Delivering equity financing solutions to South Africa's renewable energy sector

30th November 2018

Delivering equity financing solutions to South Africa's renewable energy sector

By Tebogo Mohwaduba and Sindisiwe Mbuli

As part of the fourth round of the South African Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), RMB helped fund Thebe Investment Corporation's (TIC) shareholding in a portfolio of projects developed by BioTherm Energy (a subsidiary of the Denham Capital private equity firm). The portfolio of two wind and two photovoltaic (PV) projects, is currently under construction, having reached financial close on the 23rd of July 2018. The total combined project value of the four projects is R6.5 billion with a total generation capacity of 284 MW.

RMB has tailored funding solutions for various equity partners by effectively managing the risks associated with the construction and operational phases, as well as long-term dividend volatility in the underlying projects.  

RMB’s Infrastructure Finance team, in collaboration with the Principal Investments team, provided a R507 million project finance equity facility to TIC to fund 75% of its equity commitment. RMB’s financing solution enabled TIC to take up a 37.5% stake in each of the four energy projects and play a meaningful role as BioTherm Energy’s BEE partner.

With decreasing tariffs and shareholder returns in the latter rounds of the REIPPPP, RMB’s project finance equity facilities are structured to deliver lower electricity tariffs and better returns for shareholders.

Once built, the combined power generation from the four projects will provide sufficient clean renewable energy to power more than [182 000] homes. The projects include the 120 MW Golden Valley wind project near Bedford in the Eastern Cape, the 32 MW Excelsior wind project near Swellendam in the Western Cape, the 86 MW Konkoonsies II solar PV project between Pofadder and Onseepkans in the Northern Cape and the 45 MW Aggeneys solar PV project near Aggeneys in the Northern Cape. Construction on all four projects has commenced and will boost employment in those regions, with electricity delivery into the grid expected to start in the fourth quarter of 2019.

RMB concluded these financings under significant time pressure which enabled the equity participants to abide by all the underlying project timelines in order to reach financial close at the stipulated dates.

To date, RMB has concluded a total of six separate transactions with various shareholders in REIPPPP. RMB is able to provide this type of equity financing to BEE as well as non-BEE clients, particularly international sponsors who are looking to manage exchange rate risk over the 20-year power purchase agreement term.

Mbuli and Mohwaduba are infrastructure finance transactors at Rand Merchant Bank