Development finance institutions from Norway and the UK plan to invest R600m in an SA company that will develop solar and wind power projects to generate 2.4GW of renewable energy.
The money will be used to support SA’s clean energy goals, as it will enable the development of more than 2.4GW of new wind and solar projects, generating about 6,400GWh per year.
This is comparable to the generation capacity of Eskom’s mid-sized coal-fired power stations such as the Arnot and Hendrina stations, which can generate about 2GW. Once finished, Kusile will be Eskom’s largest power station with generation capacity of 4.8GW.
Norwegian investment fund Norfund and the UK’s CDC Group (which will soon be renamed British International Investment) announced in Cape Town on Thursday that they would invest R360m and R240m, respectively, in H1 Capital, an SA-based black-owned and managed renewables investment and development company.
This investment was the first to come from a new climate investment fund, managed by Norfund, which was announced by Norway at COP26 in Glasgow, Scotland, in 2021.
It also demonstrated the commitment by the UK and Norway to act on pledges made at COP26 to scale up climate finance to Africa and to “[deepen] collaboration on solutions that will meet the continent’s needs and address the climate emergency”, the finance institutions said in a statement.
Reyburn Hendricks, the CEO of H1 Capital, told Business Day, the wind and solar plants would be located at various sites in the Western Cape, Northern Cape and Eastern Cape, and they will all be grid connected. “In total there will be about 24 projects and we are aiming to have the first of these come online by the end of 2023, and most of the plants operational by the end of 2024,” he said.
The project will contribute to avoiding annual carbon emissions of 6.2-million tonnes.
SA has committed to having greenhouse gas emissions peak in 2025 at 510-million tonnes, and at COP26 the country committed to reduce domestic carbon emissions to within a target range of between 350-million and 420-million tonnes by 2030.
Hendricks said the funding from the Norwegian and UK investors would come in the form of preference shares with a drawdown period of 16 years.
UK minister for Africa Vicky Ford said in the statement that SA’s target to generate 20GW of new renewable capacity over the next 10 years was indicative of the country’s bold steps towards securing a net-zero future for itself.
“[The] $16m of UK investment in H1 Capital demonstrates our continued commitment to remaining a strong partner for Africa, to help address the urgent climate challenge and promote clean and equitable growth that will ensure African economies can build back better,” she said.
The UK was one of the partners in a landmark climate finance deal that SA inked at COP26. In terms of the agreement, the governments of France, Germany, the UK and the US, as well as the EU, would help SA “mobilise” $8.5bn to support SA’s “just transition”.
Ford said that this latest investment in H1 Capital reaffirmed the UK’s commitment to SA’s low-carbon transition through the $8.5bn multi-donor Just Energy Transition Partnership.
Update: March 3 2022
This story has been updated with comment from Hendricks.
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