Absa Bank and Globeleq, an independent power producer, have completed the senior debt refinancing of three of the IPP’s renewable power plants in South Africa.
The company hopes to eventually refinance its entire portfolio of assets it owns in South Africa and have started with assets held since the Financial Close of Round 1 of the REIPPP Programme, namely Jeffreys Bay, De Aar and Droogfontein.
The purpose of the refinancing is to enhance the projects’ capital structures, allowing for the release of value to shareholders and the reduction of the tariff to the national utility, and ultimately consumers in South Africa.
The tariff reductions will save the national utility, Eskom, more than one billion rand across the three assets over the remaining 12-year term of the power purchase agreements.
Absa Bank acted as the mandated lead arranger and sole underwriter of the c. R5.2 billion debt financing package.
This transaction will be the second refinancing of renewable assets under the Department of Mineral Resources and Energy’s Independent Power Producer Office (IPPO) Refinancing Protocol. Globeleq hopes to eventually refinance the entire portfolio of assets it owns in South Africa.
Refinance of renewable assets address wholesale electricity tariffs
Apart from reducing wholesale electricity prices, the refinancing will unlock funds for the shareholders which, in turn, will encourage re-investment in the sector as well as accelerate equity distributions to the three community trust shareholders, enabling spend on high impact sustainable ventures.
Globeleq proactively engaged in June 2020 after the IPPO requested owners of the South African renewable Round 1-3.5 projects to consider participating in a voluntary programme to refinance renewable assets, and led the refinancing process on behalf of all its shareholders in the 138MW Jeffreys Bay Wind Farm, 50MW De Aar Solar and 50MW Droogfontein Solar plants.
Bernard Magoro, Head of the IPP Office, said: “We wish to thank all parties for the commitment shown and the constructive way in which they approached this refinancing and hope that the successful conclusion thereof will lead to more IPPs taking comfort from the process and coming to the fore to participate in this initiative. The IPPO is proud to be part of this achievement.”
Mike Scholey, Globeleq CEO, said: “Globeleq sees this transaction as enabling future secondary market debt, which in turn will stimulate new opportunities, jobs and contribute to the economic development of South Africa. We hope that other IPPs will look to do the same and reduce the cost of their power to Eskom.”
Absa’s Johan Koorts, Resource & Project Finance Principal, said: “Absa Bank has been a major supporter of the South African renewable energy programme since its inception and has to date arranged financing for c. 3 gigawatts of projects across various bid windows. This transaction strongly demonstrates Absa’s ongoing commitment to the financing of clean energy and the acceleration of investments that make a sustainable impact on the communities we serve.”