Carol Paton Writer at Large
Picture: ISTOCK
Picture: ISTOCK

German Development Bank KfW on Thursday launched SA’s first debt-funded vehicle for small renewable energy projects, in a move it hopes will kick-start the ability of businesses and municipalities to produce their own electricity.

The bank, which has a strong renewable energy mandate and has previously provided support to Eskom, said in a statement it would provide R350m of first-loss equity, supported by a R1bn loan fund from RMB, and hoped to raise a further R700m in the coming year from other banks keen to enter the market.

Germany has witnessed a strong trend of migration from the grid by corporates, industry and local government as falling technology prices have made it viable to produce electricity for own use from solar, wind and biomass sources.

While SA’s Renewable Energy Independent Power Prod-ucer Programme had envisaged a round of bids for small producers, this has been stalled indefinitely due to opposition from Eskom, which is the end purchaser, and uncertainty over the future of the programme.

KfW director Jan Martin Witte said the programme aimed to give "small renewable producers in the non-Eskom space a shot in the arm".

Known as The Facility for Investment in Renewable Small Transactions (FIRST), the facility will make finance available for small-scale renewable energy projects that have, up until now, found it challenging to access affordable funding from commercial investors.

Based on an expected loan portfolio of R2bn, FIRST’s portfolio should include between 20 and 25 utility-style projects spread across solar photo-voltaic, wind, biomass and small-scale hydro predominantly, with clients coming from the corporate and industrial sector, as well as municipalities. Individual loans provided by the fund are expected to be between R50m and R300m. The first loan should be concluded within the next six months.

KfW on Thursday also signed an agreement to loan R900m to the Land Bank to assist with refinancing its loan book and extending longer-term financing to farmers.

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