South African bank Absa, a major player in the renewable energy sector, has refinanced three operational power plants in South Africa. The plants are owned by UK independent power producer (IPP) Globeleq.
Globeleq is refinancing three of its renewable energy plants in South Africa. This is part of a transaction with Absa Bank, a financial institution that is very active in the energy sector in the Rainbow Nation. Absa acted as mandated lead arranger and sole underwriter of the debt financing package of approximately 5.2 billion South African rand, or about $351 million, for the purchase of the debt incurred by the British company in the construction of its power plants.
According to Globeleq, the debt buyback of the three renewable energy plants will contribute to the improvement of the capital structure of the projects, thereby unlocking shareholder value, as well as reducing tariffs for the national power utility Eskom and ultimately for South African consumers.
Three plants with a capacity of 238 MW
Globeleq’s 2020 transaction is in response to a notice issued by the Independent Power Producer Office (IPPO) requesting that Independent Power Producers (IPPs) awarded concessions in the first bidding window of the Renewable Energy Independent Power Producer Procurement Programme (REIPPP) consider participating in a voluntary refinancing programme. Among the clean energy facilities refinanced by Absa is the Jeffrey’s Bay wind farm.
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This facility went into commercial operation in 2014, between Jeffrey’s Bay and Humansdorp in the Eastern Cape. The wind farm covers an area of 3,700 hectares and has a capacity of 138 MW, with an annual production of 460,000 MWh, which is fed into the South African national electricity grid from a 132 kV substation. For the wind farm, UK IPP has signed a 20-year power purchase agreement (PPA) with South African state-owned utility Eskom.
The impact of refinancing
Absa also refinanced the De Aar and Droogfontein solar PV plants of 50 MWp each. The two solar farms in the Northern Cape are also covered by a 20-year PPA with Eskom. According to Globeleq, the refinancing of these facilities allows for a reduction in the feed-in tariffs, benefiting Eskom. The state-owned company will be able to save more than one billion South African rand ($67.4 million) on the three assets over the remaining 12-year term of the PPAs.
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“In addition to reducing wholesale electricity prices, the refinancing will unlock shareholder funds, encouraging reinvestment in the sector and accelerating equity distributions to the three community trust shareholders, allowing for spending on high-impact sustainable projects,” the Mike Scholey-led company says. IPP wants to refinance all of its operational plants in South Africa. Under the REIPPP, Globeleq has been awarded the construction of eight renewable energy plants. For the record, the energy company is owned by the British investor CDC Group (70%) and Norfund (30%).
Jean Marie Takouleu