Renewable energy investment company African Rainbow Energy and independent power producer SOLA have reached financial close on 200MW solar PV projects, worth R4 billion, for Tronox Mineral Sands.
The Patrice Motsepe-owned African Rainbow Energy and SOLA announced the closing of the transaction today, calling it “the largest corporate renewable energy power purchase agreement in Africa”.
This comes less than six months after the power purchase agreements were signed in mid-March. Construction of the projects will now begin.
SOLA will provide engineering services on the project, while global construction company WBHO will build it.
“We’re very pleased to be part of the first major utility energy project in SA for a private offtaker,” says Derek Wallace, managing director for projects at WBHO. “We are looking forward to delivering a world-class project.”
This initiative is being touted as a potential breakthrough for the private energy market and the parties to the deal say it has paved the way for more projects like it.
Developing renewable projects for private buyers is expected to increase on the back of the growing power crisis in SA.
In a statement, SOLA and African Rainbow say the projects announced today will fulfil the obligations of a bilateral electricity sales agreement between SOLA Group and KwaZulu-Natal-based mining company Tronox Mineral Sands.
New experience
The project comprises 387 000 solar panels mounted on single axis trackers that track the sun’s position as it moves across the sky. The facilities will also be “one of the first projects” to directly feed into Eskom’s high voltage transmission network.
The new facilities will supply electricity through wheeling arrangements with Eskom to five Tronox facilities in the Western Cape and KwaZulu-Natal for their own use.
“There are significant firsts here for the renewable energy industry,” says Dom Wills, CEO of SOLA Group.
“These are the first projects of this scale in SA that are based on pure private bilateral trade. It's also a great plus for the country that these projects are 100% South African-owned, financed, constructed, operated and managed.”
Melissa Zona, Tronox Holdings senior vice-president, chief human resources and sustainability officer, comments: "This is yet another example of how Tronox is committed to being a leader when it comes to corporate sustainability and protection of the environment.
“Switching from coal-based to renewable power in SA is one of the many ways Tronox is implementing technology and best practices at our sites to protect our land, water, air and ecosystems and operate more sustainably."
According to Zona: “Tronox's renewable energy project with SOLA Group will reduce our global carbon emissions by approximately 13% compared to our 2019 baseline."
Breaking the bank
SOLA says renewable projects are capital-intensive and long-term, and for the projects announced today, it needed to raise a total of R4 billion of funding for construction and development.
For this to happen, SOLA reached an agreement with funding partner and shareholder African Rainbow Energy.
African Rainbow holds a 40% stake in SOLA, making it the largest individual shareholder in the group.
Brian Dames, CEO of African Rainbow Energy, notes: “African Rainbow Energy is a leading renewable energy platform, the largest shareholder in the SOLA Group and the funder of the two projects.
“This is a clear demonstration of African Rainbow Energy’s and partners, Absa, DBSA [Development Bank of Southern Africa], Nedbank and Standard Bank’s commitment to our country, the economy and our customers. This investment brings hope.”
The debt arrangement for the projects was led by PepperTree Capital, and lenders included three of the big banks in SA and the DBSA, which provided a total of R3.1 billion of debt in the project.
Looking ahead, Will says: “We hope the model of private power through bilateral agreements continues to become more widely adopted. The benefits to the end-user are competition, choice and ultimately a more diverse contribution to the power system.”
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