Norwegian renewable energy producer Scatec is set to start construction of solar and battery storage facilities in the Northern Cape Province of South Africa, after reaching financial close.
The US$1 billion project, the largest of its kind in Africa and the first sizeable baseload renewable energy project in South Africa, will provide 540 megawatts of solar power capacity and 1.1 gigawatt hours of battery storage capacity.
It is being implemented under South Africa’s Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), and has a 20-year power purchase agreement with the Kenhardt region.
Scatec will own 51% of the equity in the project, with H1 Holdings holding the remaining 49%. H1 is a South African Broad-based Black Economic Empowerment renewables investment and development company.
Scatec will be the engineering, procurement and construction (EPC) provider. It will provide operation and maintenance as well as asset management services to the power plants. The value of Scatec’s development and EPC contract for the project is about 13.7 billion rand (US$800 million).
A US$720 million senior non-recourse senior debt facility has been arranged by Standard Bank, in cooperation with British International Investment (BII), the United Kingdom’s development finance institution. The funding is being provided in local currency.
In its role as the lead bank, BII has provided a US$135 million senior debt investment along with an additional US$26 million mezzanine financing to H1.
Standard Bank has acted as the mandated lead arranger and underwriter to provide debt funding towards the project and has additionally arranged the ancillary facilities amounting to US$207 million.
It also acted as the sole derivative and hedge provider, and executed one of the first ESG-linked derivatives on the continent, thereby leading the South African market in sustainable linked derivatives.
According to BII, the funding comes at an especially critical period when South Africans are experiencing a winter with prolonged and crippling power cuts. The project, which is at the forefront of utility-size renewable energy technology, has an innovative design that will ensure reliable delivery of clean energy when demand requires it, even at sundown.
Rentia van Tonder, head of power at Standard Bank, notes: “This is not only about ensuring a reliable supply of power to citizens and a growing economy, but also in ensuring that we meet our obligations as a nation to reduce carbon emissions by bringing more clean energy onto the grid.”