Standard Bank and British International Investment (“BII”) have partnered with Scatec and H1 Holdings to successfully reach financial close on the first sizable battery energy storage and photovoltaic (PV) solar project in South Africa – Africa’s largest and South Africa’s first baseload renewable energy project, uniquely powered entirely by renewable sources.
This is the first project to reach financial close under the Government’s Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), with Standard Bank acting as the Mandated Lead Arranger and underwriter to provide debt funding towards the R18 billion total project costs including VAT. In addition to being a green loan, Standard Bank 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.
BII, the UK’s development finance institution (DFI), is acting as the Lead Bank and providing a R2.2bn senior debt investment. Alongside this, the DFI is providing an additional equity investment of R445mn mezzanine financing to H1 Holdings, a Broad-based Black Economic Empowerment (BBBEE) company and an investor in the project.
The project will provide total solar power capacity of 540 megawatts (MW) photovoltaics (PV) and 1.1 gigawatt hours (GWh) of battery energy storage (BESS) – delivering reliable clean power into South Africa’s grid. The project will contribute toward solving the country’s power challenges, which have been especially crippling this winter as South Africa continues to undergo prolonged power cuts.
“Standard Bank is honoured to be playing a leading role in delivering power to the grid by facilitating the first dispatchable and base load renewable energy project in South Africa, and supporting South Africa’s drive to energy security,” says Rentia van Tonder, Head of Power at Standard Bank. “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.”
This major project is aligned to Standard Bank Group’s Environmental, Social and Governance (ESG) framework, which was captured in the launch of its Climate Policy in March this year. In its policy, Standard Bank committed to mobilise a cumulative amount of between R250 billion and R300 billion for sustainable finance by the end of 2026. This target includes R50 billion of financing for renewable energy and underwriting of a further R15 billion for renewable energy by the end of 2024.
Iain Macaulay, Director and Head of Project Finance, Africa and Pakistan at BII, said: “BII is thrilled to be partnered alongside Standard Bank to back this largest-of-its-kind battery storage system by Scatec which aims to deliver predictable clean energy to South Africa’s grid at a significant scale and at a critical time. This investment builds on our existing partnership with Scatec across multiple clean energy initiatives and financial solutions across the African continent. BII is proud to back a project at the forefront of renewable energy technology that has the potential to be scaled commercially.”
BII’s funding of the project aligns with its ambition to scale climate-infrastructure investment in South Africa with an aim to address critical challenges exacerbated by climate change and help bridge the gap in the country’s energy demand and supply. In addition to diversifying and decarbonising the country’s power system by displacing thermal power generation, the project will boost economic productivity, accelerate inclusive growth, and catalyse sustainable climate solutions in the energy space for South Africa and across the continent.
Macaulay notes that, “BII’s flexible capital is playing a crucial role in backing pioneering solar PV and battery storage technology, which, if proven to be commercially competitive, can significantly catalyse the market for hybrid renewable and storage projects.”
Scatec first entered South Africa in 2010, since which Standard Bank has been their bank and partner on their growth journey. This historic relationship has played an important role in reaching this milestone for South Africa and the African continent.
“Our financing of this project forms part of our R50 billion commitment to renewables and is yet another important milestone on our sustainable financing journey on the African continent,” says Stephen Barnes, Global Head of Power and Infrastructure at Standard Bank Group.
“Our holistic approach to solutioning for our clients based on our in-depth sector knowledge and partnership approach is really a key differentiating factor for us and is an integral part of our customer value proposition. Fostering trusted partnerships is fundamental to our strategy as we set out to power positive impact together with our clients,” says Barnes.
Standard Bank is leading the way in terms of its sustainable finance offering and commitment to funding renewable energy projects in South Africa. Last month, Standard Bank announced that it had successfully supported the project signed into Government’s 2000MW RMIPPPP, together with British International Investment.
“It is incredibly exciting to not only witness, but to be a part of solutioning for South Africa’s power generation challenges and assisting the country’s developmental needs,” says van Tonder. “We are optimistic that this project will create the necessary momentum to shift the country’s reliance from carbon-based fuels towards sustainable energy, creating new green jobs and technical expertise in the sector.”