Old Mutual Limited (OML) is a legacy South African financial institution that offers a broad range of financial services including insurance, banking, asset management, and savings.
According to its 2020 Annual Report, OML had ZAR691.2 billion in assets under management (AUM) as of December 31, 2020.
Old Mutual Alternative Investments (OMAI) is a wholly owned alternative investments subsidiary of OML.
Futuregrowth Asset Management is a fixed income specialist that is 70 percent owned by Old Mutual Investment Group (OMIG). OMIG is a wholly owned subsidiary of OML.
OMAI and Futuregrowth have separate investment funds that have heavily invested in South Africa’s internationally acclaimed Renewable Energy Independent Power Producer Procurement (REIPPP) program.
Meanwhile, Stanlib South Africa is a wholly owned asset management subsidiary of Liberty Holdings, which is a South African insurance, asset management, and property holding company.
According to the 2020 Liberty Holdings Ltd. Annual Report, Stanlib had ZAR614 billion in AUM as of December 31, 2020.
Standard Bank of South Africa owns 54 percent of Liberty Holdings.
Old Mutual and Stanlib are the two biggest asset managers currently invested in the REIPPP program through various investment funds.
This report examines these funds.
It’s worth pointing out that another South African asset manager, Inspired Evolution Investment Management, has made larger fund investments than Stanlib in REIPPP projects. However, Inspired Evolution has exited those investments.
FUNDING THE REIPPPP
Since launching in 2011, the REIPPP program has so far birthed 92 projects in four rounds.
About 70% to 80% of the almost R200 billion invested in the 92 projects has been funded by debt.
The bulk of this debt has come from South Africa’s big five commercial banks: Standard Bank, ABSA, Nedbank, Rand Merchant Bank, and Investec.
The rest of the debt has come from Development Finance Institutions (DFIs), export credit agencies, and asset managers like Old Mutual and Stanlib.
However, apart from project sponsors/developers, asset managers have dominated equity investments.
OLD MUTUAL LIMITED
IDEAS Fund
African Infrastructure Investment Managers (AIIM), a wholly owned subsidiary of Old Mutual Alternative Investments (OMAI), manages all OMAI infrastructure funds, including the Infrastructural, Developmental and Environmental Assets Managed Fund (IDEAS Fund).
Launched in 1999, the IDEAS Fund is a closed-end ZAR15 billion fund looking to take significant minority stakes in infrastructure projects that create positive social and environmental impacts.
The IDEAS Fund is the largest equity investor in the REIPPPP.
It’s also the biggest solar PV investor (881 MW installed capacity) in South Africa.
The fund has participated in all four REIPPPP rounds, thereby investing ZAR10 billion in equity in the 27 projects listed in Table 1 below (Also Read: Solar Projects in South Africa: 10 Largest Solar Power Plants in MW).
Table 1. IDEAS Fund Investments In the REIPPPP
| Investment | Shareholding |
|---|---|
| Orionis Solar PV (56 MW) | 49% |
| Bokamoso Solar PV (75 MW) | 50% |
| Waterloo Solar PV (75 MW) | 50% |
| Matla A. Bokone Solar PV (75 MW) | 50% |
| Greefspan Solar PV (10 MW) | 49% |
| Greefspan 2 Solar PV (55 MW) | 50% |
| Zeerust Solar PV (75 MW) | 50% |
| De Wildt Solar PV (50 MW) | 50% |
| Project Witkop Solar PV (30 MW) | 90% |
| Linde Solar PV (40 MW) | 10% |
| Vredendal Solar PV (10 MW) | 49% |
| Kathu REISA Solar PV (75 MW) | 63% |
| Aurora Solar PV (10 MW) | 49% |
| Herbert Solar PV (20 MW) | 49% |
| Kalkbult Solar PV (75 MW) | 10% |
| Letsatsi Solar PV (75 MW) | 34% |
| Lesedi Solar PV (75 MW) | 34% |
| Kangnas Wind Farm (140 MW) | 20% |
| Perdekraal Wind Farm (110 MW) | 20% |
| Roggeveld Wind Farm (147 MW) | 25% |
| Umoya Wind Farm (67 MW) | 80% |
| Jeffreys Bay Wind Farm (138 MW) | 21% |
| Metrowind Wind Farm (27 MW) | 34% |
| Noupoort Wind Farm (80 MW) | 25% |
| Loeriesfontein wind Farm (140 MW) | 25% |
| Khobab Wind Farm (140 MW) | 25% |
| Cookhouse Wind Farm (139 MW) | 56% indirect interest |
| Source: IDEAS Fund |
The fund has reportedly returned around 15.8 percent annualized IRR since launching.
Futuregrowth Power Debt Fund
Futuregrowth Asset Management is a fixed income assets subsidiary of Old Mutual.
Launched in January 2013, the Power Debt fund invests solely in energy projects and is South Africa’s largest institutional debt fund.
Furthermore, it’s Futuregrowth’s flagship REIPPP investment vehicle.
As at September 30, 2020, the fund size was ZAR8.5 billion, including committed capital, and ZAR7.4 billion of that had been deployed to 29 REIPPPP projects as follows:
- ZAR2.3 billion lended to 12 Solar PV plants
- ZAR1.4 billion lended to three concentrated solar power (CSP) plants; and
- ZAR3.7 billion lended to 14 wind farms.
The 29 projects are listed in Table 2.
Table 2. Futuregrowth Power Debt Fund Lending to the REIPPPP
| Investment | Percentage of Total Debt Provided |
|---|---|
| Dreunberg Solar PV (75 MW) | 32% |
| Matla A. Bokone Solar PV (75 MW) | 11% |
| Greefspan Solar PV (10 MW) | 22% |
| Witkop Solar PV (30 MW) | Unknown |
| Soutpan Solar PV (28 MW) | Unknown |
| Mainstream De Aar (50 MW) | 17% |
| Herbert Solar PV (20 MW) | 22% |
| Kalkbult Solar PV (75 MW) | 24% |
| Kathu REISA PV (75 MW) | Unknown |
| Droogfontein Solar PV (50 MW) | Unknown |
| Mulilo Prieska Solar PV (75 MW) | Unknown |
| Solar Capital Orange Solar PV (86 MW) | Unknown |
| Kathu CSP (100 MW) | 14% |
| Bokpoort CSP (50 MW) | Unknown |
| Kaxu CSP (100 MW) | Unknown |
| Chaba Wind Farm (21.5 MW) | Unknown |
| Grassridge Wind Farm (61.5 MW) | Unknown |
| Amakhala Wind Farm (134 MW) | Unknown |
| Tsitsikamma Wind Farm (95 MW) | Unknown |
| Waainek Wind Farm (24.6 MW) | Unknown |
| Noupoort Wind Farm (80 MW) | Unknown |
| Noblesfontein Wind Farm (74 MW) | Unknown |
| Khobab Wind Farm (140 MW) | Unknown |
| Copperton Wind Farm (102 MW) | Unknown |
| Loeriesfontein Wind Farm (140 MW) | Unknown |
| Kangnas Wind Farm (140 MW) | 16% |
| Cookhouse Wind Farm (139 MW) | 19.76% |
| Perdekraal Wind Farm (110 MW) | 16.27% |
| Wesley-Ciskei Wind Farm (34.5 MW) | 47.00% |
As at September 30, 2020, the fund had returned an annualized 10.4 percent since inception, thereby outperforming its benchmark, which is the South African short term fixed interest composite index’s (STeFI) 6.6 percent annualized return over the same period.
Futuregrowth Development Equity Fund
Launched in September 2006, the Development Equity targets infrastructure development projects and has a small exposure to energy.
The fund size was ZAR2.5 billion, including committed capital, as at September 30, 2020. Approximately ZAR2.2 billion of the capital has been deployed.
The fund has invested ZAR165 million in equity in the following five REIPPPP projects:
- Gibson Bay wind farm 111 MW
- Khobab wind farm 140 MW
- Loeriesfontein 2 wind farm 140 MW
- Noupoort wind farm 80 MW
- Mulilo Prieska Solar PV plant 86 MW
As at September 30, 2016, the fund has returned an annualized 18.5 percent IRR since inception, which is at the lower end of its targeted nominal return of 18 – 22 percent.
STANLIB SOUTH AFRICA
Unlike Old Mutual funds that significantly lend to projects, Stanlib funds provide mostly equity funding.
Stanlib Infrastructure Fund I (Fund 1)
Launched in 2013, the Stanlib Infrastructure Private Equity Fund 1 (Fund 1) is a closed end investment fund looking to take significant minority stakes in infrastructure projects, with a bias toward greenfield renewable energy projects in South Africa.
The fund manager is Stanlib Asset Management Ltd.
It has a term of 10 years, plus two possible extension periods of one year each.
The target fund size was ZAR1 billion, with a maximum of ZAR1.5 billion.
It achieved its first close in May 2013 with a ZAR500m seed funding from parent company Liberty Holdings.
After the first close it raised approximately ZAR800m from local institutional investors. Investors were required to commit a minimum of ZAR50 million.
The fund reached its final close in January 2015, raising ZAR1,189 million (USD104.8 million) in total commitments, including ZAR200 million from Black Economic Empowerment (BEE) group Royal Bafokeng Holdings (RBH).
Table 3: Stanlib Fund 1 Current Investments
| Investments as of September 30, 2015 | Shareholding | Cost (ZAR million) |
|---|---|---|
| Kouga Wind Farm (80 MW) | 35% | 169.2 |
| Kalkbult Solar PV Plant (75 MW) | 10% | 63.5 |
| REISA Kathu Solar PV Plant (75 MW) | 12.50% | 223 |
| Dreunberg Solar PV Plant (75 MW) | 20% | 96.2 |
| Linde Solar PV Plant (40 MW) | 10% | 24.6 |
| Total Investments | 576.5 | |
| Source: Stanlib |
Since 2015, Stanlib Fund 1 has made further investments.
It has increased its stakes in Table 3 projects in the following ways:
- Kouga Wind farm from 35% to 40.6%
- Kalkbult PV from 10% to 25%
- Dreunberg PV from 20% to 30.45%
- Linde PV from 10% to 20.45%.
In August 2020, the Fund acquired 10 percent of Mulilo Energy Holdings, which is a leading South African renewable energy developer that has been awarded six solar and two wind projects – not including projects in Table 3 above – under the REIPPP program.
Stanlib Fund 1 still has an outstanding balance of committed funds, so it will likely invest in more greenfield projects in upcoming REIPPPP rounds.
The target return (IRR) for the fund is 18 percent per annum, after costs.
Stanlib Infrastructure Fund II (Fund 2)
Launched in July 2020, Fund 2 is similar in structure to Fund 1 but will focus more on brownfield projects, i.e., post construction projects with established cash flows, rather than riskier greenfield projects.
It has a larger target fund size of ZAR7.9 billion.
