Black-owned energy and development company Pele Energy Group has raised new capital for growth and working capital through a unique preference share funding structure, leading to a long-term partnership with financial services provider Investec Bank.

This structure has accounted for Pele’s full energy investment portfolio and long-term revenues to provide holistic business funding.

The money will be used for project development costs for pipeline projects, working capital and equity funding for one of Pele's current wind farms (101 MW) that is under construction, as well as future wind and solar projects.

The funding also provides Pele a unique compelling element for all its upcoming future projects with the ability to secure what has typically been the most difficult tranche of equity funding for its projects - the own equity contribution portion which is lowest ranking on the cashflow scale - which is typically characterised by limited to no funders providing this tranche.

Pele note that the senior equity portion is typically funded by the development finance institutions (80% - 90%) or the commercial banks (50% - 60%). "The real bottleneck has been in securing the residual amount not provided by the development finance institutions or commercial banks," Pele note in a statement.

Investec’s ability to assess Pele’s business comprehensively, rather than limit risk to the project level, is novel, demonstrating an appreciation of the full business model, which couples energy investments with a wide variety of related services, ranging from construction management to community development.

Additionally, Investec provided acquisition funding to increase Pele’s stake in the Touwsrivier concentrated solar power project, supporting the long-term growth aspirations that underpin the rationale for the partnership.

Investec’s Power and Infrastructure Finance (PIF) team was intimately involved in both transactions, which have further strengthened the strategic partnership between Pele and Investec.

“Pele’s commitment to advancing structural transformation in South Africa necessitates a partner that is equally invested in holistically fulfilling this mandate. With Investec’s vision of being an out of the ordinary partner for its clients, Pele has the benefit of a long-term strategic growth partner with an aligning mission,” says Pele co-founder and director Obakeng Moloabi.

As entrepreneurial businesses, both Pele and Investec are solutions-oriented with a constant focus on the creation of new value. To this end, the transactions were concluded during  the country's lockdown to curb the spread of Covid-19.

Investec PIF head Andre Wepener explains that the timing of the transactions reflects the willingness of all parties to invest in the future, looking beyond current circumstances.

“The conclusion of these transactions was a unique example of how business has continued during the lockdown. We were able to bring together all of the different moving parts, with almost everyone working remotely.”

Wepener, citing the Economist magazine, notes that international carbon dioxide emissions dropped by 1.4% in 2009 after the global financial crisis, but in the following year, they were rising again at a faster rate than they had since 2003, at about 5.9%. “We are mindful of the potential climate risks when the economy restarts and therefore stand firm in our commitment to clean energy investments as they will make the new economy a sustainable one.”

He says that there also needs to be support for government’s clear intention to transition to lower carbon emissions in the energy sector, as demonstrated by the shift towards renewables in the updated Integrated Resource Plan.

The partnership enables Pele the enhanced opportunity to bring to fruition projects in its pipeline.

Pele is developing solar projects for Round 5 of South Africa’s Renewable Energy Independent Power Producer Procurement Programme and also working on mining client power purchase agreements.

“Ultimately, by scaling investments in energy and economically isolated communities, we seek to make a contribution to the attainment of the goals of South Africa’s National Development Plan,” concludes Moloabi.