Once debt-ridden Eskom, which is South Africa’s state-owned electric utility, first ran into trouble in 2007 and started to drag the whole economy down with load sheddings, the government decided to end its monopoly in power generation.
The result of that decision was the Integrated Resource Plan 2019 (IRP 2019), first unveiled in March 2011 and last revised in 2019.
The IRP is South Africa’s energy master plan for meeting electricity generation requirements from 2010 to 2030.
The Renewable Energy Independent Power Producers Procurement (REIPPP) solar financing program, which was launched in August 2011, is the renewable energy component of the IRP.
According to the IRP 2019, South Africa aims to have installed solar photovoltaics (PV) generation capacity of 7,958 MW by 2030 and concentrated solar power (CSP) capacity of 600 MW by 2030.
As such, by 2030, PV will account for 10.5 percent of the country’s electricity generation mix while CSP will account for 0.9 percent.
According to Wikipedia, in 2016, South Africa had 1,326 MW of installed solar power generation capacity. Find out more about South Africa’s 10 Largest Solar Power Plants in MW
REIPPP INVESTMENTS
The REIPPP is touted as a more flexible alternative to Feed-in Tariffs (FiTs) because its bidding process recognizes falling solar and wind power generation costs.
That’s why successive bidding rounds under the REIPPP have awarded contracts at progressively lower tariffs – see Table 1.
Table 1: REIPPP Bidding Rounds by Solar Technology| Round | Item | PV | CSP |
|---|---|---|---|
| Round 1 (November 2011) | Number of Projects Approved | 18 | 2 |
| Total Capacity (MW) | 632 | 150 | |
| Average Tariff Bid (ZAR/kWh) | 3.65 | 3.55 | |
| Round 2 (May 2012) | Number of Projects Approved | 9 | 1 |
| Total Capacity (MW) | 417 | 50 | |
| Average Tariff Bid (ZAR/kWh) | 2.18 | 3.32 | |
| Round 3 (November 2013) | Number of Projects Approved | 6 | 2 |
| Total Capacity (MW) | 435 | 200 | |
| Average Tariff Bid (ZAR/kWh) | 1.17 | 1.93 | |
| Round 4 (April 2015) or Round 3.5 for CSP | Number of Projects Approved | 13 | 2 |
| Total Capacity (MW) | 888 | 200 | |
| Average Tariff Bid (ZAR/kWh) | 0.91 | 1.8 | |
| SOURCES: Department of Energy (DoE), South Africa Photovoltaic Industry Association (SAPVIA). | |||
The REIPPP solar financing program is credited with mobilizing massive local and foreign investment into South Africa’s renewable energy industry.
It has reportedly attracted over USD13.5 billion in private investment into South Africa.
The following sections highlight the REIPPP solar financing program’s biggest solar power investors – and their investments – by type of institution.
COMPANIES
In the financing of a renewable energy project, the sponsor or developer, such as the underlisted companies, typically create a non-recourse special purpose vehicle (SPV) to execute the project.
Then the sponsor and its partners take equity stakes in the SPV while financiers lend to it.
For some of the following companies, their REIPPP project was their first African project, which they then used as a stepping stone to other continental projects.
So in a way, the REIPPP solar financing program has spurred private investment not only into South Africa but into the whole continent.
1. Scatec Solar
Norwegian firm Scatec entered the South African market in 2010.
It’s the leading non-fund investor in solar REIPPP projects, with 448 MW in operation comprising the following PV plants:
- Sirius (86 MW)
- Dyason’s Klip 1 (86 MW)
- Dyason’s Klip 2 (86 MW)
- Kalkbult (75 MW)
- Dreunberg (75 MW)
- Linde (40 MW).
Read more about Scatec Solar’s investment in solar REIPPPP projects.
2. SolarReserve
U.S.-based Solar Reserve is a global developer of utility-scale power projects.
Its 346 MW investments are in the following projects:
- Lesedi PV (75 MW)
- Letsatsi PV (75 MW)
- Jasper PV (96 MW)
- Redstone CSP (100 MW).
3. Enel Green Power South Africa (EGPSA)
EGPSA is the local renewable energy subsidiary of Italian energy giant Enel.
It has invested in 1,257 MW of renewable energy in South Africa, 323 MW of which is solar.
Its PV investments are:
- ACSA Upington (10 MW)
- Adams Solar PV 2 (82.5 MW)
- Paleisheuwel (82.5 MW)
- Pulida (82.5 MW)
- Tom Burke (66 MW).
4. Phelan Energy Group – Solar Capital
The Irish firm is solely focused on solar PV projects through its wholly owned local subsidiary, Solar Capital.
It’s invested in 261 MW of projects consisting of the following:
- De Aar 1 (85.3MW)
- De Aar 3 (90 MW)
- Solar Capital Orange (86 MW).
5. Abengoa Solar
Spanish firm Abengoa is responsible for the following CSP plants with a combined capacity of 250 MW:
- Khi Solar One (50 MW)
- KaXu Solar One (100 MW)
- Xina CSP (100 MW).
6. Acciona Energy South Africa
The Spanish firm is invested in 244 MW consisting of the following projects:
- Kathu CSP (100 MW)
- Sishen PV (94 MW)
- Bokpoort CSP (50 MW).
7. Globeleq
UK-based Pan-African Globeleq is a leading IPP.
UK state-owned development finance institution (DFI), CDC, holds a 70 percent shareholding in Globeleq, with Norwegian DFI, Norfund, holding 30 percent.
It’s invested in 219 MW of PV projects consisting of the following:
- Aries Solar (11 MW)
- Boshoff (66 MW)
- De Aar (50 MW)
- Droogfontein (50 MW)
- Konkoonsies I (11 MW)
- Soutpan (31 MW).
8. Mulilo Energy Group
South African renewable energy developer Mulilo has 185 MW of solar PV investments consisting of the following:
- Mulilo Sonnedix Prieska (75MW)
- Mulilo Prieska (75MW)
- Mulilo Gestamp Prieska (19.9 MW)
- Mulilo Gestamp De Aar (9.7 MW)
- Mulilo Du Plessis (5 MW).
9. BioTherm Energy
South African company BioTherm is wholly owned by UK-based global private equity firm Actis.
BioTherm is invested in 126 MW of the following PV projects:
- Aggeneys Solar (40 MW)
- Konkoonsies II (86 MW).
ASSET MANAGERS
Asset managers often pool money together in an investment fund that then takes equity in SPVs.
1. Old Mutual
Old Mutual’s Infrastructural, Developmental and Environmental Assets Managed Fund (IDEAS Fund) is by far the biggest solar investor in the REIPPP solar financing program.
The asset manager has participated in all four REIPPP rounds and it’s likely to do so in upcoming ones.
It has equity investments in 881 MW of generating capacity consisting of the following PV projects:
- Orionis (56 MW)
- Bokamoso (75 MW)
- Waterloo (75 MW)
- Matla A Bokone (75 MW)
- Greefspan (10 MW)
- Greefspan 2 (55 MW)
- Zeerust (75 MW)
- De Wildt (50 MW)
- Lesedi (75MW)
- Letsatsi (75 MW)
- Kalkbult (75 MW)
- Herbert (20 MW)
- Aurora-Rietvlei (10 MW)
- Kathu REISA (75 MW)
- Vredendal (10 MW)
- Linde (40 MW)
- Witkop (30 MW).
2. Stanlib
The South African asset manager, which is a wholly owned subsidiary of Liberty Holdings, is invested in 190 MW consisting of the following PV projects:
- Kalkbult (75 MW)
- Dreunberg (75 MW)
- Linde (40 MW).
Old Mutual and Stanlib are the two biggest asset managers currently invested in the REIPPP program through various investment funds.
FINANCIAL INSTITUTIONS
Most REIPPP projects are financed with 75 percent debt and 25 percent equity. The second most common structure is 70 percent debt and 30 percent equity.
Once a SPV secures a power purchase agreement (PPA) with sole offtaker Eskom, the crucial next step is to seek debt financing.
This is where financial institutions come in.
BANKS
Table 2 indicates lenders to REIPPP solar projects of at least 10 MW.
Table 2: Lenders to REIPPP Solar Projects of at Least 10 MW| Project | Nedbank | Standard Bank | Barclays | Investec | Rand Merchant Bank | Deutsche Bank | ABSA |
|---|---|---|---|---|---|---|---|
| Jasper | - | - | - | - | RMB | - | - |
| Sishen | NED | - | - | INV | - | - | - |
| De Aar 3 | - | STB | - | - | - | - | - |
| Solar Capital Orange | - | - | - | - | - | DB | - |
| Mulilo Sonnedix Prieska | NED | STB | - | - | - | - | - |
| Mulilo Prieska | NED | - | - | - | - | - | ABSA |
| De Aar 1 | - | STB | - | - | - | DB | - |
| Paleisheuwel | NED | - | - | - | - | - | ABSA |
| Adams Solar 2 | NED | - | - | - | - | - | - |
| Pulida Solar | NED | - | - | - | - | - | ABSA |
| Kalkbult | - | STB | - | - | - | - | - |
| Dreunberg | - | STB | - | - | - | - | - |
| Linde | - | STB | - | - | - | - | - |
| Witkop | - | STB | - | - | - | - | - |
| Vredendal | - | - | - | - | RMB | - | - |
| Aurora- Rietvlei | - | - | - | - | RMB | - | - |
| Letsatsi | - | - | - | - | RMB | - | - |
| Lesedi | - | - | - | - | RMB | - | - |
| De Wildt | NED | - | BAR | - | - | - | - |
| Zeerust | NED | - | BAR | - | - | - | - |
| Greefspan 2 | NED | - | BAR | - | - | - | - |
| Waterloo | NED | - | BAR | - | - | - | - |
| Bokamoso | NED | - | - | - | - | - | - |
| Orionis | NED | - | - | - | - | - | - |
| Aggeneys | NED | - | - | - | - | - | - |
| Konkoosies I | - | STB | - | - | - | - | - |
| Konkoosies II | NED | - | - | - | - | - | - |
| Mulilo Gestamp Prieska | NED | - | - | - | - | - | - |
| Soutpan | - | STB | - | - | - | - | - |
| Droogfontein | NED | - | - | - | - | - | ABSA |
| Globeleq De Aar | - | - | - | - | - | - | ABSA |
| Boshoff | - | - | - | - | - | - | ABSA |
| Bokpoort CSP | - | - | BAR | INV | - | - | - |
| Kathu CSP | NED | - | - | INV | RMB | - | ABSA |
| Xina CSP | NED | - | - | - | - | - | ABSA |
| Kaxu CSP | NED | - | - | - | RMB | - | - |
| Khi CSP - 100% DFIs | - | - | - | - | - | - | - |
| Tom Burke | NED | - | - | - | - | - | ABSA |
| Redstone CSP | NED | - | - | INV | - | - | ABSA |
| Karoshoek CSP | NED | STB | - | INV | - | - | ABSA |
| Dyason's Klip 1 | - | STB | - | - | - | - | - |
| Dyason's Klip 2 | - | STB | - | - | - | - | - |
| Sirius | NED | STB | - | - | - | - | - |
| Aries | NED | - | - | - | - | - | - |
| Matla A Bokone | NED | - | BAR | - | - | - | - |
| Kathu REISA PV - 100% DFIs | - | - | - | - | - | - | - |
As the table above indicates, Nedbank is by far the biggest lender to REIPPP projects in terms of number of projects.
According to the company, “it is the only commercial bank to have funded deals across all five allocated technologies to date. In all REIPPP rounds to date Nedbank has arranged and financed a total of 42 transactions, underwriting a total of ZAR37 billion.”
The second most active bank by number of projects is ABSA/Barclays. However, it’s the biggest lender in terms of value.
The bank has secured debt financing worth ZAR50 billion for 33 projects from the start of the REIPPP solar financing program.
In third position is the Standard Bank Group.
MULTILATERALS
South African development finance institutions (DFIs) are more active in REIPPP projects than their foreign counterparts.
However, these local DFIs tend to have some foreign shareholders, so their intense participation in the REIPPP solar financing program may be driven by a lot of indirect foreign funding.
Africa Development Bank (AfDB)
The pan-African lender has focused on concentrated solar power projects in South Africa:
- Xina CSP (100 MW)
- Redstone CSP (100 MW).
Development Bank of Southern Africa (DBSA)
To date, regional multilateral lender DBSA has invested ZAR13 billion in senior debt funding into renewable energy projects awarded under REIPPPP, which translates to 1,502 MW of clean energy for South Africa (DBSA, 2018).
It has committed approximately ZAR18 billion to 33 projects across Round 1 to 4 of the REIPPP.
Its solar investments include the following mix of PV and CSP projects:
- Jasper PV
- De Aar 3 Solar PV
- Khi Solar One CSP
- KaXu Solar One CSP
- Kathu REISA PV
- Solar Capital Orange PV
- Globeleq De Aar PV
- Droogfontein PV
- Kathu CSP
- Xina CSP.
Industrial Development Corporation (IDC)
South African DFI, IDC, is another big investor in REIPPP solar projects.
Some of the projects it’s invested in are:
- Aries Solar
- Mulilo Prieska
- Khi CSP
- Kaxu CSP
- Xina CSP
- Karoshoek Solar One CSP
- Konkoonsies I
- Mulilo Gestamp Prieska.
International Finance Corporation (IFC)
The World Bank’s IFC is invested in the following projects:
- Khi CSP
- Kaxu CSP
- Redstone CSP
- Xina CSP.
DEVELOPMENT FINANCE INSTITUTIONS (DFIs)
Norfund
Norwegian DFI, Norfund, has funded many of Norwegian firm Scatec Solar’s PV projects, including the following:
- Sirius Project One
- Dyason’s Klip 1
- Dyason’s Klip 2
- Kalkbult.
Other DFIs that have participated in three or more REIPPP projects are:
- Netherlands Development Finance Company (FMO)
- German Investment and Development Corporation (DEG).
GOVERNMENT AGENCIES
Public Investment Corporation (PIC)
South Africa’s state-owned pension funds manager PIC is invested in the following projects:
- Xina CSP
- Jasper PV
- De Aar 1
- De Aar 3
- Xina CSP
- Redstone CSP
- Soutpan
- Witkop
- Boshoff
- Bokpoort CSP.
REFERENCES
The Journey to Fast-Tracking Change In South Africa’s Renewable Energy Sector: The DBSA Story
DBSA Coffee Book,
DBSA 2018
