Standard Bank Underwrites $2.5 Billion South African Renewable Power Bids

Standard Bank Group Ltd. (SBK), Africa’s largest lender, increased its funding for renewable-energy projects in the continent’s biggest economy to 27 billion rand ($3.5 billion).

The bank agreed to underwrite 19 billion rand for 31 of the projects submitted in the second round of bids in South Africa’s renewable-energy program of as much as $12 billion, Power Finance Head Alastair Campbell told reporters in Johannesburg today. The lender is already underwriting 8.2 billion rand for preferred bidders in the first phase, announced in December.

The government invited bids on Aug. 3 to build 3,725 megawatts of renewable energy by the end of 2016. It approved 28 projects to add 1,416 megawatts in the first bidding round in December and yesterday closed submissions for the second. Bids probably exceeded the number of megawatts available in the second round, and this is likely to be the case in the third phase, Campbell said.

“The returns from emerging markets for infrastructure and power are more favorable now, especially since the financial crisis and the general stability that has come to Africa,” Ntlai Mosiah, Standard Bank’s head of power advisory services, told reporters. “In Europe, tariffs that were agreed on with those governments have unfortunately been renegotiated by decree, so there is less confidence in those as a result.”

Wind, Photovoltaic Projects

Standard Bank agreed to provide senior debt underwriting for wind and photovoltaic projects with a combined power- generating capacity of 1,454 megawatts in the second round, Campbell said.

“The second bidding window has resulted in a lot of bidders being aggressive in the pricing of their bids,” Campbell said. “We’ve had a squeeze on our margins. Everyone’s been squeezed.” This bodes well for South Africa’s future electricity prices, he said.

Average power prices in the country have almost trebled in the last four years as Eskom Holdings SOC Ltd., the state utility that supplies about 95 percent of the country’s electricity, increased charges.

South Africa wants to generate more power from wind, solar and nuclear sources to cut reliance on coal and reduce pollution. The government wants to use the opportunity to boost job creation through manufacturing in the country, where about one in every four people don’t have a job.

The government increased local-content requirements after the second round, Mosiah said. Gestamp Wind is looking to start manufacturing domestically while Suzlon Energy Ltd. (SUEL), India’s biggest wind-turbine maker, is looking to make towers in South Africa, Campbell said.

The government is scheduled to finish evaluating the second-round bids on May 11. A total of 79 bids were received in this phase, Thandiwe Maimane, a spokesman for the Department of Energy, said by mobile phone today, without giving further details.

To contact the reporter on this story: Carli Cooke in Johannesburg at clourens@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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