Deals

AIIM’s IDEAS fund backs South Africa’s struggling renewables sector with 800MW deal

The Old Mutual subsidiary’s various vehicles are now invested in about 25% of renewable energy in the country, which recently rebooted its renewables programme.

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Africa Infrastructure Investment Managers has invested in a renewable energy portfolio with capacity of about 800MW in South Africa, providing a vote of confidence to the recently struggling sector.

The Old Mutual subsidiary invested in the six solar sites and three wind farms through its IDEAS Managed Fund. The open-ended vehicle holds majority and minority interests in more than 1GW of renewables projects, a 118MW thermal power station, a 600MW coal-fired power plant and a variety of toll-road concessions and telecom groups. It has generated a return of 15.8 percent since its 1999 inception, according to latest available figures as at the end of 2016.

The latest investment includes a 50.01 percent share in the solar parks and a minority interest in the three wind farms, two of which will be South Africa’s largest once built. The entire portfolio is due to be constructed by 2020 at a total investment of 9 billion rand (622.5 million; €541 million).

The solar portfolio was initially developed by the former SunEdison group before its bankruptcy in 2016, while two of the three wind farms AIIM invested in are owned by the Actis and Mainstream Renewable Power platform Lekela Power.

The projects were all awarded as part of South Africa’s fourth round of the Renewable Independent Power Producer Procurement programme. However, doubts had clouded the completion of these projects, with national utility Eskom refusing to sign the power-purchase agreements for the projects, citing cost issues.

The situation was eventually resolved earlier this year and has resulted in significant activity in the sector in recent months, with Denham Capital’s BioTherm closing on a 284MW wind and solar portfolio late last month and utility Enel also signing financing for five wind farms. The programme is expected to bring about 2.3GW of new renewable power to South Africa’s grid within the next five years.

The latest deal ensures AIIM retains a significant role in the sector, with the group’s investments covering about 25 percent of grid-connected renewables capacity in South Africa across the IDEAS fund and its African Infrastructure Investment Funds, the third of which is still at the fundraising stage.