Small Projects IPP Procurement Programme First Stage 2

Small Projects IPP Procurement Programme First Stage 2 Bid Submission Phase Preferred Bidders’ Announcement 4 October 2015

Introduction • In August 2011, subsequent to the Ministerial determination of the same month providing for procurement of 3 725 MW of renewables generation capacity from IPPs, the Department of Energy initiated the Renewable Energy IPP Procurement Programme (“REIPPPP”) to procure renewables generation capacity from the private sector • In a further Ministerial determination in December 2012, the Minister determined that a further 3 200 MW of renewables generation capacity was to be procured from IPPs • Each determination includes a 100 MW allocation for the procurement of ‘small projects’ (≤ 5 MW) from the following renewable energy sources: – Solar Photovoltaic – Wind – Small Hydro – – – Landfill Gas Biomass Biogas 2

Introduction (cont’d) • In August 2015, a third determination was made, providing for procurement of a further 6 300 MW of renewables generation capacity from IPPs. Out of this, 200 MW was allocated to ‘small projects’, indicating the Department’s commitment to the ‘small projects’ industry • The Department has established the Small Projects IPP Procurement Programme, to run alongside, but separately from, the REIPPPP, for the purpose of procuring renewable energy from ‘small projects’ • The procurement documents were first released to the market on 21 August 2013 • The Small Projects IPP Procurement Programme was designed to follow a two stage evaluation process: – The Stage 1 is effectively a pre-qualification stage, with high level qualification criteria which must be met to obtain a Selected Bidder award which enables the bidder to progress to the Stage 2 process – The Stage 2 process is a complete bid evaluation where qualification criteria must be met before price and economic development criteria are comparatively scored 3

Introduction (cont’d) • The Department elected to follow the two stage process in order to mitigate the risk of a large number of inexperienced new developers incurring significant costs in compiling bid responses on projects that may have little or no chance of success • To date, there have been two Stage 1 Bid Submission Phases and one Stage 2 Bid Submission Phase: – The First Stage 1 Bid Submission Date was 14 October 2013. Selected Bidders were appointed in March 2014; – The Second Stage 1 Bid Submission Date was 26 May 2014. Selected Bidders were appointed in February 2015; – The First Stage 2 Bid Submission Date was 3 November 2014. 29 bids were received on 3 November 2014. These bids amounted to 139 MW whilst the available MW for allocation was 50 MW. 4

Procurement Process Background Procurement documents Request for Proposals Power Purchase Agreement Implementation Agreement • • Part A: General Requirements, Rules and Provisions Part B: Stage 1 Qualification Criteria Part C: Stage 2 Qualification Criteria Part D: Stage 2 Evaluation Criteria • Contract between the Buyer (Eskom) and the Seller (IPP) • Solar Photovoltaic PPA To be concluded in • Onshore Wind PPA respect of all First • Biomass PPA Stage 2 projects • Contract between the IPP and the Department • Obligation for IPP to deliver on Economic Development obligations • On Buyer default – Department to pay the IPP 5

Contractual Arrangement Eskom n tio nta t me en ple em Im gre A Po we Ag r Pu ree rch me ase nt IPP Government Support Framework Agreement 6

Procurement Process Background RFP Part D Request for Proposal (RFP)RFP Part C RFP Part B RFP Part A • Requirements • Rules • Provisions Stage 1 Qualification • Environment • Land • Commercial • Economic Development • Technical Stage 2 Qualification • Environment • Land • Commercial • Economic Development • Finance • Technical Stage 2 Comparative • Price Evaluation • Economic Development • Job Creation • Local Content • Ownership • Management Control • Preferential Procurement • Enterprise Development • Socio-Economic Development • SME Participation 7

STAGE 2 PART D EVALUATION Price 70% Balanced Scorecard – ED commitments Fully Indexed Price and Partially Indexed Price (30% of Price indexed to CPI) – Rand/MWh ED 30% 8

OVERVIEW OF EVALUATION PROCESS 9

Evaluation Protocols • Evaluation conducted in a ‘closed’ evaluation environment, under strict security conditions • Members of the evaluation team are ‘ring-fenced’ within each of their firms • Signed declaration of interest by all firms and individuals involved in the evaluation process • Reports prepared by each discipline reviewed by independent review teams • Overall process reviewed by independent governance review team 10

Evaluation Composition Evaluation Streams: • Legal Environment • Legal Land • • • Governance Team Land rights Notarial lease registration Proof of land use application Independent Review Team EY Acceptance of the PPA Project structure Legal • • Financial South African entity participation Shareholding by SMEs Contributor status level Compliance with thresholds • • • Letsema Technical Pieter van Huyssteen Blueprint Consult Evaluation Team Financial Technical ED Bowman Gilfillan Economic Development • • • First Stage 2 Environmental Authorisation Legal Commercial • • • Evaluation team: Full and partial price indexation Financial proposal Webber Wentzel Legal ED Ledwaba Mazwai Eligibility Energy resource Technical proveness Environment Ledwaba Mazwai Webber Wentzel Land Ledwaba Mazwai Webber Wentzel Financial Technical Pw. C Mott Mac. Donald Novadays Commercial Ledwaba Mazwai Webber Wentzel 11

PREFERRED BIDDERS 12

Preferred Bidders Solar Photovoltaic Contracted Capacity Fully Indexed Price* (ZAR/MWh) Partially Indexed Price* (ZAR/MWh) Portion Indexed ED Score (out of 30) Adams Solar PV Project 5 MW R 981, 00 R 1 279, 80 30, 0% 16, 89 Bellatrix Solar PV Project 5 MW R 1 028, 00 R 1 345, 77 30, 0% 17, 04 Du Plessis Solar PV 4 5 MW R 1 160, 00 R 1 624, 00 30, 0% 23, 57 Heuningspruit PV 1 5 MW R 1 017, 00 R 1 504, 10 30, 0% 10, 37 Steynsrus PV 1 5 MW R 1 017, 00 R 1 504, 10 30, 0% 10, 34 Steynsrus PV 2 5 MW R 1 017, 00 R 1 504, 10 30, 0% 10, 38 TOTAL 30 MW Project Name * April 2013 base date 13

Preferred Bidders Salient Terms Solar Photovoltaic First Stage 2 Price: Fully Indexed (Ave. Rand per MWh) (Base Apr ‘ 13) R 1 037 Price: Partially Indexed (30% indexed to CPI) (Ave. Rand per MWh) (Base Apr ‘ 13) R 1 460 MW allocation 30 MW Total Project Cost (ZAR Millions) R 678 14

Preferred Bidders Onshore Wind Contracte d Capacity Fully Indexed Price* (ZAR/MWh) Partially Indexed Price* (ZAR/MWh) Portion Indexed ED Score (out of 30) Hopefield Community Wind Farm 4 MW R 1 000, 00 R 1 405, 80 30, 0% 9, 76 Klawer Wind Farm 5 MW R 950, 00 R 1 332, 45 30, 0% 15, 93 TOTAL 9 MW Project Name * April 2013 base date 15

Preferred Bidders Salient Terms Onshore Wind First Stage 2 Price: Fully Indexed (Ave. Rand per MWh) (Base Apr ‘ 13) Price: Partially Indexed (30% indexed to CPI) (Ave. Rand per MWh) (Base Apr ‘ 13) R 975 R 1 369 MW allocation 9 MW Total Project Cost (ZAR Millions) R 315 16

Preferred Bidders Biomass Contracte d Capacity Fully Indexed Price* (ZAR/MWh) Partially Indexed Price* (ZAR/MWh) Portion Indexed ED Score (out of 30) Busby Renewables 5 MW R 1 400, 00 R 1 939, 52 30, 0% 11, 37 George Small Scale Biomass 5 MW R 1 400, 00 R 2 025, 00 30, 0% 23, 06 Project Name TOTAL 10 MW * April 2013 base date 17

Preferred Bidders Salient Terms Biomass First Stage 2 Price: Fully Indexed (Ave. Rand per MWh) (Base Apr ‘ 13) R 1 400 Price: Partially Indexed (30% indexed to CPI) (Ave. Rand per MWh) (Base Apr ‘ 13) R 1 982 MW allocation 10 MW Total Project Cost (ZAR Millions) R 552 18

Preferred Bidders Summary Technology No. of Bids MW taken by Preferred Bidders Maximum MW available for allocation for First Stage 2 Solar Photovoltaic 6 30 MW Onshore Wind 2 9 MW 10 MW N/A 10 MW Landfill Gas Biomass N/A 2 Biogas N/A N/A TOTAL 10 49 MW 50 MW 19

Preferred Bidders Geographic Distribution Province No. of Bids Total Contracted Capacity Eastern Cape - - Free State 3 15 MW Gauteng - - Kwa. Zulu-Natal - - Limpopo - - Mpumalanga 1 5 MW North West - - Northern Cape 3 15 MW Western Cape 3 14 MW 20

Preferred Bidders Job Creation per Province (1) Jobs* during Construction Period Jobs* during Operations Period Free State 27 600 Mpumalanga 156 457 Northern Cape 191 745 Western Cape 114 680 TOTAL 488 2 482 Province * 1 job = 12 person-months and 1 person-month = 160 working hours (1) Jobs for RSA Citizens 21

Preferred Bidders Investment per Province Total Project Cost* (ZAR Millions) Total Project Value** (ZAR Millions) Local Content Value (ZAR Millions) Free State R 333 R 168 Mpumalanga R 281 R 207 R 114 Northern Cape R 345 R 284 R 186 Western Cape R 586 R 461 R 266 R 1 545 R 1 285 R 734 Province TOTAL * Total Project Cost - aggregate Debt and Equity required to fund the Project ** Total Project Value - defined in the IA, used to calculate Bidders’ Local Content commitments 22

Preferred Bidders Foreign Investment Foreign % of Total Funding Foreign Portion Total Debt and Equity Funding Debt (incl. Mezz. Debt) R 663 - - Equity R 882 R 185 12, 0% TOTAL R 1 545 R 185 12, 0% 23

Preferred Bidders Economic Development Solar Photovoltaic First Stage 2 MW allocation 30 MW Local Content Value (ZAR Millions) R 353 Local Content % 57, 3% Job Creation: Construction (Citizens) 217 Job Creation: Operations (Citizens) 1 346 24

Preferred Bidders Economic Development Onshore Wind First Stage 2 MW allocation 9 MW Local Content Value (ZAR Millions) R 112 Local Content % 50, 0% Job Creation: Construction (Citizens) 48 Job Creation: Operations (Citizens) 80 25

Preferred Bidders Economic Development Biomass First Stage 2 MW allocation 10 MW Local Content Value (ZAR Millions) R 268 Local Content % 60, 3% Job Creation: Construction (Citizens) Job Creation: Operations (Citizens) 222 1 057 26

Analysis of MW awarded and remaining Technology Solar Photovoltaic MW capacity remaining (as per Ministerial determinations to date) MW capacity awarded in First Stage 2 30 MW N/A 9 MW N/A - N/A 10 MW N/A Biogas - N/A TOTAL 49 MW 351 MW Onshore Wind Landfill Gas Biomass 27

THANK YOU 28