15 Dec 2020
First refinancing transaction in South African renewables sector
Financing transaction sets innovative funding benchmark for the pioneering REIPPP programme. The R5 billion transaction is the largest infrastructure refinancing initiative to be implemented in the country.
The ACWA Power Solafrica Bokpoort Concentrated Solar Power (CSP) plant, one of the major drivers of renewable energy in South Africa, has achieved another significant first, having announced the largest infrastructure refinancing initiative to be implemented in the country.
Project financiers, led by Investec Bank, have concluded the first refinancing transaction for Bokpoort CSP, in South Africa's pioneering Renewable Energy Independent Power Producer Procurement (REIPPP) programme, marking a new era for growth and opportunity. In May this year, the department of mineral resources and energy (DMRE), via the IPP Office (IPPO) invited Bid Window 1 – 3.5 IPPs to consider participating in a voluntary refinancing initiative.
Bernard Magoro, Head of the Independent Power Producers Office was pleased to have reached this significant milestone in concluding the first such transaction. “We hope that this will encourage other Bid Window 1-3.5 IPPs to also participate and jointly contribute to a reduction in the wholesale price of electricity”.
The ACWA Power-developed, majority-owned and managed plant achieved commercial operations date (COD) in March 2016, and has since been setting new production records, including the African continental benchmark for 13 days (312 hours) of continuous operations on 23 October 2020 and recently an all-time record for maximum daily production at 1,077 MWh, recorded on 30 November 2020 at a daily load factor of 89.8%.
The R5 billion deal is the largest infrastructure refinancing initiative implemented in South Africa to date. It is particularly significant in the context of the government's recently gazetted plans to increase the country’s reliance on affordable, reliable and sustainable electricity through solar and other Independent Power Producer (IPP) projects.
“Accelerating South Africa's transition to a cheaper and more sustainable energy mix requires innovative funding solutions,” explains Andre Wepener, Head of the Power & Infrastructure Finance team at Investec Bank. “This refinancing transaction increases gearing and creates more favourable debt terms, effectively reducing the project’s cost of capital. The structure unlocks a reduced tariff to Eskom under the Power Purchase Agreement (PPA), which directly impacts the cost of electricity for South African consumers.”
Founded in June 2013, ACWA Power Solafrica Bokpoort CSP is a ring-fenced project company, established by ACWA Power, a leading Saudi developer, investor and operator of power generation and desalinated water plants worldwide. Additional shareholders in the project company include the Public Investment Corporation (PIC), Solafrica Lereko Investments, the Lereko Metier Solafrica Fund I Trust, Kurisani Solafrica Investment, Solafrica Community Investment Company and Lereko Metier Sustainable Capital Fund.
“Marking an industry first for South Africa and its renewable sector, this refinancing transaction is a demonstration of our capability to collaborate, and create transformative solutions that deliver strong stakeholder value, truly benefitting our partners and the communities within which we operate. ACWA Power is firmly committed to leading the energy transition across markets, and we are proud to contribute meaningfully to the social economic development of nations through our mission of reliably and responsibly delivering power and desalinated water at an affordable cost,” said Rajit Nanda, Chief Portfolio Management Officer and Acting CIO for ACWA Power.
The initial build project attracted approximately R1.4 billion in foreign direct investment into the country, with almost 42% of the total project costs directed to local content and value-add in civil works, reinforcing steel, structure steel, local manufacturing, as well as pre-assembly and on-site assembling.
The refinancing transaction also extends the socio-economic and community impact of this greenfield project, which created roughly 1,300 jobs during the peak construction period and now employs 61 permanent staff during operations.
“Investec has a long-standing relationship with ACWA Power and has worked as the mandated lead arranger on various other ACWA Power projects in South Africa,” elaborates Wepener. This synergistic partnership includes Investec's appointment as the sole mandated lead arranger (MLA) for the project’s R5 billion refinancing initiative. Additional project lenders include ABSA, RMB, Omsfin, Sanlam and Futuregrowth.
Located in the Northern Cape Province to maximise the country's enviable solar resources, the 50 MW plant was one of the first CSP projects awarded under the REIPPP programme, and includes 1,300MWht of molten salt thermal energy storage capacity, making it one of the biggest storage facilities of all CSP plants in South Africa. The project operates on a 20-year PPA with Eskom, consistently producing electricity to meet South Africa's peak demand periods in support of the grid.
Bokpoort CSP is one of ACWA Power’s flagship projects in the African continent, and testament to the company’s commitment to being at the forefront of the energy transition and providing transformative solutions, including the early adoption of technologies to deliver power and water reliably and responsibly.
Notes to Editors:
About Investec Corporate and Institutional Banking
Investec Corporate and Institutional Banking (ICIB) provides a wide range of products and services through its lending, trading and treasury operations, backed by a research offering, to a select client base that includes corporate clients, public sector bodies, financial institutions and private investors. The treasury structuring and financial products business units offer structured financial solutions respectively to institutional clients and retail clients, the latter through its distribution channel. ICIB also undertakes non-private client deposit taking, corporate and public sector lending, project finance, acquisition and leveraged finance activities.
About ACWA Power
ACWA Power is a developer, investor and operator of power generation and desalinated water production plants. Registered and established in 2004 in Riyadh, Saudi Arabia; ACWA Power employs about 3,500 people and is currently present in 12 countries in the Middle East, Africa, Central Asia and Southeast Asia. ACWA Power’s portfolio includes 58 assets with an investment value of USD 59.9 billion, producing 37.7 GW of power and 5.8 million m3/day of desalinated water delivered on a bulk basis to address the needs of state utilities and industries on long term, off-taker contracts under utility services outsourcing and Public-Private-Partnership models.
ACWA Power’s mission is to reliably deliver electricity and desalinated water at a low cost, thereby contributing effectively to the sustainable, social and economic development of communities and countries. ACWA Power is committed to the values of Safety, People and Performance in operating its business across all geographies. For more information, please visit www.acwapower.com.