Absa and AREP partner to launch renewable energy investment platform in South Africa

SOUTH AFRICA – African Rainbow Energy and Power (AREP) and Absa have launched a new entity as an African-led, world-class, renewable energy investment platform, African Rainbow Energy.

The establishment of African Rainbow Energy expands the pool of funding available for renewable energy developments in South Africa, at a time when the country is accelerating its plans to expand and diversify its energy base through the Renewable Energy Independent Power Producer Programme (REIPPP).

“The private sector is simultaneously expanding its energy supply, an important step for the South African economy, which aims to source reliable and cost-effective renewable energy to drive growth and employment,” said AREP and Absa in a joint statement.

African Rainbow Energy and Power (AREP) will make an initial investment of assets covering wind, solar photovoltaic and biomass projects with an installed capacity of more than 700MW of renewable energy while Absa will make an initial investment of R500 million (US$34.5 million) in cash and transfer R5 billion (US$345.3 million) of its existing renewable energy assets to African Rainbow Energy.

That will result in the new renewable investment platform having approximately R6.5 billion (US$448.9 million) of gross assets, covering 31 renewable assets, making it one of the largest and most diverse independently owned energy businesses in South Africa.

The effective date of the fund is subject to the fulfillment of certain conditions precedent, which is expected to be concluded in the fourth quarter of 2021.

This collaboration supports AREP’s objectives to utilize modern and renewable energy technologies to provide affordable electricity in South Africa and on the African continent.

Absa is uniquely positioned given its key role in the African continent’s economy and its commitment to the development of renewable energy and the green economy.

Absa is a leading funder in the renewable energy market and this transaction expands its participation in this important sector.

Brian Dames, African Rainbow Energy Chief Executive Officer: “Renewables have been one of the most successful asset classes globally offering a unique mix of attractive long-term, inflation-linked returns and growth providing significant scope to deploy further funds. African Rainbow Energy is engaging with other investors to increase its equity base and fund further growth with the aim of listing on the Johannesburg Stock Exchange in future.”

Dames continued by saying that African Rainbow Energy is uniquely positioned to access these investment opportunities given its track record for competence and delivery, its unique network of entrepreneurs and its partnership with entities that have a history of empowering women, youth, rural and urban communities.

“Renewables are an important part of Absa’s sustainability strategy and we target financing or arranging more than US$6.9 billion for environment, social and governance-related projects by 2025”

Jason Quinn – Interim Group CEO, Absa

The investment platform will invest in renewable technologies including solar, wind, and battery energy storage solutions.

It has already secured an investment pipeline and has partnered on a number of bids into Round 5 of South Africa’s highly successful REIPPP.

African Rainbow Energy will also invest in the private power sector and is working with several companies on bespoke energy solutions.

Jason Quinn, Absa interim Group Chief Executive, commented: “Our participation in African Rainbow Energy underscores Absa’s commitment to support renewable energy development and enhance the green economy, as part of our sustainability agenda. Renewables are an important part of Absa’s sustainability strategy and we target financing or arranging more than R100 billion (US$6.9 billion) for the environment, social and governance-related projects by 2025.”

Absa not only brings capital to the initiative but also expertise and experience in renewable energy financing as it is at the forefront of financing renewable energy in South Africa, having funded 33 projects to date, representing approximately 3 gigawatts, which amounts to 46% of the total projects closed to date in South Africa.

Absa’s renewable energy loans amounted to R20 billion (US$1.4 billion) as of 31 December 2020.

Dr. Patrice Motsepe, the founder of AREP, said: “Approximately 15 years ago we set out to create a world-class African energy company that would provide investors with predictable and growing returns from a clean energy portfolio of environmentally responsible assets.”

“This energy company would also contribute to the growth of the South African economy and the economies on the rest of the African continent while improving the living conditions of the poor, unemployed and marginalized. Absa is a like-minded partner that shares our vision of building this initiative at scale in Africa,” added Motsepe.

AREP’s holding company, Ubuntu-Botho Energy Holdings Proprietary Limited was founded by Dr. Patrice Motsepe and is the only African company that is a partner in the Breakthrough Energy Ventures which was started by Bill Gates and includes several globally respected leaders including Jeff Bezos, Richard Branson, Jack Ma, Mukesh Ambani and others.

Breakthrough Energy Ventures is an investor-led fund that is building new, cutting-edge companies that aim to provide energy with zero emissions.

“Our investment in African Rainbow Energy creates an opportunity for Absa to increase our role in the much-needed expansion of the renewable energy sector,” said Quinn.

“The fund will provide investors with exposure to utility-scale, commercial and industrial sector clean-energy investments, building a platform of scale in South Africa, and will seek selected, bankable projects in Africa,” said Dames.

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