Independent power producer Globeleq and financial services firm Absa have completed the senior debt refinancing of three of Globeleq's renewable energy power plants in South Africa, the companies said on August 10.
The purpose of the refinancing is to enhance the projects’ capital structures, allowing for the release of value to shareholders and the reduction of the tariff to the national utility and, ultimately, consumers in South Africa.
The tariff reductions will save State-owned power utility Eskom more than R1-billion across the three assets over the remaining 12-year term of the power purchase agreements.
Absa acted as the mandated lead arranger and sole underwriter of the R5.2-billion debt financing package.
This transaction will be the second refinancing of renewable assets under the Department of Mineral Resources and Energy's Independent Power Producer Office (IPPO) Refinancing Protocol.
Globeleq proactively engaged Absa in June 2020 after the IPPO requested owners of the South African renewable projects procured under Round 1 to Round 3.5 of the Renewable Independent Power Producer Procurement Programme (REIPPPP) to consider participating in a voluntary refinancing programme.
Globeleq led the refinancing process on behalf of its shareholders in the 138 MW Jeffreys Bay Wind Farm, and the 50 MW De Aar Solar and the 50 MW Droogfontein Solar plants.
“Globeleq sees this transaction as enabling future secondary market debt, which in turn will stimulate new opportunities, jobs and contribute to the economic development of South Africa. We hope that other IPPs will look to do the same and reduce the cost of their power to Eskom,” Globeleq CEO Mike Scholey said.
Globeleq hopes to eventually refinance the entire portfolio of assets it owns in South Africa.
The Refinancing Protocol will result in tariff reductions. Apart from reducing wholesale electricity prices, the refinancing will unlock funds for the shareholders, which, in turn, will encourage re-investment in the sector, as well as accelerate equity distributions to the three community trust shareholders, enabling spending on high-impact sustainable ventures.
“Absa Bank has been a major supporter of the REIPPPP since its inception and has, to date, arranged financing for about 3 GW of projects across various bid windows. This transaction strongly demonstrates Absa’s ongoing commitment to the financing of clean energy and the acceleration of investments that make a sustainable impact on the communities we serve,” Absa Resource & Project Finance principal Johan Koorts said.
“We thank all parties for the commitment shown and the constructive way in which they approached this refinancing and hope that its successful conclusion will lead to more IPPs taking comfort from the process and coming to the fore to participate in this initiative. The IPPO is proud to be part of this achievement,” IPPO head Bernard Magoro said.