The financial close on renewable energy aggregator NOA’s 349MW Khauta South solar PV project near Welkom in the Free State was structured in such a way the group retains liquidity allowing it to accelerate investment in further renewable energy projects to achieve the necessary scale.
The guarantee facility is a departure from the norm in which guarantees are issued against large amounts of cash collateral, which subsequently lies idle and cannot be used for further developments. “This transaction represents a blueprint for future generation facilities,” said Karel Cornelissen, CEO of NOA.
“By combining innovative finance with a scalable development model, we’re helping to drive SA’s energy transition and adding much need generation capacity to the national grid, while delivering real economic and environmental value.”
Jamie MacDonald, general counsel at NOA, said NOA Trading bought electricity from NOA-owned and third party-owned independent power producers (IPPs) in terms of long-term power purchase agreements (PPAs). It on-sells it to a variety of off-takers, offering flexibility regarding among other things the term of the offtake agreement and earns a margin on the sales.
Some of the deals announced so far include the provision of renewable energy to buildings owned by property groups Redefine and Old Mutual Real Estate Holding Company as well as the Manganese Metal Company. The energy will be wheeled through the Eskom network to the respective sites.
Generally, the IPP relies on its PPA with the trader as security for the financing of the generation project. Until recently these projects were mostly bilateral with for example a mine as the only off-taker of the electricity. That provided clarity and certainty regarding the financial strength behind the PPA.
Trading is, however, a relatively new service in the SA electricity supply industry and trading companies are in essence middlemen, often without the strong balance sheets or large amounts of cash to back their financial obligations under PPAs, as was the case with off-takers in bilateral deals. This creates a challenge in the whole financing supply chain.
So far, many traders have had to put up liquid instruments such as guarantees to support their payment liabilities to IPPs under their PPAs, but NOA was reluctant to secure these instruments purely with cash, where that cash could otherwise be deployed to accelerate its growth to reach utility scale.
“We worked closely with Standard Bank to find another workable and bankable structure which optimises our use of capital,” MacDonald said. “If a fully cash-backed structure was the only option, we would not have been able to close more projects without further equity or going to the market for more funding.”
Standard Bank assisted NOA so it can use its capital more efficiently, MacDonald said.
Vincenzia Leitich, energy and infrastructure executive at Standard Bank said the institution had been working with NOA for several years and had developed comfort with the trader’s business model. It considered the profile of NOA’s off-takers and the general progress in the liberalisation of the local electricity market, to develop a mixed pool of collateral to back the financing.
Leitich said Standard Bank could look at a similar approach with other traders but could not just do a carbon copy of this deal structure. It was a complex process and the parties had to work together to find the right solution in every instance.
Eskom has voiced considerable resistance to the development of trading. It indicated it would challenge in court energy regulator Nersa’s award of several trading licences early this year and announced it would exclude traders from its virtual wheeling project. Leitich however said the country was heading towards a competitive electricity market.
“The country is clearly on an upward trajectory through sector policy changes and moving to a liberalised and competitive market. Positive momentum remains, despite some hiccups.”
Cornelissen said the country’s constrained grid environment also remained a challenge. “While grid bottlenecks persist in many resource-rich areas, we see growing opportunity in optimising secured capacity,” he said.
“As part of our strategy, we’re investing in battery energy storage systems to enable better load-shifting and maximise the export of clean energy from our assets.”
Khauta South forms part of a larger 506MW complex, alongside Khauta West (157MW), positioning the Free State as a strategic hub for utility-scale renewable energy projects.
Once operational the joint Khauta projects will generate 1,073 GWh of clean energy per year. It will become the country’s largest single-asset solar PV facility once constructed.
The Khauta South project was acquired by NOA in April 2024 from Pure New Energy. Early works construction on the site began in early 2025, with energy production for Khauta South expected from early 2027.
NOA is backed by African Infrastructure Investment Managers, part of Old Mutual and one of Africa’s leading infrastructure private equity fund managers. With more than 740MW of grid-secured projects in its portfolio, the company is on track to add generation capacity to SA’s grid from 2026.
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