Sat, 12 Jun 2021

  • The Turkish-led Karpowership consortium is weeks away from a deadline to finalise its 20-year supply deal with Eskom, but now faces multiple legal hurdles.
  • The Green Scorpions are investigating whether the former head of SANParks provided misleading information to secure an emergency permit on Karpowership's behalf.
  • The environment department has until 25 June to adjudicate Karpowership's application for environmental authorisation - and it may depend on what the investigators find.

The Green Scorpions are investigating whether Karpowership SA or its environmental consultants provided misleading information to secure an emergency exemption from stringent provisions of the National Environmental Management Act (Nema).

The Environmental Management Inspectorate - known as the Green Scorpions - is tasked with investigating environmental crimes.

The investigation could result in criminal charges, but could also torpedo Karpowership's environmental authorisations, which it needs for its mammoth R225 billion deal with Eskom to go ahead.

In March, the Turkish-led consortium was selected as a preferred bidder to provide 1 220MW of emergency power under the Risk Mitigation Independent Power Producer Programme (RMI4P). The electricity will come from gas-fired powerships, which are intended to be moored in the ports of Richards Bay, Coega and Saldanha.

The investigation stems from an extraordinary authorisation in June 2020 - just before the tender was announced - by a top official in the Department of Forestry, Fisheries and Environment (DFFE).

The official exempted Karpowership under an emergency provision of Nema from doing environmental impact assessments (EIAs), supposedly because it would provide emergency power to combat Covid-19.

The department revoked the exemption after an outcry, claiming it had been misled. This forced Karpowership to reapply, this time with complete EIAs for all three sites. But DFFE has confirmed that these new applications could be denied if the investigation confirms that Karpowership and its consultants intentionally misled officials.

"The department is currently investigating the conduct of the [environmental consultants] and [Karpowership] in relation to the Nema ... exemption application," spokesperson Albi Modise said in a written response.

Modise confirmed that the investigation is being led by the "Environmental Management Inspectors within the Department", aka the Green Scorpions, who have been tasked to establish "whether or not evidence exists of the commissioning of an offence".

"Should 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," he 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."

DFFE has also commissioned an external legal review to establish whether Karpowership's current EIA applications should have been rejected because the proposed projects lacked consent from Transnet National Ports Authority (TNPA), as the owner of the land.

Karpowership is hoping to secure TNPA's consent as a "sole source provider" or through an 11th hour special directive issued by Transport Minister Fikile Mbalula. But a legal opinion delivered to Business Unity South Africa (Busa) last week warned that any permit handed to Karpowership faces a barrage of legal challenges.

The stakes are high: Karpowership desperately needs its environmental permits and landowner consent before the end of July, the deadline for all preferred bidders selected for the RMI4P tender.

If the Turkish-led consortium fails to secure these permits, it risks losing the R183 million bid bond it has put up as collateral. If found guilty of intentionally misleading government officials, Karpowership and its environmental consultants could receive fines of up to R10 million or 10 years in jail.

On the other hand, if the government greenlights Karpowership's projects, five gas-fired powerships could arrive in South African ports next year. This is intended to kickstart a new energy future for South Africa, one fuelled by liquified natural gas (LNG), but also fraught with environmental problems.

Karpowership declined to respond our 46 questions covering a wide range of environmental issues. Instead, spokesperson Kay Sexwale said: "We are confident the unfounded claims about the environmental assessments of our projects will be dealt with swiftly. We are continuing to work to the deadlines ... and look forward to getting to work helping to alleviate South Africa's energy challenges and supporting the wider economy.

"Powerships fuelled by LNG are the cleanest, most sustainable way of providing reliable power while supporting South Africa's transition to renewables. Our projects were awarded preferred bidder status because we provided the best combined package of affordability, cleaner energy, proven technology and economic development initiatives."

But to understand how we got to the brink of this multibillion-rand deal, we need to go back to 2015, when Karpowership sidled up to Eskom with a tantalising solution to end loadshedding. What our research suggests is that the company has a history of trying to leverage emergencies to get its way.

2015: Dear Mr Tsotsi

In February 2015, Eskom was facing the uncomfortable prospect of severe loadshedding in summer.

Eskom board chair Zola Tsotsi had a plan, though. On 10 February 2015, he wrote to then energy minister Tina Joemat-Pettersson, requesting the go-ahead for three power-generation solutions - "measures which we believe need to be taken immediately in our quest to [relieve] the constraint in the electricity supply system".

One of the solutions came from Karadeniz, the parent company of Karpowership: "Their proposal includes the berthing of 500MW ship-plants at our ports. Once a decision to implement the proposal is reached, they can dispatch the first 500MW unit onto the grid within six months and then a successive 500MW unit every four months thereafter," he wrote.

Tsotsi did not specify how many ships Eskom would hire, but made it clear that this would not be done through a standard procurement process: "[W]e request the Honourable Minister to authorise Eskom to engage and conclude all required measures to enable speedy implementation of these projects."

The Public Finance Management Act does make provision for emergency procurement, but state-owned entities, like Eskom, must jump through numerous hoops to justify such contracts. And in this case, Tsotsi had gone straight to the minister, despite Eskom management being lukewarm about the powerships solution.

Tsotsi resigned soon after, and Eskom told Karadeniz to apply to the independent power producer programme, which now falls under the Department of Mineral Resources and Energy.

"As there are a number of potential suppliers of powerships ... it is necessary to ensure a fair and transparent engagement," Eskom told City Press at the time.

Tsotsi said this week he did not remember the circumstances of the offer. As far as he could recall, he did not receive an answer from the minister before he stepped down as chair at the end of March 2015.

2018: For the sake of the elections

Three years later, Karpowership was ready to have another go at the South African market.

According to Karpowership's local partner, Sechaba Moletsane, the country was once again facing loadshedding and, with elections coming up in 2019, he implored the Karadeniz family to intervene.

"We went up to Turkey in [February] 2018 ... because the elections were coming up and there was major, major loadshedding," he recalled during a recent Mail & Guardian webinar, sponsored by Karpowership.

As much as this was an electricity supply problem, it was also a political one for the ANC, which has historically been reluctant to implement loadshedding ahead of the elections, fearing it would cost the party votes.

Moletsane said they approached Eskom, the Department of Energy and the Department of Public Enterprises, but all declined Karpowership's unsolicited bid.

"[T]hey didn't uptake our proposal, the elections went on and successfully, so they ended up using more of the peaker plants," he said, referring to the diesel-fired peaker plants that are Eskom's last resort to avoid loadshedding.

2020: Dr Mabunda's plan to tackle Covid-19

By 25 June last year, 118 000 South Africans had tested positive for Covid-19 and 2 335 had lost their lives.

Armed with this and other information about the rapidly escalating infection rate, Dr David Mabunda contacted the DFFE with a plan to tackle the pandemic.

Mabunda was not a medical doctor, but a doctor of tourism management. He had served (not without controversy) as the chief executive of SANParks and Ezemvelo KZN Wildlife.

But he was now representing Karpowership.

Conflict of interest?Mabunda resigned from SANParks in 2014. At the time, there were questions about R81 million he received from the controversial MalaMala land claim deal. An internal investigation described this as "a serious conflict of interest", environmental journalism outfit Oxpeckers reported. Mabunda denied wrongdoing at the time, saying he had declared his interest in the deal and received permission to participate.

What the country needed, Mabunda told DFFE chief director of compliance, Sonnyboy Bapela, during a 25 June discussion, was a secure supply of electricity to ensure that hospitals did not go dark and ventilators kept pumping life-saving oxygen to patients.

What Karpowership needed in return was an emergency permit - issued in terms of section 30A of Nema - allowing it to bypass the costly and highly technical EIA process that normally takes months to complete.

Section 30A was designed for emergencies when quick action can save lives and prevent environmental disaster. A single independent power producer, hoping to supply Eskom with electricity, generally would not qualify.

But when a national state of disaster was declared in March 2020, in response to the Covid-19 pandemic, Karpowership had its emergency.

Emergency situationUnder section 30A of Nema, a national state of disaster counts as an emergency situation and gives the environmental minister the power to override ordinary provisions of the Act.

"In terms of section 30A, the Minister ... and Provincial Authorities may ... issue a verbal or written directive to carry out activities without obtaining an environmental authorisation," lawyers from Webber Wentzel wrote in a March 2020 newsletter. This included building "emergency infrastructure projects to help curb the effects of Covid-19", such as temporary hospitals or cemeteries.

But would powerships count?

The day after his conversation with Mabunda, Bapela gave Karpowership the go-ahead to bring in as many ships as it wanted into the ports of Coega, Richards Bay, Saldanha and Durban - no environmental permits required.

Powerships are more like power plants than cargo ships: critics have warned that the potential harm to fish, birds and red-list species could be severe. These environmental costs may be unavoidable in an emergency. But, in July 2020, Karpowership was far from persuading Eskom to buy its electricity.

When Daily Maverick's Tony Carnie raised the alarm that Karpowership may be abusing its 30A exemption, sales director Patrick O'Driscoll responded: "Although the energy crisis is not new, the need for a reliable and sustainable power supply is required to safeguard critical infrastructure and maintain industry, such as the manufacturers and industries that support the medical fields."

If Karpowership was asked, he said, it could start supplying power within eight to 10 weeks: "This potential project will assist the government in its efforts to ameliorate the impact of Covid-19, which will have the overall effect of saving lives during the pandemic. It is also vital for post-Covid-19 national recovery strategies."

DFFE's Modise told us that, of the 12 applications for section 30A exemptions received since the start of the national disaster, only two cited the Covid-19 pandemic as the cause of the emergency. One came from the Department of Public Works, which asked for permission to build "military-type bailey bridges", so that ambulances could access rural areas; the other from Karpowership.

'We were misled'

On 24 August 2020, the Department of Mineral Resources and Energy released the RMI4P tender, the multibillion-rand procurement to supply Eskom with power for the next 20 years.

The next day, DFFE sent out a press release, saying that it had withdrawn Karpowership's 30A exemption, essentially because the company did not disclose that it wanted the emergency permits for its proposed RMI4P projects, which would likely only start supplying power in 2022.

"When the company had initially submitted their request it had indicated that the country's electricity supply was under threat because of the increased pressure on the healthcare system as a result of the Covid-19 outbreak.

"It has subsequently emerged that the company had applied for the verbal directive ... in preparation for the possible implementation of the [RMI4P]. This information was not disclosed to the department [and] it has now emerged that there was in fact no emergency situation", the release said.

"[I]t will be fair to say the department was misled," spokesperson Modise recently told amaBhungane.

He explained: "The department already concluded that there was a reasonable belief that the circumstances pertaining to the emergency situation were materially different from what was indicated in the oral request/written confirmation of the oral request. Accordingly, the section 30A directive was revoked."

In other words, what Mabunda told the department, in that 25 June meeting, allegedly did not match the reality on the ground. That was enough to withdraw the 30A exemption.

What the Green Scorpions are now investigating is whether Karpowership, Mabunda or Triplo4 Sustainable Solution, the firm of environmental assessment practitioners doing the consortium's EIAs, intentionally deceived DFFE in order to secure these valuable exemptions.

Degrees of deception

In 2015, the government gazetted new regulations that apply to verbal requests for section 30A exemptions:

  • In terms of regulation 12, an official can "amend, suspend or revoke" the exemption if "having assessed the scene of the emergency situation or disaster" they have a "reasonable belief" that the circumstances on the ground are "materially different" to what was described in the verbal request. This is why the department revoked Karpowership's exemption. Karpowership did not challenge the decision.
  • In terms of regulation 15, 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. Regulation 16 says that anyone found guilty of this offence is liable for a fine of up to R10 million and/or jail time of up to 10 years. This is what the Green Scorpions are investigating. Karpowership denies that it is guilty of this offence.

Environmental assessment practitioners, like Triplo4, are required to be independent, not paid shills for their clients. If they are found to be complicit in the bogus 30A applications, the new EIAs they have prepared for Karpowership that are now awaiting DFFE approval could be rejected - which could sink the consortium's R225 billion deal.

"[W]e are investigating the professional conduct of the persons who are alleged to have submitted false and misleading information as this would compromise their independence and objectivity. The findings will be brought to the attention of the unit responsible for assessing the current Environmental Impact Assessment applications," Modise confirmed.

Hantie Plomp, the sole director of Triplo4 and Karpowership's lead EIA consultant, declined to answer our detailed questions: "[W]e deny any wrongdoing and advise that a full response cannot be provided as the matters are ," she said via email.

Mabunda's role, and that of his company, Nselenduna Consulting, appears to be more diverse. Mabunda told us that he is "assisting Triplo4 with the Karpowership project", but letters attached to court papers show that he also assisted Karpowership to obtain another valuable exemption from the Department of Trade, Industry and Competition. This helped Karpowership to bypass the RMI4P's 40% local content rule.

Asked about his apparent ability to secure valuable exemptions from the government, Mabunda was coy: "I've been advised by my counsel ... not to respond to any of your questions at this stage as they constitute a greater part of the pending DFFE investigation. The matter is at the moment."

Landowner consent

After the department yanked Karpowership's 30A exemption in August 2020, it had no choice but to follow the long, tedious process of applying for an environmental permit.

But it was running out of time to meet the November 2020 deadline to submit its RMI4P bid.

On 17 September, DFFE officials met with Karpowership and its consultants to outline the standard process it would now have to follow to get environmental authorisation for its proposed projects in the ports of Richards Bay, Coega and Saldanha.

The officials reminded the consultants that one of the documents it would need was written permission from the landowner - in this case, TNPA.

Although the powerships will only be moored in Transnet's harbours, there is other infrastructure - pipelines, pylons, etc. - that will need to be built on Transnet land. And without big-picture planning, projects like these could disrupt traffic or hamper port expansion plans.

Faced with this roadblock, Karpowership tried a different tactic.

On 5 October 2020, Jason van der Poel, Karpowership's attorney from law firm Webber Wentzel, produced a legal opinion arguing that the company did not need landowner consent because it was a "strategic integrated project", and therefore exempt.

Section 39(1) of Nema says that anyone wanting an environmental permit must first get the landowner's consent to carry out their proposed project. One of the few exceptions is if it is a strategic integrated project (SIP), a gazetted list of projects deemed to be in the national interest.

Because the RMI4P is such a project, Van der Poel argued that any project applying to the RMI4P should be deemed one too.

The department's response was a firm "no".

Sabelo Malaza, the department's chief director of integrated environmental authorisations, responded that he "noted" Webber Wentzel's legal opinion, but that Karpowership "must, as advised ... submit signed landowner consent".

The most Transnet was willing to provide was a letter giving Karpowership permission to carry out its environmental impact assessments, although it was careful to remind Karpowership that this should not be construed as Transnet giving the go-ahead for the projects.

Another golden loophole

What happened next is now the subject of a legal review.

There is a simple rule when applying for an environmental permit: first make sure you get permission from the owner of the land to carry out your project. Nema regulation 16(1), which imposes the obligation to attach landowner consent to an EIA application, is so unremarkable that it does not bother to spell out what the department should do if a company turns up without landowner consent.

Instead, officials are simply told to "check whether the application ... is properly completed" and accompanied by the required documents.

When Karpowership submitted its application on 8 October 2020, it did not have landowner consent. Instead of being turned away, it was simply warned to submit landowner consent when it came back with its final environmental scoping report.

"Failure to provide the above-mentioned information will result in your application for Environmental Authorisation being refused," an official from Malaza's department warned in an email.

Asked why the department had not rejected Karpowership's application upfront, the department said that the regulations do not give any explicit instruction to reject an application that is incomplete.

"It is only after a detailed evaluation is done that the failure to submit critical documents will be assessed," Modise noted.

But when Karpowership came back with its final scoping reports in mid-November, still without landowner consent, the department let it slide.

"Following a review ... the findings were such that the department can accept the final Scoping Reports with particular conditions," the department told us.

One of those conditions was that Karpowership would now need to submit landowner consent with its final environmental impact assessment reports in April.

The ruling was a stroke of luck for Karpowership, which had just put up R183 million in bid guarantees. If it turned out that its bids were non-compliant, it could be forced to forfeit that money to the Department of Mineral Resources and Energy.

But other bidders for the RMI4P were more risk-averse. One rival bidder, who spoke to amaBhungane on condition of anonymity, said his firm had decided not to submit an RMI4P bid because they knew they could not obtain Transnet consent beforehand. A second company, that did submit a bid, said it opted for a more expensive fuel source because the same landowner consent issue would hamper its ability to import LNG.

The leeway from DFFE was just long enough for Karpowership: in March, it was selected as an RMI4P preferred bidder. Its projects were now undeniably strategic integrated projects, like the RMI4P itself.

This meant that to get its EIA approval from DFFE, Karpowership no longer needs landowner consent. It does, however, still need landowner consent from TNPA as a separate requirement of the tender.

DFFE is emphatic that it did not give Karpowership special treatment, but has commissioned an external legal review: "In light of the numerous queries received on this issue, the [department] ... wanted to provide assurance that all relevant legislative provisions were correctly interpreted and implemented," Modise said.

The clock is ticking

Karpowership is now waiting to find out if the department will approve its final EIA reports for its projects in the ports of Richards Bay, Coega and Saldanha.

It is facing an uphill battle: a complaint has been laid against Triplo4's Plomp, Karpowership's chief environmental consultant, alleging that she ran a sub-standard public participation process and produced biased and flawed environmental reports. The Environmental Assessment Practitioners Association of South Africa, the regulatory body for environmental consultants, is reviewing the complaint and has yet to say whether it will investigate.

DFFE has also received a formal complaint about the EIA at Saldanha over Triplo4's failure to conduct a study on the powerships' impact on sealife, which could have knock-on effects for the local fishing industry.

DFFE's Modise, meanwhile, told amaBhungane that the Green Scorpions' investigation is being prioritised: "The relevant findings will be taken into consideration prior to the EIA application being finalised. The EIA application is expected to be finalised by not later than 25 June 2021."

Karpowership has, via its bid bonds, placed a R183 million bet that it can clinch the environmental permits it needs before the end of July 2020. The odds are stacked against it. But it appears serenely confident that it can clear any regulatory hurdle.

Based on the evidence, it has reason to be confident: government officials have made concessions at every stage. And now that it is deemed to be in the "national interest" for Karpowership's bid to succeed, is anyone going to stand in its way?

Source: News24

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