SA renewable industry scores R600m from Norwegian, British funders

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  • SA's renewable energy industry has received a R600 million boost from foreign funders, Norfund and CDC Group.
  • H1 Capital, an equity partner in renewable energy projects, will use the funds to bolster renewable energy capacity by 2.4 GW.
  • The deal will support the reduction of 6.2 million tons of carbon emissions annually, or 12.5% of Norway's emissions.

South Africa's renewable energy industry has received an R600 million boost from foreign funders.

The Norwegian Investment Fund, Norfund and UK development finance institution CDC Group on Thursday signed a memorandum of understanding with broad-based black economic empowerment investment company H1 Capital to fund 2.4 GW of new wind and solar projects. The projects form part of bid window five of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

The projects will generate 6 400 GWh per year.

H1 Capital is an investment and development company which has funded several renewable energy projects in South Africa. It has a 49% stake in three solar hybrid storage projects that were announced as preferred bidders in the Risk Mitigation Independent Power Producer Procurement Programme - Kenhardt 1, 2 and 3. The projects are to be developed by Norwegian firm Scatec and will be based in the Northern Cape.

Under bid window, five of the REIPPPP H1 is co-invested in 21 projects under four sponsors - namely Scatec, Redrocket, EDF and Globeleq Mainstream.

The funding to H1 entails R360 million from Norfund and R240 million from CDC Group. The investment supports pledges Norway and the UK made at COP26 at Glasgow last year to scale up climate finance to Africa.

At COP26, Norway announced a new Climate Investment Fund, to be managed by Norfund. This deal is the first investment under the new fund.

CDC Group - which will soon be named British International Investment - has funded multiple projects in South Africa in the past, having invested over $367 million (~R5.6 billion) in the country. These investments include an equity stake and loan provided to Trans African Concessions to finance a 440km motorway between Witbank and Maputo. Other renewable energy investments in the country involve backing for independent power producer Globeleq's six wind and six solar power projects and the Redstone concentrated solar power plant.

The investment in H1 marks the CDC Group's first broad-based black economic empowerment deal.

Thithi Kuhlase-Maseko, head of CDC Group's SA office, said that the deal helps achieve their aims to promote sustainability and inclusiveness. "This investment marks another key step toward fulfilling our pledge to devote greater capital to fund clean infrastructure and support South Africa on its path towards just energy prospects."

At the signing ceremony Norway's Minister of International Development, Anne Beathe Tvinnereim, noted that the deal would support access to clean energy, facilitate the reduction of fossil fuels and support job creation. The pipeline of projects would help avoid carbon emissions of 6.2 million tons - which is 12.5% of Norwegian emissions, said Tvinnereim.

"We are in this together. We need to think globally, and we need to pull together, and we need action now," she added. Tvinnereim expressed optimism that this would be the first of many more mutually beneficial partnerships contributing to a just transition in SA.

Commenting on the significance of the deal, H1 CEO Rayburn Hendricks said that the projects are capital intensive. Capital is scarce, and to achieve the country's objectives for clean energy, "long-term patient capital" is needed.

While R600 million has been pledged, the total exposure to rollout projects is "multiples" of that figure. However, he explained that the R600 million forms an "equity layer" that is often harder to raise from the market than debt. The funding secures H1's financial commitment to the projects it is invested in.

"From H1 we are ready to do the job that is expected of us. This is something we worked on for a very long time… we are able to perform our obligations."

Hendricks is hopeful the partnership with Norfund and CDC Group can be replicated with other projects and players in Sub-Saharan Africa.

Both CDC Group and Norfund affirmed commitments to supporting private sector energy developments. 

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