GuarantCo, part of the Private Infrastructure Development Group (PIDG), and British International Investment (BII), the UK's development finance institution and impact investor, expect to unlock US$500 million of new renewable power development through a groundbreaking deal with Etana Energy, the South African energy trading company.
GuarantCo and BII will provide $100 million ($50 million each) of default guarantee finance for Etana in South Africa's largest "energy wheeling framework" transaction.
This innovative type of deal is designed to unlock new renewable energy capacity by providing independent power producers (IPPs) with the revenue certainty they need to break ground on new renewable energy projects.
It is expected that the US$100 million in guarantee financing will unlock an estimated US$500 million of new renewable energy projects - providing a major boost to South Africa's green energy transition - and underlining the UK's support for the country's Just Energy Transition Partnership (JETP). Displacing fossil fuel generation with electricity generated from renewable sources will avoid 1.2 million tonnes of CO2-equivalent emissions annually and create a significant number of new jobs.
This transaction qualifies under the IPG (International Partner Group countries) as part of their JETP commitment to South Africa. JETP is funded by several governments, including the UK, and serves to accelerate South Africa's transition in the energy sector. This is GuarantCo's first contribution to this programme.
The guarantee facility will enable around 500MW to be added to the grid by several renewable energy (wind and solar) IPPs over the next few years.
Recent regulatory changes in South Africa have opened up the opportunity for private power producers to sell electricity to business customers, and companies like Etana are looking to accelerate this opportunity, expanding the addressable market by buying renewable energy from private generators and then selling that output to a portfolio of commercial customers by "wheeling" the electricity across the existing transmission network.
Etana's founding shareholders are H1 Holdings, a black-owned investment company with which BII has a longstanding relationship, and Chariot Limited, a British group which is focused on developing transitional energy projects in Africa, listed on the London Stock Exchange (AIM: CHAR).
Iain Macaulay, Director and Head of Project Finance, Africa for BII, said: "BII is demonstrating global leadership in unlocking private capital for climate finance. The Etana deal is a truly innovative form of financing that I hope will serve as a template for unlocking South Africa's green energy potential."
Evan Rice, CEO at Etana Energy, said: "We need to pursue all avenues that can unlock the capital required to build new electricity generation capacity in South Africa. Local businesses need low carbon, cost-competitive electricity to remain relevant and viable. Etana's aggregation model offers a way to meet these needs whilst enabling new renewable energy capacity to be built. ThisThis guarantee facility is a critical piece of the puzzle for a relatively new company like Etana to be a bankable offtaker for IPPs. We are incredibly grateful to GuarantCo and BII for their vision, support and commitment to catalysing this opportunity with us.''
Surabhi Mathur Visser, Deputy CEO at GuarantCo, said: "We are proud to support the renewables sector in South Africa by entering into this guarantee framework agreement with Etana Energy. From an investment point of view, it provides strong replication opportunities by proving to the market that a guarantee framework can work at scale. GuarantCo continues to seek out potential market transformation transactions like this in lower-income communities to deliver against the UN's Sustainable Development Goals in alignment with the PIDG 2030 strategy."
