Karpowership SA is not going down without a fight: on Tuesday it filed an 11th hour appeal against government’s decision to reject its ship-borne powerplants on environmental grounds.
But its R225-billion deal faces fresh icebergs ahead.
The Green Scorpions, the law enforcement unit tasked with investigating environmental crimes, believes that agents of the company should face criminal charges for intentionally misleading the Department of Forestry, Fisheries and the Environment (DFFE).
“The docket was referred to the Director of Public Prosecutions (“DPP”) North Gauteng on the 15th of June 2021. The DPP is in the process of reviewing the docket, and the investigating officer has been requested to provide additional clarity on certain aspects of the investigation,” spokesperson Albi Modise confirmed in a written statement.
The criminal charges relate to Karpowership’s earlier attempt to bypass the lengthy and costly environmental studies required by the National Environmental Management Act (Nema).
Companies can apply for an exemption under section 30a of Nema if there is an emergency where quick action can save lives and prevent further environmental damage.
In June 2020, Karpowership used this clause to get its wide-reaching exemption for its powerships by claiming that they would deliver emergency power to assist with the Covid-19 pandemic.
The section 30a permits were withdrawn after the DFFE concluded that “there was in fact no emergency situation”.
In terms of the legislation, it is an offence for anyone to “wilfully, knowingly or negligently, provide incorrect or misleading information” to the department in an attempt to secure an exemption. Anyone found guilty faces a fine of up to R10-million and/or jail time of up to 10 years.
In early June, DFFE confirmed that “Environmental Management Inspectors within the Department”, aka the Green Scorpions, were investigating Karpowership and its environmental consultants: Triplo4 Sustainable Solutions and Nselenduna Consulting.
“Should prima facie evidence exist of an offence, the Department will bring the relevant information to the attention of the South African Police Service for further investigation and/or the Director of Public Prosecutions to commence a prosecution,” Modise told us at the time.
By referring the case to the police and the director of public prosecutions, the DFFE is effectively saying it has found prima facie evidence.
However, DFFE would not confirm whether it is Karpowership’s representatives or its environmental consultants, or both, who will be the focus of any potential charges.
Neither Karpowership nor its consultants responded by the time this article was published. We will update the article with any comment that is forthcoming.
‘Substandard’ environmental reports
Although the Green Scorpion’s investigation is separate from the appeal Karpowership filed on Tuesday, the two cases are intertwined.
After its Section 30a exemptions were withdrawn in August 2020, Karpowership was forced to conduct environmental impact assessments (EIAs) on its three proposed projects in the ports of Richards Bay, Coega and Saldanha.
In March this year, these three projects were selected as preferred bidders for the Risk Mitigation Independent Power Producer Procurement Programme (RMI4P). Collectively the gas-fired powerships would deliver 1 220MW of electricity to Eskom.
At the time, the EIAs were incomplete. But in June, DFFE said it would not grant the environmental authorisations necessary for these RMI4P projects to go ahead, citing numerous shortcomings in the EIAs.
Amongst the many concerns was that the powerships would cause irreparable harm to birds and marine life.
The appeal, filed by Karpowership on Tuesday, seeks to overturn this decision.
But the Green Scorpions’ investigation makes that harder to do. Essentially, Karpowership and/or its consultants are accused of first lying to bypass an EIA, then producing allegedly substandard EIAs that downplayed the environmental damage the powerships would cause.
The DFFE previously told us: “If the outcome of the investigation reveals that there was something untoward about their conduct, then that would have a material effect on the current EIA applications that is under review by the Department.”
Karpowership, meanwhile, is doubling down on claims that DFFE has been misled by a “vicious, adversarial and aggressive” campaign.
When DFFE’s decision was announced in late June, Karpowership’s knee-jerk reaction was to claim that the department had “allowed a misinformation campaign to derail the [DMRE’s] strategic plan to end load shedding and address South Africa’s economic and energy crisis”.
“South Africans should understand that the decision on behalf of the DFFE threatens the delivery of this power and will extend load shedding for years to come,” it warned in a statement to media.
In its 77-page appeal on the 450 MW Richards Bay project, the company made similar claims, lashing out at its critics, including the media:
“The Minister will be aware that the Karpowership proposal has become highly controversial and is the subject of attacks at a multiplicity of levels, most of which are uninformed and needlessly adversarial … The Project also raised significant controversy particularly from the media and NGOs, which we believe to be unfounded and emotive,” it said.
At another point in the appeal, Karpowership accuses DFFE officials of being “downright obstructive” for failing to provide guidance on its application.
Get up to speed on all the allegations by going to amaBhungane’s Special Projects page.
However, the appeal also sets out the technical reasons why Karpowership believes DFFE erred by refusing to approve its projects. One of the concerns DFFE cited was that there was inadequate public consultation. Karpowership insists that it met the minimum standards.
Another reason DFFE gave for rejecting the projects was that Karpowership had failed to conduct sufficient underwater studies. The company argues that since there are no powerships currently moored in South Africa that it relied on comparative international studies.
It argues that DFFE could approve the projects but require the company to conduct ongoing studies of underwater noise and the impact on the environment.
The appeal also recycles the argument that Karpowership will help to end loadshedding, and that its projects should be treated as strategically important for the country.
“The Project … is a national priority, requiring a degree of urgency,” it said.
“The DFFE failed to consider the strategic nature of the Project … given the impacts of the Project on energy risk mitigation and the development and growth of the SA Economy.”
This argument is supported to two other appeals filed by business forums: the West Coast Black Business Alliance and the National African Federated Chamber of Commerce and Industry. Both implore DFFE to consider the socio-economic plusses of Karpowership’s projects.
The next 70 days
In terms of the regulations, the appeal will play out over roughly the next 70 days, a process governed by the National Appeal Regulations (2014).
Interested and affected parties have 20 days to compile responding statements, challenging the arguments contained in Karpowership’s appeal.
While Minister Barbara Creecy can grant an extension to this timeframe, there is no provision in the regulations for her to speed up this vital consultation process.
After that, the department can move faster if it chooses to do so. The person within the department handling the appeal (the appeal administrator) has up to 30 days to come up with a recommendation. They can also appoint an independent expert or panel of experts to provide input.
But appeal administrator only makes a recommendation on whether to uphold the appeal. That recommendation is then sent to the minister who has another 20 days to take the final decision.
While Creecy could make a decision sooner, she can, by our calculations, wait until early September to make a decision on whether the sink or save Karpowership’s projects.
RMI4P in question
So, where does this leave the RMI4P and can Karpowership continue as a preferred bidder?
Although Karpowership’s appeal was filed within the stipulated 20-day window set out in the National Appeal Regulations, it was filed too late for the projects to meet the deadline set by the rules of the RMI4P tender.
The tender required that all preferred bidders reach financial close by 31 July 2021; which included having “unconditional” environmental authorisations in place.
However, the Department of Mineral Resources and Energy (DMRE) has hinted that this deadline could be moved.
“The date of 31 July remains. However, this will depend on the DMRE and Eskom having achieved all the necessary [Public Finance Management Act] approvals,” DMRE told us in a written statement.
But shifting the deadline risks attracting further legal challenges.
DMRE is already facing a legal challenge from losing bidder DNG Power which is seeking to overturn the tender on the basis that Karpowership was given preferential treatment.
In recently filed court papers, DNG chief executive Aldworth Mbalati claimed that the department and others “went to great lengths to ensure that the friction in the course of [Karpowership’s] path was minimised” and that Karpowership “enjoyed a less-challenging bid process” than other bidders.
Any attempt to relax the deadlines seemingly for Karpowership’s benefit would fuel those claims.
But DMRE told us that the case itself was putting the 31 July deadline under pressure: “The case was scheduled for 21-23 July 2021, However, we have been informed that the assigned Judge is no longer available on those dates, we are waiting for the Deputy Judge President to assign another Judge to hear the case.”
The RMI4P plans to bring 2 000MW of power online by December 2022.