Financing SA’s future: unlocking scalable investments for renewable energy

SA’s energy transition is at a pivotal moment with an urgent need to secure flexible, scalable financing for independent power producers (IPPs) to drive long-term sustainability.

As the country moves to decarbonise its economy and bolster energy security, financing models must evolve to support the shift from project-based investments to building investable, growth-driven enterprises.

The R575m capital raise by Pele Energy Group through Pele Energy Fund 1, backed by Nedbank and the Norwegian Climate Investment Fund, managed by Norfund, represents a major milestone for SA’s renewable energy sector.

As part of Pele Energy Group’s R3bn Capital Strategy this transaction follows the R2.5bn Sithala facility raised in 2023 with Nedbank, Norfund and the Industrial Development Corporation (IDC).

This investment is not just about funding individual projects — it provides the financial muscle to scale operations, expand into new markets and accelerate the development of clean energy infrastructure.

New era of IPP financing

Pele Energy Group was one of the first 28 IPPs to be awarded a power generation licence under SA’s Renewable Energy Independent Power Producer Procurement Programme (REIPPP) in 2011.

Since then the renewable energy financing landscape has evolved significantly, moving from early-stage government-backed projects to a dynamic market where corporate buyers, development finance institutions (DFIs) and commercial banks play a critical role.

Historically, financing for IPPs in SA was largely project-specific, with banks and DFIs funding individual assets. However, as demand for renewable energy grows — particularly from industries seeking to decarbonise — IPPs must transition into long-term, sustainable businesses.

This requires access to strategic, flexible capital that can fund multiple stages of growth, including:

1. Development capital: Feasibility studies, environmental impact assessments and grid connections.
   
   
2. Project equity financing: Investment capital for constructing power plants and securing power purchase agreements.
   
   
3. Operational and growth capital: Working capital to expand business operations, scale impact and enter new markets.

This funding gap has been a significant challenge for many emerging IPPs. The strategic investment from Nedbank and Norfund into Pele Energy Group’s investment vehicle directly addresses this issue, providing structured, long-term capital to drive expansion, secure future projects and fortify the group’s balance sheet — all while maintaining its strong black ownership and commitment to transformation in the renewable energy sector. 

Power of blended finance

The Nedbank-Norfund partnership with Pele Energy Group together with IDC in the Sithala facility demonstrates the effectiveness of blended finance, where a mix of concessional capital and commercial funding reduces risk and attracts further investment into the sector.

Blended finance can align mandates from different providers of capital. An IPP generally has three main clusters of activity that require financing:

1. Project development stage, where funding is needed for environmental impact assessments and grid studies.
   
   
2. Project equity funding, where the IPP is investing capital into projects.
   
   
3. Operational costs, such as salaries and overheads, which require working capital.

DFI capital is much more geared towards the developmental stage, whereas a commercial bank has a more risk-based approach and mainly takes on project equity. The hardest funding gap to bridge is the payment of overheads until a business becomes sustainable. This is one of the most challenging sources of capital to obtain in the African market.

Opportunities and challenges in SA’s renewable energy market

The South African energy sector is in transition with at least 30GW of renewables required over the next decade to replace ageing coal-fired power stations and support economic growth. This presents a once-in-a-generation investment opportunity for companies that can develop, build and operate bankable renewable energy projects at scale.

However, challenges remain:

• Regulatory uncertainty: Shifting policies and approval delays can slow progress.
  
  
• Infrastructure constraints: Grid availability and capacity must be expanded to accommodate more renewable energy.
  
  
• Financing gaps: While project equity capital is becoming more available, working capital and development funding remain scarce.

Despite these hurdles, the momentum for private sector investment is stronger than ever, particularly as corporate buyers demand cleaner, more reliable energy. The rise of corporate PPAs, embedded generation projects and government-led energy transition programmes makes this an attractive time for long-term investors.

Beyond finance: embedding sustainability and social impact

For investors, financing renewable energy is not just about returns — it’s about impact. Pele Energy Group integrates sustainability into its core business model, ensuring that clean energy projects also drive economic and social transformation.

Through Pele Green Energy and Knowledge Pele, the group actively works to uplift communities, create jobs and foster local economic development alongside its energy investments. This holistic approach makes Pele Energy Group an attractive partner for long-term institutional investors seeking both financial and developmental returns.

What this means for the future of IPPs

The ability to secure flexible, long-term capital is a game-changer for SA’s renewable energy industry. As the country moves towards a sustainable, low-carbon economy, IPPs must evolve from single-project developers to fully-fledged energy enterprises.

The backing from Nedbank and Norfund solidifies Pele Energy Group’s position as a market leader, providing the resources to:

• Scale its renewable energy portfolio and enter new markets;
  
  
• Drive sustainable job creation and economic impact; and
  
  
• Deliver large-scale, bankable energy projects that contribute to SA’s energy security.

Whether investors, business leaders or policymakers — the key takeaway is clear: SA’s renewable energy market is no longer just an opportunity; it is a strategic imperative for economic growth, energy security and long-term sustainability.

The companies that get their financing strategies right today will be the ones powering the continent’s future tomorrow.

This article was sponsored by Pele Energy Group.