The consortium consisting of SolarReserve, a US developer of utility-scale solar power projects; the Kensani Group, an investment and financial advisory player in South Africa; and Intikon Energy, a South African developer of renewable energy projects, has successfully closed financing for two 75MW solar photovoltaic (PV) projects.
The Letsatsi Project and the Lesedi Project are located in the Free State and the Northern Cape, respectively. The combined cost of the two solar PV developments is approximately ZAR5.15bn (US$586mn), making these two of the largest project finance transactions ever completed in South Africa and among the largest renewable energy projects in Africa.
The solar projects – which will both operate under 20-year power purchase agreements with Eskom, the South African power utility - were selected by the South Africa Department of Energy (DOE) in the first round of bids under the South Africa Renewable Energy Independent Power Producer Procurement Program (REIPPPP). Construction will be undertaken by a consortium led by one of the largest international contractors, ACS Cobra, along with Madrid-based Gransolar and South Africa's Kensani Energy EPC. Upon completion, scheduled for mid 2014, the projects will power more than 50,000 homes.
Jointly yielding approximately 600 construction jobs and 100 permanent operational jobs, the solar PV projects combined are also expected to generate an additional 2640 indirect and induced jobs across the supply chain during the construction phase and 140 new indirect and induced jobs during operations, the consortium said. A percentage of total project revenues from the solar PV developments will be set aside for enterprise and socio-economic development, amounting to around ZAR510mn (US$59mn) over the life of the projects.
"The successful financial closure of the first round of REIPPPP projects is precedent setting on a global scale and has once again demonstrated the South African Government's commitment to the enhancement of national infrastructure which will be a catalyst of economic development and job creation,” said Wandile Motlana, chairperson of the Kensani Group.
Kevin Smith, CEO of SolarReserve said financial close of the two South African PV projects marks “a significant achievement” for the company’s international development and expansion. “We have further advanced photovoltaic and solar thermal projects in development in the country under this progressive program initiated by the South African government, and look forward to continuing our work here."
Rand Merchant Bank (a division of FirstRand Bank Limited) acted as the mandated lead arranger and bookrunner for the projects' debt funding requirements. Equity for the projects was provided by the IDEAS Managed Fund (managed by Old Mutual Investment Group South Africa), Kensani Capital Investments, GCL-Poly Energy Holdings, SolarReserve and Intikon, with Rand Merchant Bank providing preference share equity. Kensani Eaglestone Capital Advisory acted as financial advisor to the projects, while international law firm Baker & McKenzie supported the project activities through its offices in Johannesburg and the US.