The World Bank’s Multilateral Investment Guarantee Agency (MIGA) has issued guarantees covering the construction, ownership, operation and maintenance of six solar photovoltaic (PV) plants in South Africa.
MIGA said in early November that the guarantees covered 90% of investments by Norwegian-based Scatec Solar for up to 15 years against the risks of breach of contract and transfer restrictions and convertibility.
Three of the plants (Kalkbult, Dreunberg and Linde) have been in operation since 2013 and 2014, while the remainder (Sirius, Dyason’s Klip 1 and Dyason’s Klip 3) are currently under construction.
The six plants are expected to generate a combined 1 billion kWh that will be sold to South African parastatal Eskom under 20-year power purchase agreements.
“By covering not only greenfield, but also brownfield projects, we are encouraging additional investments in renewable power,” said Keiko Honda, MIGA’s chief executive. “We are helping decrease perceived levels of risk and increasing capacity for sponsors.”
Another investors in the plants is KLP Norfund, a facility for co-investments in renewable energy across Africa that was established by the Norwegian Investment Fund for Development Countries and Norway’s largest life insurance company.
Project lenders include Standard Bank of South Africa, Sanlam Life Insurance, and the Development Bank of Southern Africa.
The six projects fall under the South African Renewable Energy Independent Power Procurement Programme (REIPPP), which has drawn in substantial private sector expertise and investment through multiple rounds of bidding into grid-connected renewable energy at competitive prices.
REIPPP prices have dropped over four rounds of bidding, with average solar PV costs dropping by 75% in nominal terms, “making renewables the most price-competitive power source in South Africa”, MIGA stressed.
It said its “support for the plants highlights the demonstration effects of earlier rounds of bidding”.
Previous MIGA support for South Africa’s transition towards becoming a low-carbon economy has included credit enhancement in support of adding new transmission lines to provide basic electricity connections for customers, as well as guarantees for three wind farms.