African Infrastructure Investment Managers (AIIM), one of Africa’s largest and most experienced infrastructure-focused private equity fund managers and a member of Old Mutual Alternative Investments (OMAI), has acquired – through its IDEAS Managed Fund (IDEAS) – majority stakes in three new solar power plants in South Africa.
The 30MW portfolio of facilities, which reached financial close in May 2022, are expected to reach commercial operation in March and April 2023. They will connect via a combination of wheeling and behind the meter solutions, feeding energy into Harmony operations in the Welkom area in South Africa.
Construction is anticipated to commence in June 2022. When all three power facilities are fully operational, it is expected that they will deliver 68GWh of clean energy in the first twelve months of operations and 1.3TWh over the 20-year lifespan of the facilities. The energy provided by the portfolio is expected to mitigate 65,000 tonnes of CO2 emissions in the first year of operations.
According to the SA government’s Integrated Resource Plan 2019 (or, IRP 2019), there is a requirement to add c.30,000MW of renewable energy onto the country’s grid by 2030, of which c.4,000MW are expected to be other distributed generation, co-generation, biomass, and landfill technologies. However, given the current proposed amendments to the Electricity Regulatory Act (ERA) to permit self-generation <100MW and the concept of “wheeling” electricity through the transmission network, growth will likely exceed the 2019 IRP allowance. This ambition supports a material investment requirement and opportunity to build out the renewable energy and green economy sectors for SA.
In aggregate, these rank as some of the largest solar photovoltaic plants for commercial and industrial private offtake in South Africa to date, a demonstration of Harmony’s visionary approach as an early starter in the adoption of clean energy for its operations.
The portfolio has been financed through a mix of debt and equity. Equity was funded by IDEAS and the Mahlako Financial Services-managed Mahlako Energy Fund 1 (Mahlako). Debt was provided by Rand Merchant Bank, a division of FirstRand Bank Limited (RMB).
Commenting on the transaction, Sean Friend, Investment Director at AIIM and Co-portfolio Manager of the IDEAS Managed Fund, said: “Together with our partner Mahlako, we are excited to conclude this transaction and create a long-lasting partnership with Harmony. This portfolio further entrenches IDEAS as a leading investor in the renewable energy, as well as the commercial and industrial private power market in particular. We look forward to pursuing additional investments in this sector, in light of the focus on clean energy and the need to pursue a sustainable energy mix for SA.”
IDEAS has funded projects which contribute c.25% of renewable energy which is currently supplying the electricity grid in South Africa through its renewable energy portfolio of more than ZAR 10billion in value.
Friend adds: “We see significant opportunities in the sector to partner with clients in reducing the carbon intensity of their energy. We are very proud that AIIM has impact measurement and monitoring structures in place that are implemented in our investments in an effort to improve carbon savings across energy portfolios. This focus is in line with our Climate Investment Policy spearheaded by our fully integrated ESG (environmental, social and governance) team.”
According to Mitesh Pema, Principal of the Mahlako Energy Fund 1, “This investment is testament to Mahlako’s commitment to energy security and sustainable investments, while providing superior returns for our investors. Further to our ESG principles enshrined in our investment process, we actively seek out opportunities that contribute towards South Africa’s clean energy goals”.
African Clean Energy Developments (ACED), an AIIM affiliate, is the development and management service provider to the independent power producer (IPP). ACED has served as the technical lead and transaction managers on the projects and will manage the construction process. Energy Infrastructure Management Services (EIMS), another AIIM affiliate, will manage the operations once the projects reach their commercial operations date.
James Cumming, General Manager at ACED, relayed that “Reaching financial close on these projects is not only a fantastic achievement for Harmony and all those involved in the transaction, but it also highlights that the South African C&I power market and wheeling makes economic sense for private off-takers and investors, and is bankable. We look forward to getting these projects to CoD and delivering more MWh for others in the very near future.”
The projects were jointly developed by BBEnergy, Energy Group and Harmony. Amedeo Buonajuti, Director at Energy Group, remarked: “Private offtake contracts of this scale are a milestone for renewable energy in South Africa. We are grateful for Harmony’s visionary partnership and support from Eskom, NERSA and Government.”