Renewable energy supply looms closer

The nine photovoltaic (PV) and wind projects the group is involved in represent almost a third of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) Round 1 projects, which reached financial close in late 2012 and are now entering the construction phase. The projects total approximately 300 MW and are located across South Africa.

Group's role

As LTA, its role is to monitor whether construction progress observed on site represents the programme; whether amounts requested for payment of capital costs are representative of the construction progress; and to advise whether a borrower will achieve commercial operation date (COD) on or before the completion longstop date.

As the owner's engineer, it monitors the quality of construction to ensure compliance with the technical design. The first of the projects to reach COD will be in November 2013, demonstrating that the construction timescales required are just one part of the project development process. Most of the projects have been in development for many years, culminating in around a 12-month construction process to bring developers' long-term investment to fruition. Despite the delays in reaching financial close, these projects now in construction, represent an exciting milestone for the group's involvement in the South African renewable energy programme.

Risk management

The group was heavily involved in the commercial and technical due diligence aspects during the REIPPPP Round 1 and Round 2 projects, undertaking the LTA role for over 1.3 GW of renewable energy projects, including PV, wind and hydro projects. In order to facilitate the due diligence process, it employs a proactive approach to the identification and mitigation of risk.

Its reviews incorporate a comprehensive system of checks at each stage to identify risks emerging as the project progresses and the group provides suggestions of ways to mitigate the risks. It adds supplementary data sources where relevant through industry knowledge and from experience of similar assets.

Some of the most common risks to projects include ensuring a robust logistics and transport strategy is in place, ensuring the correct equipment arrives at site on time and is then secured safely. Security and on-site storage strategies are important and are often neglected until equipment arrives on site, exposing expensive components to theft and degradation. The importance of having an electronic monitoring system and robust programming tools cannot be underestimated. Notable risks relating to contractual matters from a technical viewpoint include the extent to which EPC and O&M contracts are fully wrapped; the identification of proposed 'carve outs' and the commercial implications for the project.

Round 3 potential

Putting all its South African and global experience to good effect, the group is currently taking a number of Round 2 preferred bidder projects through to financial close and is looking forward to assisting developers with Round 3 projects.

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