Patrice Motsepe’s African Rainbow Energy and Power (AREP) and Absa have launched a new entity called African Rainbow Energy as an African-led, world-class, renewable energy investment platform.
AREP will make an initial investment in assets comprising wind, solar photovoltaic, and biomass projects totaling more than 700 megawatts of renewable energy capacity. Absa will spend R500 million in cash and transfer R5 billion in renewable energy assets to African Rainbow Energy as a first step. African Rainbow Energy will have roughly R6.5 billion in gross assets, covering 31 renewable assets, making it one of South Africa’s largest and most diverse independently held energy enterprises.
The formation of African Rainbow Energy boosts the pool of finance available for renewable energy projects in South Africa, which comes at a time when the country is advancing its aspirations to grow and diversify its energy base through the Renewable Energy Independent Power Producer Programme (REIPPP). At the same time, the private sector is increasing its energy supply. This is a significant step forward for the South African economy, which is attempting to find reliable and cost-effective renewable energy in order to boost growth and employment.
This partnership helps AREP achieve its goal of using contemporary and renewable energy technology to offer affordable electricity in South Africa and across the African continent. Absa is in a unique position because of its central role in the African continent’s economy and its dedication to renewable energy and the green economy. Absa is a key funder in the renewable energy market, and this deal further strengthens its position in this vital area.
“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 JSE in future,” said Brian Dames, African Rainbow Energy Chief Executive Officer. “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.”
African Rainbow Energy plans to invest in sustainable energy technologies such as solar, wind, and energy storage batteries. It already has a sizable investment pipeline and has partnered on a number of proposals for South Africa’s highly successful REIPPP Round 5.
African Rainbow Energy will also invest in the private power sector and is working with several companies on bespoke energy solutions.
“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,” said Jason Quinn, Absa interim Group Chief Executive. “Renewables are an important part of Absa’s sustainability strategy and we target
financing or arranging more than R100 billion for 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. 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 at 31 December 2020.
Dr Patrice Motsepe 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 marginalised. Absa is a like-minded partner that shares our vision of building this initiative at scale in Africa.”
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.
The effective date of the fund is subject to the fulfillment of certain conditions precedent, which are expected to be concluded in the fourth quarter of 2021.