SOUTH AFRICA: UK Climate Investments & Norfund Invest in Joint Venture to Develop Renewable Assets

UKCI and Norfund are funding a South African joint venture partnership between H1 Holdings and Pele Green Energy to develop renewable energy assets on a 50/50 basis.

Today, Macquarie-managed UK Climate Investments (UKCI) and Norfund announced they are financing a joint venture between H1 Holdings and Pele Green Energy to fund their 40% equity participation in a 700 MW portfolio of onshore wind farms. Both partners will invest alongside Enel Green Power in one of South Africa’s largest renewable energy equity deals valued at around $US100 million.

UKCI and Norfund’s commitment is aligned with the UN’s Sustainable Development Goal number seven to increase access to clean, reliable, and affordable energy which is a critical enabler of social and economic development. However, despite having some of the world’s best renewable energy sources, almost 600 million people in sub-Saharan Africa live without access to electricity.

Whilst this number has been in steady decline over recent years, the COVID-19 pandemic has halted progress. 13 million more people lacked access to electricity in 2020 compared to the previous year.

In addition to tackling this challenge, UKCI and Norfund’s investment will also aim to accelerate South Africa’s transition to a low carbon economy, with a strong emphasis on enhancing Black Economic Empowerment (BEE). To this end, the portfolio will make annual social investments in their host communities which have historically been disadvantaged. These BEE investments will strengthen the joint venture partners as leading Independent Power Producers (IPPs).

The investment from UKCI deepens and strengthens the UK Government’s commitment to supporting a green post Covid-19 recovery in South Africa. It also exemplified the kind of innovative climate financing and partnership between DFIs and the private sector promoted through the Climate Finance Leadership Initiative (CFLI).

Macquarie and Enel are founding private sector members of CFLI and Norfund has been a leading participant among the European Development Finance Institutions who have been working with CFLI members on partnering together in emerging and developing markets.

Richard Abel, Managing Director of UKCI, said: “UK Climate Investments has operated in the region for over three years now and has committed more than £67million across several exciting renewable energy projects. This partnership and investment is another
sign of the growing maturity of the market and an indication that the future of green
finance in sub-Saharan Africa will be bright. We’re proud to be a part of the solution to
transition towards a lower-carbon energy system.”

Bjørnar Baugerud, Vice President – Clean Energy in Norfund, said: “Norfund believes that providing increased access to affordable renewable energy is an effective way to contribute to create jobs and improve lives. Increasing the share of renewables in the South-African energy mix is also an important contribution to limit the climate crisis. We are confident that this new partnership will be an effective tool to reach our common goals.”

British High Commissioner to South Africa, Antony Phillipson, said: “The UK Government is committed to making sizeable climate finance investments here in South Africa. This latest initiative from UK Climate Investments will support the expansion of renewable energy and boost local ownership in the sector. It is vital that we maximise the potential of renewable energy as South Africa looks to tackle its current energy deficit and deliver their ambitious Nationally Determined Contribution (NDC) with its targets for emissions reductions by 2030. This is a key part of delivering a just transition.”

Reyburn Hendricks, CEO of H1 Holdings said, “H1 is proud to play a role in assisting
in the portfolio of wind farms to become a reality. We look forward to working with our
funding partners, UKCI and Norfund, as well as our fellow shareholders, Enel Green
Power and Pele Green Energy, in contributing to meeting South Africa’s commitments to
a lower-carbon energy system.”

Gqi Raoleka, MD Pele Green Energy (PGE) said “We are proud to partner with leading global investment firms such as the UKCI and Norfund to drive a Just Energy Transition in South Africa. This investment expands our operational involvement in wind farms across South Africa but of more significance is the offshore direct investment being attracted into the South African economy. We are humbled to continue serving the objectives of the National Development and Integrated Resource Plans, as these projects form part of the government’s Renewable Energy Independent Power Producers (REIPPP) Programme.

H1 Holdings is renowned for its fundraising abilities, thus fulfilling a crucial element of the global requirement to increase funding for renewable energy and climate action. Pele
Green Energy, which will assume a more operational role across the portfolio, will bring
technical expertise given their unique position as one of the few South African IPPs that
controls and operates a utility-scale power plant.

Enel Green Power, who will retain a 60% ownership interest in the portfolio, have a proven track record of successfully delivering renewable energy projects in South Africa, as well as other markets