Banking group Investec is gearing up to participate in a range of new private electricity projects in both South Africa and the rest of Africa having already expanded its exposure to six projects with a combined investment value of R20-billion.

The group has approved debt funding worth R6.5-billion for the projects, five of which are in South Africa, with the sixth being in Mozambique.

Project and infrastructure finance head Fazel Moosa reports that it is experiencing “unprecedented deal flow” and that it has received debt-exposure approval for a further R8-billion ahead of the third bid window under the South African government’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

Through the REIPPPP, the Department of Energy (DoE) aims to secure an initial 3 625 MW of large-scale renewables capacity, of which 2 460 MW has already been allocated across 47 projects, which secured allocations following the first two bid windows.

The third bid window will close on August 19 and the next set of preferred projects should be unveiled on October 29 and reach financial closure during 2014.

Moosa expects the third bidding round to be highly competitive and anticipates that the tariffs bid, especially for solar photovoltaic (PV) projects could continue to fall sharply. The average prices offered by the solar PV developers in the second round fell from 275c/kWh to 165c/kWh, while wind prices fell from 114c/kWh to 89c/kWh and concentrated solar power (CSP) prices fell slightly from 268c/kWh to 251c/kWh.

Investec is participating as a debt and, in some instances, as an equity partner in three second-round projects, including:

• The R2.3-billion, 74 MW Sishen solar PV project, being developed with Acciona, Aveng, the Dibeng Trust and Soul City, near Kathu, in the Northern Cape.
• The R2-billion, 94 MW West Coast One wind project, in the Western Cape, where it is an equity investor and is in partnership with GDF Suez, Kagiso Tiso and a community trust.
• And the R5-billion, 50 MW CSP parabolic-trough Bokpoort project, near Upington, in the Northern Cape, which is being developed by ACWA Power International.

All the projects reached financial closure in June.

The group is also an investor and the sole lender to a R155-million cogeneration project being built at Anglo Platinum’s Waterval smelter near Rustenburg, in the North West province. The project will incorporate technology developed by Ormat, of Israel, to convert thermal energy to electricity and should be completed by June 2014.

The other two projects have not yet progressed to financial close, but include the so-called ‘DoE peaker projects’ in South Africa and a 40 MW gas-fired project in Mozambique.

The peaker projects involve the development of two open-cycle gas-turbine power plants, one in KwaZulu-Natal and the other in the Eastern Cape, with a combined capacity of 1 005 MW and a combined investment value of R10-billion.

The projects are being developed by a consortium comprising GDF Suez, Legend Power Solutions, Mitsui & Company and The Peaker Trust, representing black economic-empowerment and community interests.

In Mozambique, the bank is partnering in the development of the R1-billion, 40 MW Kuvaninga independent power producer project situated near Chokwe, in the Gaza province of southern Mozambique.

Despite the slowdown in demand for electricity in South Africa, Moosa believes there is still material pent-up demand for new power capacity, owing to the country’s tight supply/demand balance. “Given that the renewables programme accounts for a small portion of the generation mix and that tariffs are becoming increasingly competitive . . . we are happy to keep on financing.”

However, he is concerned about the fact that Eskom received a lower-than-requested tariff hike for the coming five years, which could constrain its position as the anchor client for new capacity that could be developed both inside South Africa and within the region.

Nevertheless, the group will continuing to seek to build its renewables, baseload and cogeneration portfolio, but will also seek to develop models that are less reliant on power purchase agreements, or incentives from Eskom.