ABSA BANK AND African Rainbow Energy and Power (Arep) have partnered to launch African Rainbow Energy (ARE), a renewable energy investment platform with R6.5 billion of gross assets in hand, to expand the pool of funding available in the country as South Africa battles with a constrained energy supply from power utility Eskom.
With a R500 million cash injection from Absa, which will also transfer R5bn of existing renewable assets to the company, ARE would provide investors with exposure to utility scale, commercial and industrial sector clean-energy investments, building a platform of scale in South Africa, and will seek selected, bankable projects in Africa, it said on Friday.
The transaction represents about 25 percent of Absa’s R20bn loan book and will expand its participation in the sector, in which the bank has already funded 33 projects constituting about 3 gigawatts, or 46 percent, of the total projects closed to date in South Africa.
For its part, Arep will transfer its existing investments in wind, solar photovoltaic and biomass projects, which have an installed capacity of more than 700 megawatts of renewable energy.
This will result in ARE having about R6.5bn of gross assets, covering 31 renewable assets, making it a sizeable independently-owned energy business in South Africa.
ARE chief executive Brian Dames said that ultimately the new firm planned to list on the JSE once it had reached sufficient scale.
The new company had already secured a deep investment pipeline and had partnered on a number of bids into round 5 of the Reippp.
The effective date of the fund was subject to the fulfilment of certain conditions precedent, which were expected to be concluded in the fourth quarter of 2021, it said.
Jason Quinn, Absa’s interim group chief executive, said: “Renewables are an important part of Absa’s sustainability strategy and we target financing or arranging more than R100bn for environment, social and governance-related projects by 2025.”
However, energy analyst Penny Herbst said there were concerns about not only the cost of renewable energy as opposed to conventional energy means but what such deals cost the country when the deals fell through, which inevitably led to downgrades by rating agencies.
Herbst said even the National Energy Regulator of South Africa was at its wits’ end in the regulation of renewable energy entities, being used to regulating Eskom only.
“Nersa has not transformed to this space,” she said.
Nuclear physicist Kelvin Klemm was sceptical about renewable energy reliance, pointing out that industrial scale requirements needed consistent supply which could not be guaranteed according to the availability of wind force and sunlight durability.
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