in South Africa Programme which operate on the basis of a tariff determined by a competitive bidding process.

Like the South African programmes, bidders will need to document compliance with established technical, economic and financial, environmental, social and legal requirements.

Compliance is a critical aspect of any proposal to bid for these types of projects. The legal requirements are of particular importance and it is imperative that potential bidders seek the advice of experienced counsel in this regard.

The initial focus of the Program was on:

  • Hydro;
  • Biomass; and
  • Bagasse.

In addition to these focus areas of the Programme, the GET FiT Solar Facility (the "Solar Facility") was introduced in 2014. Previously, during the first round of request for proposals under GET FiT in 2013, Solar PV was not included as an eligible technology.

The minimum foreseen capacity benefiting from the GET FiT Solar Facility is estimated to be at least 20 MW. Single projects must have an installed capacity of 5 MWp, however, one bidder can be eligible for up to two projects.

The Electricity Regulatory Authority (the "ERA") will tender out Solar PV concessions in which developers will be asked to bid a price per kWh. Concessions will be awarded following a due diligence process whereby the most cost effective bidders are selected. The selected developers will receive an output-based GET FiT Premium Payment (the "Premium Payment") in order to bridge the gap between the predetermined tariff that is set by the ERA and the offer of the selected developer, which offer would be lower than the pre-determined tariff.

Following the Premium Payment, successful bidders will subsequently enter into a "Developer Finance Agreement" with the Government of Uganda. Selected bidders will be required to sign a standardised Power Purchase Agreement ("PPA") with a duration of 20 years. An additional benefit in being chosen as a selected bidder is the potential eligibility for a guarantee arrangement with the World Bank.

2. BIDDING REQUIREMENTS

Eligible bidders under the Solar Facility are required to provide the following:

  1. an Expression of Interest ("EOI") for developing, financing, building and operating a grid connected solar photovoltaic power plant situated in Uganda;
  2. documentation justifying their capacities in respect of finances, technical expertise and project relevance experience in order to facilitate the development, financing, building and operation of the solar PV plant; and
  3. evidence of effective site selection for the development and installation of the project, such as the land co-ordinates and maps.

3. DEADLINES

EOIs must be submitted by no later than 28 March 2014 at 3pm (EAT). This process aims to pre qualify up to 10 bidders no later than four weeks following the bid submission date. These shortlisted bidders will be invited to tender in early May 2014 and in doing so will need to submit technical and financial proposals. Bidders will be invited to propose up to two separate projects of 5 MWp each.

The tender process is aimed to be completed by July 2014.

The awarding of the contract, signing of the PPA and the Developer Finance Agreement with the successful bidders is aimed to be completed by the end of September 2014.

The IC decision is planned for October/November 2014

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.

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