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Details on the approach South Africa will be taking to piloting Independent Power Transmission (IPT) projects as part of a strategy to accelerate the expansion of its electricity grid will be included in the upcoming Medium-Term Budget Policy Statement (MTBPS), a senior official in the office of Electricity and Energy Minister Dr Kgosientsho Ramokgopa has confirmed.

The MTBPS is scheduled to be released by Finance Minister Enoch Godongwana on October 30.

Speaking during a virtual discussion hosted by RES4Africa, the ministry's head of strategic initiatives and international partnerships, Shaakira Karolia, reported that significant progress had been made to firm up South Africa's approach to private participation in the grid, following Cabinet's approval of a transmission finance pathway in December last year.

Together with the National Treasury and the International Finance Corporation (IFC), the Ministry of Electricity and Energy had narrowed down the IPT procurement options to a build, operate, own and transfer, or BOOT, model, with remuneration based on capacity payments that would be linked to the transmission line's availability.

South Africa, which has been studying IPT models used internationally, is expected to lean heavily on Brazil's approach, which includes a price cap set at the tender stage, and the first IPTs are likely to be implemented on transmission corridors in the Northern and Western Cape.

Bidding is expected to be coordinated outside of the department along the lines of the Independent Power Producer Office, and it has been reported previously that this new office could be housed under the Development Bank of Southern Africa.

Should the competitive auction model be used, bidders would submit a yearly revenue requirement to cover the capital, operational and maintenance expenditure of the IPT, as well as equity returns and debt repayments over the contract period, which is typically between 25 and 35 years in other countries.

The National Treasury is also on record as stating that it is not keen to extend large guarantees to IPT projects and that it is working with the World Bank on the creation of a 'credit guarantee vehicle' that would provide guarantees without reference to government's balance sheet.

Ramokgopa, Karolia said, would soon outline government's approach to IPT's as part of a broader strategy to be pursued with the National Transmission Company South Africa (NTCSA) to deliver on a Transmission Development Plan (TDP) that requires more than 14 000 km of new powerlines by 2033, alongside 170 new transformers and 40 capacitors.

The TDP is expected to involve investments of about R390-billion and government has concluded that IPT should be integrated into the roll-out, owing to the financial and capacity constraints of Eskom Holding's NTCSA.

NOT PRIVATISATION

Karolia stressed that the IPT model endorsed by Cabinet did not amount to the privatisation of the grid, likening the approach to the one adopted by the South African National Roads Agency Limited to expand national roads using tolling.

"We do not see IPTs as privatisation.

"They are really private-sector partnerships to increase infrastructure development in the country - the ownership comes back to the State, and the NTCSA remains responsible for operating the transmission system," she added.

IFC senior operations officer for Africa Tilana de Meillon, who has been working with government on the IPT options, said no whole-of-network concession was envisaged.

Instead the proposal was for the private sector to be allowed to implement new transmission lines based on the needs of the TDP, primarily to spread risks and to mobilise financing.

"The implementation agreement effectively only provides the support from the government to ensure the rights of the IPT to implement, own and opera...