CAPE TOWN — The Chinese use two brush strokes to write the word ‘crisis’. One brush stroke stands for danger; the other for opportunity – which can be elegantly applied to Eskom’s dysfunction right now. In yet another injection of life-giving hope to the endangered and corruption-traumatised national psyche, the Development Bank of Southern Africa, is investing big-time in renewable energy projects, the aim being to have imbedded “green” energy contributing 11.5% of total renewable energy capacity by 2030. The DBSA $200m shot-in-the-arm to the Embedded Generation Investment Program, involves helping 10 proof of concept projects more easily attract commercial financing. We’ve seen how powerful a force for societal good and course-correction banks in South Africa can be (if only to protect themselves), first by closing down the Gupta’s accounts and then the Watsons. Some of the big banks are refusing to finance coal-fired power plants, helping bring South Africa kicking and screaming into globally-accepted diversified sources of generation. Increasingly it seems, the nightmare is ending, even if we had to first wake up and smell the dimly-lit open cesspit. – Chris Bateman

By Roxanne Henderson

(Bloomberg) – South Africa’s state-owned Development Bank of Southern Africa is funding a program intended to give renewable energy projects in the electricity-starved country a boost by making them more appealing to commercial banks.

The financier will funnel $200m into the Embedded Generation Investment Program to kick start developments that will add 330 megawatts of new generating capacity to the national grid and reduce carbon emissions. Half of the funding will be provided by the Green Climate Fund, the Johannesburg-based financier said in an emailed statement.

While the DBSA’s investments will get initiatives off the ground, the goal is to create projects that commercial lenders will want to fund to completion, said Mohale Rakgate, the group executive responsible for project preparation. The projects will need to attract at least $104m more from local banks in their initial phases, he said.

“We have a pipeline of more than 10 projects,” Rakgate said. “We want to take the first steps, prove the concepts work” and get commercial financing, he said, adding that “attracting private funding is really at the core of what we are doing.”

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South Africa aims to have embedded generation contribute 2,600 megawatts to the country’s renewable energy capacity, representing an 11.5% slice, by 2030 and is rekindling enthusiasm for green alternatives to keep the nation’s lights on. The country’s debt-laden utility Eskom Holdings SOC Ltd. has been forced to cut power in recent weeks as it cannot afford to maintain its coal-fired plants.

“This is in line with a global trend that has been happening in the US and Europe. South Africa is just catching up on the renewable trend of how power is now generated by diversifying sources of generation,” Rakgate said.

Nedbank Group Ltd. is already shunning coal-fired projects, with the Johannesburg-based lender saying last month it will no longer provide project financing or other forms of asset-specific financing where the proceeds will be used to develop plants using the fuel, regardless of the country or technology.

The DBSA will launch the program after the country’s revised Integrated Resource Plan is approved by the government and will also allocate some of the funding to black empowerment schemes, it said.

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The Nordic Environment Finance Corporation NEFCO and Swedish International Development Cooperation Agency (Sida) have today signed an agreement to cooperate on expanding off-grid electricity solutions in sub-Saharan African countries. The purpose of this new and major expansion, the Beyond the Grid Fund for Africa (BGFA) is to incentivise the private sector to provide affordable and clean, high-quality off-grid energy services to people living in rural and peri-urban areas in Burkina Faso, Liberia, Mozambique and Zambia. The programme, implemented together with the Renewable Energy and Energy Efficiency Partnership (REEEP), supports the United Nations’ Sustainable Development Goals and the Paris Agreement.

Over 600 million people in sub-Saharan Africa live today without access to electricity. For most of these people, connection to the grid is not likely to happen for decades, or longer. So far, no country has been able to bridge the poverty gap without access to electricity.

The Beyond the Grid Fund for Africa aims to reduce this gap by stimulating and accelerating the emergence of new business models for provision of affordable energy access at scale whilst demonstrating sustainability over time. The programme forms part of the ‘Power Africa’ initiative launched by former President Barack Obama and contributes to the Sustainable Development Goal 7 and the Paris Agreement.

The programme builds on the positive experiences of the Beyond the Grid Fund for Zambia (BGFZ), which Sweden commenced in 2016. Sweden will contribute an initial SEK 500 million (approx. EUR 48 million) to the expansion and is through the cooperation with NEFCO looking to attract other like-minded donors with the aim to convert the Beyond the Grid Fund for Africa into a multi-donor programme over time. NEFCO will manage the new facility and the programme will be implemented in collaboration with REEEP, an expert organisation who has been instrumental to the early success of the Beyond the Grid Fund for Zambia.

“NEFCO is accredited by the EU and the Green Climate Fund and is an experienced fund manager, which is already managing several trust funds for Sida,” says Anders Arvidson, Project Leader for Beyond the Grid Fund for Africa at Sida. “We share the same values as regards environmental, social and gender aspects. Additionally, NEFCO can provide the highest level of fiduciary requirements related to reporting, auditing and anti-corruption.”

Magnus Rystedt, Managing Director at NEFCO sees great potential for small and medium-sized businesses in the programme: “We are very happy for this opportunity to make use of our considerable experience in setting up and administrating multi-donor instruments and create new, innovative green growth financing opportunities for small-and medium sized private energy companies.” 

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Solar-generation microleasing platform Sun Exchange on Tuesday announced that it had signed an agreement with Johannesburg-based boutique clean energy fund manager Decentral Energy, said Sun Exchange founder and CEO Abe Cambridge.

The agreement gives Decentral’s Grovest Energy, an Income Tax Act Section 12J fund, first right of refusal to fund 51% to 100% of selected Sun Exchange offtaker projects, as well as to fund any balances after Sun Exchange solar cell crowd-sales are completed.

Decentral provided equity and debt financing for the 473 kW rooftop solar plant for plastics recycling company Nioro Plastics, in Cape Town. The project, which came on line in January, is the largest Sun Exchange project to date, Cambridge pointed out.

The fund manager also bought nearly 59% of the Nioro Plastics solar cells, which will yield an internal rate of return of 14.5% a year. Over 20 years, Nioro Plastics will produce 14.12 GWh of clean electricity, which is equivalent to over 10 000 t of coal burned.

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​“We invest in small-scale energy assets that demonstrate predictable, inflation-linked cash flows, because we believe that the energy future will be decentralised and built upon similar financing systems,” said Decentral fund manager Christian Bode.

“For that reason, we support Sun Exchange in its vision to create a thriving, inclusive and decentralised solar-powered economy. We are so confident about its business model that we have already bought into the Nioro Plastics project, and our goal is to fund 20 MW of Sun Exchange projects by 2020.”
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South Africa is set to received US $80m loan from German development bank KfW and the Industrial Development Corporation of South Africa (IDC) to develop green economy projects across the country.

KfW executive board member Dr Stefan Peiß who was in attendance to sign the agreement together with newly appointed IDC CEO TP Nchocho, said that the loan facility dubbed the South African facility for Green Growth (SAFGG), is earmarked for local entities to invest in green economy projects that will have a beneficial impact on environment protection and resource efficiency with regard to water resource protection and conservation.

“The facility will also enable local entities to access funding to invest in the green economy, the result of which will be to help mitigate the impact of carbon dioxide emissions” said Dr Stefan Peiß.

“The loan facility from KfW would significantly boost the IDC’s objectives of increasing its investment in renewable energy initiatives and infrastructure related projects. Most importantly, KfW’s support has largely helped us to meet our developmental mandate especially regarding supporting the growth of local [small and medium-sized enterprises] in various sectors of the economy, including agriculture, light manufacturing and tourism,” Nchocho,” CEO TP Nchocho added.Peiß also commended the IDC for its role in providing funding to small and medium-sized companies that were harnessing opportunities in the green economy.

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Nedbank lived up to its slogan as the “green” bank in a decision to withdraw its funding of two proposed new coal-fired power stations in South Africa, Thabametsi and Khanyisa.
This decision fits with the banking group’s commitment to “green” funding, responsible lending and supporting sustainability initiatives. The bank says its initial proposal for funding the construction of the Thabametsi and Khanyisa independent power producers (IPPs) has lapsed and will not be renewed.

This follows a corporate policy announced in early 2018 that the bank would no longer fund the construction of any new coal-fired power plants beyond its existing commitments to fund Thabametsi and Khanyisa, which were included as part of the new coal IPP programme in the South African Department of Energy’s draft integrated resource plan for electricity, Draft IRP 2018.

The proposed Thabametsi 557 MW coal-fired power station, which would be largely owned by Japan’s Marubeni and South Korea’s Kepco, was planned to be built near Lephalale in Limpopo, while the Khanyisa 306 MW power station was to be sited near eMalahleni in Mpumalanga. The biggest shareholder of Khanyisa would be Saudi-owned Acwa Power.
Nedbank says that it would prefer to offer financing for projects in energy efficiency and renewable energy, such as landfill gas, solar, hydro and wind projects. The bank says in its core business of lending and investing, it has a crucial role to play in transforming the economy and addressing climate change and that it seeks to “use [its] financial expertise to do good for individuals, businesses and society.”

Nedbank’s announcement follows reports in September 2018 of Standard Bank’s withdrawal of financing the construction of coal-fired power. Currently, it appears that FirstRand, ABSA and the Development Bank of South Africa (DBSA) are still willing to offer funding for the Thabametsi and Khanyisa projects, but this may change. Nedbank and Standard Bank have followed the global trend of financial institutions refusing to fund the construction new coal-fired power plants.
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