A wind farm built by Acciona in Spain. An expert says Spanish, Greek and Italian projects in South Africa are battling to get guarantees.

Wiseman Khuzwayo

Projects by companies from Spain, Italy and Greece that have been named by the South African government as preferred bidders in its renewable energy programme may not be able to reach financial closure, an expert has claimed.

South Africa’s renewable energy programme aims to allocate 3 725 megawatts of generation capacity to private producers, mainly from abroad, to ensure an uninterrupted supply of electricity while reducing carbon emissions.

Rajen Ranchhoojee, a partner at law firm Eversheds who specialises in renewable energy and natural resources, said local banks had adopted a cautious approach to the banks from these southern European countries by not accepting guarantees issued by them.

Standard Bank said it would consider each guarantee from a European bank on its own merits. Nedbank said it was unable to comment on rumours from unnamed sources.

FirstRand said its senior managers were at a meeting and not available for comment. Absa was unable to comment at the time of going to press.

Local banks emerged from the global financial crisis of 2008 almost unscathed, thanks to prudent lending practices and strong regulation.

Spain, Italy and Greece are enduring a recession arising from a sovereign debt crisis. Many banks in these countries have been downgraded by international rating agencies.

The EU is South Africa’s leading trading partner.

Rafael Martín, a commercial adviser at the Spanish embassy in South Africa, said Spain was playing a leading role in the development of renewable energy. It was the largest producer of solar thermal energy, the second-largest producer of photovoltaic energy and the fourth-largest producer of wind energy.

On Tuesday, Spain’s Commerce Secretary, Jaime García-Legaz, led a delegation of 55 Spanish companies and 90 individuals in Johannesburg to promote business and investment partnerships with South African companies.

Ranchhoojee said South African banks had decided not to accept guarantees from banks in the three countries even though such guarantees were commonly issued in financing large projects, particularly infrastructural and renewable energy programmes, which had been prioritised by the South African government.

He said this trend had led to companies and investors from regions worst-hit by the crisis having to reduce their role in local projects or worse, give up on their investment as a whole.

“The cautious approach taken in respect of international bank guarantees by our local banks has led to large projects coming under pressure to the point that in the most severe circumstances we believe that some of these companies are changing banks to the larger global groups. This does not bode well for an already strained European banking system,” Ranchhoojee said.

Thabang Audat, the acting chief director for electricity at the Department of Energy, said no bank had approached the department to express problems about accepting guarantees from euro zone lenders.

The department announced 28 preferred bidders in round one and 19 in round two of the renewable energy independent power producers programme. Round three has been postponed to May 7 due to the need to focus on financial closure processes on rounds one and two. These preferred bidders include Spanish heavyweights Abengoa and Acciona.

The projects include wind facilities, small hydro and solar.