STANDARD Bank has signed an agreement with Industrial & Commercial Bank of China to jointly offer R20bn in funding support for renewable energy projects in South Africa.
ICBC is Standard Bank’s single largest shareholder, with a 20% stake. The deal, which covers the period up till 2025, has an innovative structure to provide the funding out of the rand-denominated funds accruing to ICBC through its shareholding.
The agreement was signed by ICBC chairman Jiang Jianqing and Standard Bank Group joint CEO Ben Kruger.
"This is an extremely significant transaction. It highlights Standard Bank’s commitment to the renewable energy sector and demonstrates the strength of the partnership between Standard Bank and ICBC, the world’s largest bank," Mr Kruger said.
Mr Jiang said: "ICBC’s aim is to promote the use of renewable energy in South Africa in support of the South African government’s renewable energy programme, and through this partnership, to help save the environment."
He said the Chinese bank was also interested in raising Chinese suppliers’ awareness of South Africa as an investment opportunity.
Standard Bank’s head of power and infrastructure finance, George Kotsovos, said the two banks would jointly provide finance to companies named preferred bidders in South Africa’s renewable energy independent power producer procurement programme.
"This will apply to projects where Standard Bank is or will be mandated as a lead arranger," Mr Kotsovos said.
Standard Bank has been involved in both rounds of the bidding process to have taken so far. In the first round, finalised last year, Standard Bank financed more than R9bn of debt funding, and expects to fund R6bn in the second round.
Mr Kotsovos said the imminent third round was expected to elicit significant interest from developers and liquidity could soon become an issue, and ICBC’s involvement would help to reduce the pressure.
"It represents a further diversification of our sources of funding in addition to domestic asset managers, who are keen to invest in such projects," he said.
"The renewable energy programme will require a large funding commitment and the more sources of available capital the better. The flexibility that these long-term sources of capital offer allows us to structure deals appropriately."