S. Africa Says Court Case Delays Power Provision by Seven Months

(Bloomberg) -- South Africa's energy department said a court challenge to its so-called emergency power program will likely delay the provision of 2,000 megawatts of electricity to the national grid by seven months. 

The lawsuit, filed by a losing bidder, was dismissed by a High Court on Sunday and DNG Energy Ltd., the company behind it, was ordered to pay legal costs. 

The legal proceedings forced the Department of Mineral Resources & Energy to extend the deadline for winning bidders to complete their financial arrangements by two months to the end of March, with the additional electricity expected to come online a year later. When the contracts were first awarded, the target was August of this year. 

“It is expected that these projects will be operational and ready to deliver much needed generation capacity to the national grid starting 12 months from financial close,” it said in a statement.

While the judgment ends a legal saga that had prevented Turkey's Karpowership, which won the right to supply 1,220 megawatts, and other successful bidders including Scatec ASA, Acwa Power Co. and Electricite de France SA from concluding their contracts, other hurdles remain. Agreements have to be signed with national power utility, Eskom Holdings SOC Ltd., and Karpowership needs to win environmental approval for its three ship-based, gas-fired power plants.

DNG had alleged that corruption involving government officials led to Karpowership winning the business. The government countered that DNG's bids didn't meet its requirements and rejected accusations of wrongdoing.

“The demonstrable reason for DNG's unsuccessful bids was because it failed to meet a myriad” of qualification criteria, Judge Joseph Raulinga said in his ruling. The company also submitted additional documents without getting the correct permission from the court, he said. 

DNG had demanded that its bids replace those of Karpowership.

“I believed in the merits of our case and we will study the judgment,” DNG Chief Executive Officer Aldworth Mbalati said in an interview. “If we believe there are merits for an appeal we will appeal.”

The delays could prolong intermittent power outages that South Africans have been experiencing for more than a decade because Eskom can't meet demand. Those outages hit a record last year.

While Karpowership would burn gas to supply power, some of the other bids included solar power projects in addition to diesel and gas.

Karpowership has been “convincingly vindicated by the ruling,” the company said in a response to a query. “We are one very significant step closer” to commercial closing and the implementation of the company's three projects.

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