Karpowership pursues potential gap to refloat Richards Bay project — regardless of civil society appeals

The Irem Sultan 'Power of Friendship' floating power ship. (Image: Karpowership)

By Marianne Merten

6 Dec 2023

Karpowership has asked for the effective reinstatement of its environmental authorisation for the Richards Bay site — despite appeals — so it could proceed with the 450MW gas-to-electricity project for which the commercial close deadline looms at month end, according to legal documents.

The first request to Forestry, Fisheries and the Environment Minister Barbara Creecy dated 15 November came days after Karpowership, which got the green light for Richards Bay on 25 October, had informed all interested and affected parties. That opened the period for appeals under the National Environmental Act (Nema).

Two appeals against the Richards Bay environmental authorisation were filed. The Biodiversity Law Centre (BLC) focused on inadequate off-sets for disrupting the marine estuary and also questioned the conditionality of the environmental authorisation. The Centre for Environmental Rights (CER), representing civil society organisations groundWork and South Durban Community Environmental Alliance, in its appeal raises issues from failure to fully consider environmental impact to “defective” public participation

Legally these appeals suspend the environmental authorisation until the process is finalised. However, Section 43(9) of Nema provides room for an exception — an affected entity, in this case Karpowership, could directly request the minister on good grounds to reverse the suspension of the environmental authorisation, or effectively allow it back into force.

That Karpowership did, in letters from its lawyers on 15 November, and again on 28 November that are on the public record, and have been seen by Daily Maverick.

The Turkey-based global company is under pressure to meet the commercial close and related contractual matters deadline of 31 December for its 1,220MW offshore gas-to-electricity emergency energy project. If not, the project ends right there.

creecy karpowership Minister of Forestry, Fisheries and the Environment Barbara Creecy. (Photo: Gallo Images / Misha Jordaan)

“The deadline for achieving commercial close for the project is 31 December 2023 with project document signature due to take place on 22 December 2023. If the appeal is allowed to suspend the EA (environmental authorisation) and there is no valid EA on those dates, Karpowership stands to lose its Preferred Bidder status and the process expires i.e. there will be no further project,” wrote the company’s lawyer Pinsent Masons Africa Legal Director Adam Gunn to Creecy on 15 November.

“According to the Project construction and implementation timetable, construction is only planned to start by the end of March 2024, by which time the appeals would have been decided. Therefore, there is no risk to the environment i.e. no risk of harm being caused while the appeals are being decided.”

Read more in Daily Maverick: Karpowership SA is heading for choppy financial waters

From these letters of 15 and 28 November it also emerges that Karpowership would accept the risk that it may have to stop any project construction and other work, should its request to reverse the suspension of the Richards Bay environmental authorisation be unsuccessful — or, if the company decided, pending any court review.

Appeals

The Biodiversity Law Centre and Centre for Environmental Rights have until 8 January 2024 to respond. The appeals authorities this week agreed the initial 8 December deadline was “inordinarily short” and potentially procedurally unfair, BLC Executive Director Kate Handley said on Wednesday.

She confirmed responding papers to oppose Karpowership’s “unique application” would be filed. It is understood the CER also would do so.

It is unclear how this appeals procedure timeframe will impact Karpowership’s 31 December commercial close, and grid access, deadline. But Eskom has at least once before extended the grid access deadline; this commercial close cut-off is the latest in a series of extensions granted by another minister, Mineral Resources and Energy Gwede Mantashe.

Eskom is understood to be chilly towards signing a power purchase agreement with Karpowership that’s needed to finalise the deal. However, it’s understood officials would put the case to the board for a final decision.

Controversy persists

Karpowership has been mired in controversy since Mineral Resources and Energy in March 2021 decided it was the preferred bidder under the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP).

Despite litigation almost from the get-go over a rival project bidder, and more recently by the initial empowerment partner replaced by Karpowership. A recent arbitration ruling by ex-chief justice Sandile Ngcobo was sharply critical of the company's discrimination against its empowerment partner, amaBhungane reported.

Read more in Daily Maverick: Verdict: Karpowership’s owner slammed for discrimination against BEE partners

However, Karpowership has received from various government departments the required permits — port access was granted by Transnet in February 2023, Eskom granted grid access and in July 2023 extended this to end of the year, and energy regulator Nersa granted a 20-year generation licence in September 2021.

Throughout, the global offshore gas-to-electricity company maintained its compliance with laws and regulations — and how its energy ships were part of the start of the just energy transition while boosting South Africa’s electricity supply security wracked by persistent rotational power cuts.

On the environmental front, however, communities from small-scale fishers to local residents have opposed the large ships, supplied with gas to be turned into electricity that then is fed via cables and switching stations into the national grid.

The Irem Sultan 'Power of Friendship' floating power ship. (Image: Karpowership)

Controversy also erupted here. Questions emerged over the 12-month avifauna, or bird counting and monitoring study and also over acquiring Madaka game farm with the facilitation of KwaZulu-Natal wildlife entity Ezemvelo to meet environmental offset requirements, as amaBhungane reported in September.

Read more in Daily Maverick: Quid pro quo — Karpowership offers to buy government a game farm

It is that inland offset that the BLC argues was inadequate, particularly as the affected environment is avifauna and a marine estuary, alongside various failures to consider other natural environment impacts, according to its appeal documents.

The Centre for Environmental Rights argues that environmental authorisation was taken on “irrelevant considerations” and was not related to the information available and provided. Inadequate public participation, inadequate consideration of the project’s impact on the avifauna, noise and air quality are other points in the CER appeal against the Karpowership environmental authorisation, according to the appeal documents available on its website.

Karpowership in its 28 November correspondence to Creecy has dismissed each appeal point. “This ground of appeal is therefore incorrect and does not impact on the Section 43(9) good cause motivation,” it states repeatedly.

It seems like crunch time in many ways. The 8 January 2024 deadline for responses to Karpowership’s request for an end to the suspension of its Richards Bay environmental authorisation clashes with the commercial close and grid access deadlines by 31 December 2023.

Unless Mantashe and Eskom, and possibly others, provide another extension to Karpowership, that offshore as-to-electricity project may well be dead in the water. DM

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Appeals

Controversy persists