Norwegian independent power producer (IPP) Scatec has reached financial close for three solar projects in South Africa, which will have a combined capacity of 273MW.
The projects will be built in Grootfontein, in the country’s Western Cape province, and will require an investment of around US$270 million. Scatec announced that this funding will come from the company itself, alongside US$241 million of non-recourse finance debt provided by the Standard Bank of South Africa. Scatec will own 51% of the projects upon their completion, with H1 Holdings owning 46.5%, and the Grootfontein Local Community Trust holding the remaining 2.5%.
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“South Africa is a focus market and this value accretive investment with project returns above our return hurdle, is in line with our strategy to grow profitably and build scale in Sub-Saharan Africa,” said Scatec CEO Terje Pilskog. “We are now looking forward to starting construction next year and achieving commercial operation in 2025,” added Pilskog.
As part of the deal to build the projects, Scatec will sell the power generated from its farms to state-operated utility Eskom for 20 years, at a price of US$25.58/MWh. Scatec’s announcement is notable because their projects were supported by South Africa’s Renewable Energy IPP Procurement Programme (REIPPPP), and are the first projects to have been backed by the REIPPP’s fifth funding round to reach financial close.
This is positive news for both Scatec and South Africa. The company will be optimistic about adding new projects to its renewables portfolio, which already has a capacity of 4.6GW around the world, and the generation of power in South Africa will be welcome news for a country that has suffered from severe blackouts in recent months.
2022 was the worst year on record for disruptions to the country’s energy grid, with 205 days of rolling blackouts, as disruptions to the country’s coal-fired power supply and a lack of viable renewable alternatives have combined to cut power across the country.
Earlier this year, the Norwegian IPP sold a 42% stake in a 258MW solar plant in South Africa to help the company finance further growth.
The news follows JUWI’s announcement of plans to build 400MW of new solar capacity in South Africa, as the country looks to expand its renewable power sector.
