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Mobilising funding for ten small renewable-energy projects

6th November 2015

By: Anine Kilian

Contributing Editor Online

  

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Ten small preferred energy projects bidders under the Department of Energy’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) were announced by Energy Minister Tina Joemat-Pettersson at the South African International Renewable Energy Conference last month.

Joemat-Pettersson said the contribution of these projects would go beyond the provision of clean renewable electricity and that they would support the broader national development objectives including economic development, social upliftment, job creation, broad-based black economic empowerment (BBBEE) and development of new smaller participants in the energy sector.

The REIPPPP caters for projects up to 5 MW. The preferred projects comprise six solar photovoltaic (PV), two wind and two biomass technologies. These projects require long-term loan financing, particularly for BBBEE shareholders.

The Industrial Development Corporation (IDC) will provide funding for five projects and will be provided in collaboration with Mergence Investment Managers (Mergence) – a majority black-owned specialist asset manager.

The IDC will provide an attractive interest rate through a green credit line provided by the French Agency for Development (AFD).

The IDC head of industrial infrastructure Lizeka Matshekga said the IDC would play a critical role in mobilising financial support and crowding in other funders.

“The IDC has developed standard financial models and financing agreements that project promoters can use so that each project does not have to carry these costs individually,” she said.

The IDC will finance a significant part of BBBEE, in line with its programme to support the increased participation of black entrepreneurs in the energy space.

Mergence senior analyst Peta Chennells noted that the company saw an opportunity to provide long-term funding in an area where funding was not readily available – in line with Mergence’s commitment to stimulate growth and job creation across the renewable-energy value chain.

“By collaborating with institutions like the IDC and AFD, and drawing on its experience of providing close to R1-billion of senior secured debt under the main REIPPPP, Mergence has secured more opportunities for its institutional investors to participate in investments like these that closely match their investment horizon with attractive returns,” said Chennells.

AFD provided the IDC with long-term, low-interest rate funding and technical assistance for the development of renewable-energy and energy efficiency projects in South Africa.

AFD funding has helped support five projects in the first round of the Small Projects REIPPPP, particularly, given that no funding was available for such projects under traditional market conditions in South Africa.

Special adviser to the French President on climate change and head of the French delegation to the South African Renewable Energy Conference Marie-Hélène Aubert said at the event that a few weeks before the start of the COP 21 in Paris, South Africa had taken an important step in pursing the development of small-scale renewable-energy projects.

“France, as the future president of COP 21, attaches great importance to the solutions agenda, demonstrating that concrete steps can be taken on the grounds to tackle climate change,” she concluded.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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