Absa to fund 43% of the renewable power projects awarded under the government’s IPP plan

Absa Corporate and Investment Banking , a member of Barclays, will provide R10.8 billion worth of debt funding to a total of six projects, including Wind, Solar PV and Concentrated Solar Power under the third round of the Independent Power Producer Procurement Programme, following the announcement on October 29, 2013 of the preferred bidders by the Department of Energy.

This is approximately a third of the total debt that is being committed by South Africa’s commercial banks, positioning Absa as one of the largest funders under the third round of the Renewable Energy Independent Power Producer Procurement Programme. Last week the DOE announced that a total of 17 projects across various technologies achieved preferred bidder status in the latest round of bidding. The 17 projects are expected to produce approximately 1,472MW’s of renewable energy per year once they are up and running.

Absa CIB acted as a Mandated Lead Arranger and as Lender to projects totalling a combined annual power output of 635MW’s including 360MW’s of onshore wind; 200MW’s of Concentrated Solar Power and 75MW’s of Solar Photovoltaic power.  

Theuns Ehlers, Head of Resource & Project Finance at Absa CIB, says this represents a significant commitment from the bank to the establishment of a renewable energy sector in South Africa. “We will be ready to disburse funding as soon as all documentation is finalised and hedges are closed. We are pleased that we will be financing three out of the seven wind projects, both of the CSP projects and one of the six PV projects, amounting to a total debt commitment of R10.8 billion,” says Ehlers.

“This shows that there is still a significant appetite from developers and banks to invest in renewable energy projects in South Africa. Absa started working very closely with a number of local and international independent producers from the time the government announced its IPP plan a few years ago. We took a proactive approach and we are delighted that our early involvement has been rewarded by the number of deals we secured out of this round.”

“The successful conclusion of the third procurement process has been very exciting and a big step forward in attracting local and international private players into South Africa’s energy mix. We are encouraged by the fact that this was a highly competitive and open bidding process.  Hopefully this success will also be a catalyst for other programmes, such as co-generation and cross-border IPPs,” says Ehlers.

All winning bidders are expected to sign project agreements with the Department of Energy by July 30, 2014, bringing to a close South Africa’s third round of the IPP programme which began almost a year ago. Developers will have about one month from the date of signature in which to finalise all documentation and foreign currency hedging after which projects can be rolled out.

The fourth bidding round is expected to commence in July 2014 and will be finalised a year later, where a portion of the 3,725MW’s on offer will be allocated. In line with the country’s long-term power plan, South Africa aims to secure a total of 17 800 MW of renewable energy or 42% of South Africa’s new generation capacity by 2030.