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Scatec Solar Round 4 REIPPP PV Projects

The DBSA supported three solar photovoltaic projects - Sirius1, Dyason’s Klip 1 and Dyason’s Klip 2 - developed by Scatec Solar under Round 4 of the REIPPP.

Introduction

South Africa continues to face enormous challenges in the reliable generation of energy, emanating from under-investment in the maintenance of existing assets and new generation capacity. The Integrated Resource Plan (IRP) was developed to address these challenges by providing a long-term plan for electricity generation for the country. Private sector participation in the energy sector has been part of Government’s plan since 2003 through the independent power producer (IPP) programme, with Eskom designated the sole off-taker in the programme through a resolution in 2007. 

The DBSA contributes to the transformation of the energy sector by funding various projects under the Renewable Energy Independent Power Producer Programme (REIPPP), including enabling B-BBEE parties and local community trusts to have meaningful participation in the projects that add clean energy into the national grid. 

Project Financing
Private
E&S Risk category
Category 1
DBSA Involvement

The DBSA supported three solar photovoltaic projects - Sirius1, Dyason’s Klip 1 and Dyason’s Klip 2 - developed by Scatec Solar under Round 4 of the REIPPP. These projects are situated on adjacent plots, 25 km outside of Upington in the Northern Cape. Each project has a capacity of 86 MWp, representing an annual production of 217 GWh. With this capacity, each plant is capable of supplying electricity to approximately 40 000 South African homes. In total, Scatec Solar’s three solar power stations can generate about 258 MWp, enough to connect 120 000 South African homes and prevent the emission of approximately 600 000 tons of carbon dioxide per year. The projects reached financial close in April 2018 and subsequently reached their commercial operation date between February and April 2020.

Scatec Solar, a Norwegian company, partnered with other companies to develop these projects including H1 Holdings, a black South African investment company, with a 35% shareholding and KLP Norfund Investments, a Norwegian government-private equity firm, with 18% shareholding. The remaining 42% shareholding in each of the projects is held by Scatec Solar, while the surrounding communities of Upington have a 5% ownership in each of the projects. The total investment of the projects amounts to approximately R4.8 billion. The DBSA’s exposure in the projects is approximately R1 billion, comprising of R676 million in senior debt and R326 million in B-BBEE Equity facilities. The B-BBEE Equity facility was provided to enable H1 Holdings to access funding to participate and have ownership in the projects. The DBSA also financed the equity contribution of the community trusts. The remaining project funding was provided by a consortium of commercial banks and pension funds.

Stats
217 GWh

annual production.

40 000

households supplied with electricity.

258 MWp

energy generation (enough to connect 120 000 South African homes).

600 000

ton reduction in emissions of carbon dioxide per year.

878

jobs were created during the construction phase of the projects.

R1.4 billion

used on empowering black suppliers during their construction phase.

R4800.00m
20%
Sustainability impact

H1 Holdings, the BEE Partner in these projects, has also partnered with Scatec Solar in the operations and maintenance contracts for all three projects, through an operation and maintenance company. H1 Holdings has a 49% shareholding in the company, with the remaining 51% owned by Scatec Solar. Other positive socio-economic impacts include the creation of job opportunities, transfer of skills and contributions to the local, regional and national economies. Approximately 878 jobs - including 62 women and 357 youth - were created during the construction phase of the projects. The projects have spent approximately R1.4 billion on empowering black suppliers during their construction phase. The local communities also stand to benefit from the dividend which will flow to the Community of Upington Trust from the projects. This will enable the community to implement community-based programmes that serve to uplift the citizens.

ENABLING RENEWABLE ENERGY PROJECTS BY DRAWING ON PAST SUCCESSES 

The DBSA is currently involved in 33 renewable energy projects for which the development investment is approximately R17 billion.  The Bank has also created a project development facility to assist with developing bankable feasibility studies.

The DBSA has played a major role in the renewables energy sector through both the establishment of the IPP office for the Department of Mineral Resources and Energy’s Renewable Energy Independent Power Producer Programme (REIPPP), which was launched in 2008. The aim of REIPPP is to secure energy from private sector via renewable energy sources to add to the national grid, spanning solar PV, onshore wind, CSP, small hydro, biomass and landfill gas. This will further contribute to broader national development objectives, specifically job creation, social upliftment and broadening economic ownership. The DBSA is a key funder in various projects under the REIPPP and has invested R12.4-billion into 14 projects, of which R2.5-billion was funding support for nine BBBEE entities and 15 local community trusts. These include landmark projects such as the Sirius Solar, Dyasons Klip 1 and Dyasons Klip 2 Photovoltaic (PV) projects developed by Scatec Solar. The Scatec Solar projects were funded through a combination of equity and debt raised from the DBSA (R1.1 billion), commercial banks and local asset managers. Other notable projects include the 140MW Roggeveld wind project for which the DBSA provided R951 million in debt funding and the 102MW Copperton wind project, for which the DBSA provided R1.2 billion in debt funding.

To further its position and contribution of a just transition, encompassing a move to low carbon energy while addressing the consequent risk of job loss the Bank has approved a Climate-aligned Integrated Energy Investment Framework. This framework is intended to guide the Board in making informed decision relating to the energy sector in South Africa and other high potential markets.  

In February 2019, the DBSA received the African Renewable Energy Programme Award.  This award recognises innovativeness and scale, with event organisers noting that “the achievement signified the DBSA’s growing involvement in energy project financing and raises the institution’s profile among its peers in the industry”.