The Metal Industries Benefit Funds Administrators (Mibfa) has confirmed that it will commit up to R1-billion for the provision of debt finance for projects participating in South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).
The funds will be administered by black-owned asset manager Mergence Investment Managers, which has established the Mergence Renewable Energy Debt Fund.
Mibfa represents the interests of over 400 000 members in the Engineering Industries Pension Fund and the Metal Industries Provident Fund, which collectively have assets worth more than R90-billion.
Mibfa principal officer Omar Gire says the fund is aligned with its socially responsible investing objectives, but will also clear targeted investment return thresholds.
"We expect a net return of Jibar [Johannesburg Interbank Agreed Rate] plus 3%, which should equate to consumer inflation plus 6% a year over a 15-year horizon. This exceeds our hurdle return on a risk-adjusted basis."
Mibfa envisages that 10 to 15 projects will be supported and says the upper lending limit will be determined by the board, based on the nature of the specific project and the motivation supplied by a technical advisory committee. The debt will have a tenure of up to 17 years.
The mandate is limited to wind farms and solar photovoltaic energy, but may be extended based on the investment business case.
Depending on the performance of this investment, the overall size of the Mibfa fund could also be extended.
Mergence Investment specialises in ‘impact investing’, which involves generating financial returns while also addressing environmental, social and governance objectives.
Mergence portfolio manager Mark van Wyk says the fund will be applied to projects that hve high levels of community ownership and local content, while also supporting job creation and skills development.
The financial-close deadline for the 19 second-bid-window REIPPPP projects, which collectively represent 1 043.9 MW of capacity and an investment value of around R28-billion, has been set for early May.
During the first bid window, 1 415 MW was allocated to 28 wind and solar projects, which are currently under construction.
Mibfa already has exposure to these projects on the equity side and the debt funding will be pursued to leverage returns.
The request for proposals for the third bid window has been delayed, but is expected to be released soon.