Karpowership deal ‘dead in the water’

Energy and Electricity Minister Kgosientsho Ramokgopsa said the Karpowership deal South Africa had nearly entered into is “dead in the water”.

The minister said this in response to a question at Eskom’s recent media briefing on the implementation of the Energy Action Plan.

Energy expert Chris Yelland asked the minister whether it is not time for the DoEE and its IPP Office to officially call an end to the Karpowership emergency procurement for the next 20 years now that Eskom’s plant performance has stabilised.

He also asked whether the utility plans to end the “wasteful and fruitless litigation currently in progress with OUTA and Green Connection”.

In response, the minister said, “The Karpowership projects are dead in the water. We previously announced the projects did not meet the deadline dates. The projects are buried and behind us.”

This signifies the end of a years-long deal that has attracted controversy and lawsuits since its inception.

Karpowership is a Turkish company that operates floating power plants, also known as “powerships”.

These vessels are equipped with gas-fired turbines that can generate electricity. In South Africa, Karpowership has been involved in a controversial project to alleviate the country’s chronic electricity shortages.   

The project was initiated as an emergency measure to address ongoing load-shedding in South Africa. Three powerships were planned to be anchored in South African ports, specifically Richards Bay, Saldanha Bay, and Coega. 

The combined capacity of these vessels was expected to be 1,220 megawatts, which would have contributed significantly to the national grid.

However, despite the potential benefits, the Karpowership project has faced significant opposition.

Some critics argued that the project would increase greenhouse gas emissions, hindering South Africa’s transition to a low-carbon economy.   

However, the most controversial aspect of this deal was likely the long-term contract South Africa would have had to enter into. 

When the deal was agreed upon, the 20-year deal would have cost South Africa around R218 billion. 

Concerns have also been raised about the transparency of the bidding process and the terms of the contract.

This laundry list of critiques has seen Karpowership face lawsuit after lawsuit, which has delayed the conclusion of the deal for years.

A big blow came to the deal at the start of this year when Eskom announced it would no longer reserve the transmission capacity it had agreed to set aside for Karpowership and other winners of a South African tender for emergency power provision.

This is because Karpowership did not meet a 31 December 2023 deadline to complete their financial arrangements.

“Eskom finds the expiration of the budget quotes regrettable as these projects were aimed at bringing much-needed generation capacity to the grid,” the utility said. 

The projects were initially given a financial close deadline of 31 July 2021.

African expansion

Despite this blow in South Africa, Karpowership is set to continue expanding into the rest of Africa.

In January this year, Zeynep Harezi, Karpowership’s chief commercial officer, said the company currently operates in eight African countries and plans to increase its presence in 15 more, including Kenya, Nigeria, Cameroon, Gabon, and Angola. 

“In a very short time, the construction process of our ships being produced in Turkish shipyards will be completed, and we will be able to offer faster solutions to countries needing electricity,” she said. 

Harezi said Karpowership has 36 ships with an installed capacity of 6,000 MW and an active construction pipeline. In three to five years, the company plans to have a 10,000 MW capacity with 50 ships.

She added that the company is increasing its investment in solar power. 

Karpowership, which started in 1998, has grown rapidly in Africa, where countries need sustainable and reliable power. Still, the expansion hasn’t been without setbacks.