The high dependency on coal combined with high CO² emissions in the SA energy sector, and concerns about the reliability of electricity supply, has opened an unwitting gap for private sector players to take matters into their own hands. Corporates are now able to access financial support for their own renewable energy projects.
The Facility for Investment in Renewable Small Transactions (FIRST) was established by KfW Development Bank (KfW), the German government’s development bank, and RMB. It was set up as a debt funding platform with RMB contributing R1bn and KfW R300m. Initially targeted at the now-stalled small projects independent power producers programme (SPIPP), a department of energy initiative, FIRST has since expanded its mandate to include small renewable energy projects outside the SPIPP programme.
In doing so, FIRST provides an alternative funding source for smaller corporate and industrial renewable energy projects. In an environment in which reliable and climate-friendly power is becoming increasingly worrying for industrial users, private companies are being forced to find and fund their own solutions.
Over the past year FIRST has made substantial progress on developing several small-scale renewables projects to a bankable stage and deploying debt to these projects. As one example, FIRST has reached financial close with Nova Energy, a Terra Firma-Abland joint venture, in a series of transactions that will enable Nova to install more than 10MW of rooftop solar panels supplying Abland’s portfolio of shopping malls.
On the other end of the small-scale spectrum, Kruisvallei, a 4.5MW hydro, has also reached financial close. In addition, FIRST is on the verge of closing the first of a portfolio of trigen projects developed through a joint venture between a biogas specialist and a major food producer to provide power, steam and clean water to the food producer.
These are but a few examples of the varied and flexible applications of the FIRST fund. A large part of the portfolio is expected to be small-scale solar portfolios (rolled out to a large scale), but any renewable energy or energy efficiency projects will be considered.
As the latest integrated resource plan (IRP) makes provision for 500MW a year of “Other [Distributed Generation, Co-Gen, Biomass, Landfill]”, the fund is well placed to fund private power and corporate & industrial (C&I) power opportunities in an energy sector in which Eskom is failing and the government is slow to deliver on utility-scale investments.
FIRST demonstrates how a successful partnership between a commercial bank and a development bank, which have differing mandates and investment hurdles, can deliver a blended funding solution