MEZZANINE fund Vantage Capital has become the latest financial institution to look at securing business in the renewable energy sector.
It said on Thursday that it has launched a R2.2bn renewable energy debt fund called The Vantage GreenX Fund.
It said the money was raised from a number of South African pension funds. The fund’s mandate will be to invest in the senior debt in renewable energy projects that have successfully tendered for the South African Renewable Energy Independent Power Producer procurement programme (REIPPP).
As part of the South African government’s broader initiative to diversify the country’s energy mix, 17,800MW of new capacity brought online by 2030 will come from renewable energy sources, according to the Integrated Resource Plan. This will require "colossal amounts of funding", according to Vantage.
"In addition to the banking sector in South Africa, institutional investors will need to play a major role in the financing of these programmes to ensure the ambitious targets set by government are achieved," the company said in a statement.
Vantage Risk Capital managing partner Luc Albinski said that South Africa was on track to becoming one of the fastest growing renewable energy markets in the world.
"In 2012, renewable energy accounted for less than one percent of South Africa’s energy mix; Frost & Sullivan forecasts this will grow to 12% in 2020. Renewable projects are typically 70%-80% debt funded so the renewable sector represents a massive opportunity for an alternative debt-oriented investor like Vantage."
He said the fund has already identified seven projects worth roughly R2.1bn which it will finance.
"These projects were all awarded during the first or second bidding rounds of the REIPPP. The portfolio comprises both solar and wind projects from a variety of different suppliers and sponsors. The portfolio is also geographically diverse with projects located across the country in the Eastern Cape, Northern Cape and Limpopo. In addition to these seven projects the fund will also seek to invest in a few more projects with unallocated capital," said Mr Albinski.
Vantage Capital currently manages two mezzanine debt funds with total commitments of about R2.85bn. The GreenX Fund will bring funds under management at Vantage to more than R5bn.
According to consulting engineering firm GIBB, South Africa’s electricity demand is increasing at a rate of 3% a year.
"Based on projections, there is a need to develop more than 40,000MW of new electricity generating capacity over the next 20 years" it said.