SolarAfrica's $100m solar project reaches financial close

From the newsletter

SolarAfrica Energy, a South African renewable energy company has reached a financial close of $100 million for its 114 MW Suncentral 1 solar project. The financing is part of phase one, which targets 342 MW, with all three phases targeting 1 GW capacity, making it one of the largest solar projects in South Africa. 

• Investec, an international bank and wealth manager, played a key role in financing the project by acting as the co-mandated lead arranger for debt and hedging (interest rate and forex). SolarAfrica has partnered with Enpower, a licensed energy trader authorised by the National Energy Regulator of South Africa (NERSA) to supply renewable energy to corporate clients.

• Following its 2023 merger with Lagos-based Starsight Energy, SolarAfrica Energy now has a big portfolio. This includes 520 MW of installed and contracted solar power generation capacity, 60 MWh of battery storage, and a project pipeline exceeding 2 GW.

More details

• SolarAfrica has financed and delivered 800+ projects across sub-Saharan Africa. The company operates in western, southern, and eastern Africa, with project portfolios serving a wide range of customers, including commercial & industrial businesses and residential clients. They provide energy solutions ranging from solar PV to battery storage, wheeling, and electricity trading.

• South Africa's energy market is the biggest in Africa, with an installed electricity capacity of over 50 GW, roughly a quarter of Africa's total installed capacity. Recent load-shedding challenges faced by its national utility company, Eskom, have provided opportunities for independent power producers to generate electricity to meet the growing demand.

• Commercial and industrial customers, in particular, are the most affected by load-shedding. Energy being an important component in these industries, alternatives have to be sought, and renewables fit the scale of affordable and reliable electricity.   

• This market has attracted several energy companies, including international players like Italian-based Enel Green Power, which has invested in wind and solar projects with over 330 MW of capacity. Norwegian company Scatec has a portfolio exceeding 730 MW and has built one of the largest solar plants in the country, with 540 MW of generation capacity and 150 MW of battery storage. Saudi Arabian energy developer ACWA Power is also building a 100 MW concentrated solar power project.   

• The scale of these projects demonstrates the financial muscle of these foreign companies. They can undertake massive projects without significant financial constraints, posing a challenge to local companies. However, local companies have a deeper understanding of the market and can utilise their established networks and partnerships to strike deals.

Our take

• Renewable energy opportunities are plentiful, with many companies seeking affordable power. With Eskom increasingly hiking electricity prices, with recent increases totalling 24% over three years, more customers are expected to ditch the expensive grid.

• Renewable energy companies stand to benefit from this. Though competition in the sector is heating up with the entry of international companies with strong financials, like the Dubai-based AMEA Power and Norwegian Scatec.

• SolarAfrica's merger with Lagos-based Starsight Energy gives it an opportunity to expand its operations outside South Africa. Starsight Energy's local presence gives it a better understanding of the Nigerian market, which can help SolarAfrica in designing appropriate solutions that meet market needs and enable scaling up quickly. In the end, companies that diversify their product offerings and develop strong local partnerships will be well-positioned to capitalise on the growing demand for renewable energy across Africa.