11
may
2014
infrastructure
investor
“This appears to have broken the tie with
a feed-in-tariff regime to a more market-
based regime. Hats off, that’s gutsy.”
“This is El Dorado in terms of taking cost
away from government and consumers.”
When you undertake something as
ambitious as South Africa’s Renewable
Energy Independent Power Producer
(REIPP) programme, you can expect
the wheels to initially begin turning
slower than originally hoped for.
The plan at the outset was for
the government to enlist the help of
the private sector in delivering 3,725
megawatts (MW) of renewable energy
generation capacity by 2016. But with
Round 1 of the programme only just
underway, the target was increased by
a further 3,200MW to be hit by 2020.
Given that, at this stage, potential
bidders were only just getting their
heads around the demands of the
procurement process, it’s perhaps no
wonder that – towards the end of 2012
– the whole programme was rumoured
to be in trouble.
However, Round 1 deals did even-
tually reach financial close by the end
of that year – and the experience
gave bidders more confidence when
it came to Round 2. The second round
was described by South African bank
Nedbank Capital as “more dynamic
and competitive” than Round 1.
Indeed, this competitiveness goes to
the heart of what the caught the eye of
the judges in this category. Initially, the
REIPPprogramme had started as a feed-
in tariff scheme. However, the scheme
was then amended to a competitive bid-
ding scheme which meant that, in the
words of NedbankCapital, “the strategy
of bidders was changed entirely”.
In making its submission, the firm
added: “From a robust project with
contingency headroom, bidders then
looked to the leanest project possible –
while asking banks to provide cheaper
funding.”
Nedbank rose to the challenge,
being involved in 51 percent of pre-
ferred bids in Round 2 – thereby
increasing its market share over
Round 1 by 53 percent and increasing
its renewable energy assets exposure
by 111 percent. From a standing start
a few years ago, Nedbank has taken
its market share of renewable energy
lending in South Africa to around 30
percent.
The judges were impressed that
Nedbank completed deals all over
the country in Northern Cape, West-
ern Cape, Eastern Cape and Kwa-zulu
Natal – developing new relationships
as it did so with deal partners from all
over the world.
Particularly striking, however,
was that Round 2 of the REIPP pro-
gramme embodied that vital switch
from reliance on subsidies to a
market-based environment which is
the challenge for renewable energy
investors everywhere. The programme
was effectively at the forefront of an
evolution that will have global reper-
cussions and will no doubt provide
lessons for others to learn from.
n
Round 2 of South Africa’s REIPPP scheme
represented a vital transition from government
support to competitive bidding in the renewable
energy sector
From subsidies to a lean regime
BANKING AWARDS FOR EXCELLENCE 2013
REIPPP PORTFOLIO – ROUND 2
Category:
Middle East and Africa energy
Winner:
REIPPP portfolio – Round 2
Nominated by:
Nedbank Capital
(mandated lead arranger, agent bank,
account bank, hedging bank, syndicate
bank, debt provider, Black Economic
Empowerment (BEE) funder, export
credit finance facilitator)
Other participants included:
Multiple other
organisations played the role of lender
advisers, sponsor advisers, co-funders
etc. as customary of project finance
transactions
Date of transaction(s):
Q2/Q3 2013
Size of deal:
ZAR6 billion (€413 million;
$569 million)
Honourable mentions in this category:
Cotsa floating storage and offloading
unit (FSO)
(nominated by Natixis)
Kepco Energy Resources
(nominated by
FBN Capital)
WHAT THE
JUDGES SAID:
