Patrice Motsepe, Absa launch R6.5bn renewable energy fund
Business mogul Dr Patrice Motsepe’s African Rainbow Energy and Power (AREP) and Absa have launched a new entity, called African Rainbow Energy, as an African-led renewable energy investment platform.
AREP will make an initial investment of assets covering wind, solar photovoltaic and biomass projects with an installed capacity of more than 700 megawatts of renewable energy.
Absa will make an initial investment of R500 million in cash and transfer R5 billion of its existing renewable energy assets to African Rainbow Energy.
The organisations say this will result in African Rainbow Energy having approximately R6.5 billion of gross assets, covering 31 renewable assets, making it one of the largest and most diverse independently-owned energy businesses in South Africa.
This comes as SA is steadily increasing the use of renewable energy sources. A recent report by the Council for Scientific and Industrial Research shows that coal continues to dominate the South African power supply, contributing 81.8% to the total energy mix in first half of 2021, while contribution from renewable energy sources totalled almost 11% (solar PV, wind, hydro, concentrating solar power, others) and zero-carbon energy sources contributed 14.3% (renewables and nuclear).
Diversification of energy base
AREP and Absa say the establishment of African Rainbow Energy expands the pool of funding available for renewable energy developments in SA, at a time when the country is accelerating its plans to expand and diversify its energy base through the Renewable Energy Independent Power Producer Programme (REIPPP).
The private sector is simultaneously expanding its energy supply, the organisations say, adding this is an important step for the South African economy, which aims to source reliable and cost-effective renewable energy to drive growth and employment.
This collaboration supports AREP’s objectives to utilise modern and renewable energy technologies to provide affordable electricity in SA and on the African continent.
Absa says it is uniquely positioned given its key role in the African continent’s economy and its commitment to the development of renewable energy and the green economy.
“Renewables have been one of the most successful asset classes globally, offering a unique mix of attractive long-term, inflation-linked returns and growth, providing significant scope to deploy further funds,” says Brian Dames, African Rainbow Energy CEO.
“African Rainbow Energy is engaging with other investors to increase its equity base and fund further growth with the aim of listing on the JSE in future. African Rainbow Energy is uniquely positioned to access these investment opportunities given its track record for competence and delivery, its unique network of entrepreneurs and its partnership with entities that have a history of empowering women, youth, rural and urban communities.”
African Rainbow Energy will invest in renewable technologies, including solar, wind and battery energy storage solutions.
It has already secured a deep investment pipeline and has partnered on a number of bids into Round 5 of South Africa’s highly-successful REIPPP.
African Rainbow Energy notes it will also invest in the private power sector and is working with several companies on bespoke energy solutions.
“Our participation in African Rainbow Energy underscores Absa’s commitment to support renewable energy development and enhance the green economy, as part of our sustainability agenda,” says Jason Quinn, Absa interim group chief executive.
“Renewables are an important part of Absa’s sustainability strategy and we target financing or arranging more than R100 billion for environment, social and governance related projects by 2025.”
Absa brings capital to the initiative, as well as expertise and experience in renewable energy financing.
The bank notes it is at the forefront of financing renewable energy in SA, having funded 33 projects to date, representing approximately three gigawatts, which amounts to 46% of the total projects closed to date in SA.
According to the big-four bank. Absa’s renewable energy loans amounted to R20 billion at 31 December 2020.
Says Motsepe: “Approximately 15 years ago, we set out to create a world-class African energy company that would provide investors with predictable and growing returns from a clean energy portfolio of environmentally-responsible assets.
“This energy company would also contribute to the growth of the South African economy and the economies on the rest of the African continent, while improving the living conditions of the poor, unemployed and marginalised. Absa is a like-minded partner that shares our vision of building this initiative at scale in Africa.”
AREP’s holding company, Ubuntu-Botho Energy Holdings, was founded by Motsepe and is the only African company that is a partner in Breakthrough Energy Ventures, which was started by Bill Gates and includes several globally respected leaders, including Jeff Bezos, Richard Branson, Jack Ma and Mukesh Ambani.
Breakthrough Energy Ventures is an investor-led fund that is building new, cutting-edge companies that aim to provide energy with zero emissions.
“Our investment in African Rainbow Energy creates an opportunity for Absa to increase our role in the much-needed expansion of the renewable energy sector,” says Quinn.
“The fund will provide investors with exposure to utility-scale, commercial and industrial sector clean-energy investments, building a platform of scale in South Africa, and will seek selected, bankable projects in Africa,” says Dames.
The effective date of the fund is subject to the fulfilment of certain conditions precedent, expected to be concluded in the fourth quarter of 2021.