Thorts - Delivering equity financing solutions to SA. Delivering equity financing solutions to SA's renewable energy sector.

As part of the fourth round of the South African Renewable Energy Independent

Power Producer Procurement Programme (REIPPPP), Rand Merchant Bank (RMB)

helped fund Thebe Investment Corporation's (TIC) shareholding in a portfolio

of projects developed by BioTherm Energy (a subsidiary of the Denham Capital

private equity firm). The portfolio of two wind and two photovoltaic (PV)

projects is currently under construction, having reached financial close on

the 23rd of July 2018. The total combined project value of the four projects

is R6,5bn with a total generation capacity of 284 MW.

RMB has tailored funding solutions for various equity partners by effectively

managing the risks associated with the construction and operational phases, as

well as long-term dividend volatility in the underlying projects.

The Infrastructure Finance team, in collaboration with the Principal

Investments team, provided a R507m project finance equity facility to TIC to

fund 75% of its equity commitment. The financing solution enabled TIC to take

up a 37.5% stake in each of the four energy projects and play a meaningful

role as BioTherm Energy's BEE partner.

With decreasing tariffs and shareholder returns in the latter rounds of the

REIPPPP, project finance equity facilities are structured to deliver lower

electricity tariffs and better returns for shareholders.

Once built, the combined power generation from the four projects will provide

sufficient clean renewable energy to power more than 182 000 homes. The

projects include the 120 MW Golden Valley wind project near Bedford in the

Eastern Cape, the 32 MW Excelsior wind project near Swellendam in the Western

Cape, the 86 MW Konkoonsies II solar PV project between Pofadder and

Onseepkans in the Northern Cape and the 45 MW Aggeneys solar PV project near

Aggeneys in the Northern Cape. Construction on all four projects has commenced

and will boost employment in those regions, with electricity delivery into the

grid expected to start in the fourth quarter of 2019.

These financings were concluded under significant time pressure, which enabled

the equity participants to abide by all the underlying project timelines in

order to reach financial close at the stipulated dates.

To date, RMB has concluded a total of six separate transactions with various

shareholders in REIPPPP and is able to provide this type of equity financing

to BEE as well as non-BEE clients, particularly international sponsors who are

looking to manage exchange rate risk over the 20-year power purchase agreement

term.

Sindisiwe Mbuli and Tebogo Mohwaduba are infrastructure finance transactors at

Rand Merchant Bank.

This article first appeared in DealMakers, SA's quarterly M &A publication

DealMakers is SA's M &A publication.

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