Mainstream Renewable Plans $636 Million of South African Plants

Mainstream Renewable Power Ltd. will begin building one wind and two solar plants costing 500 million euros ($636 million) in South Africa within weeks after agreeing power-purchase, funding and implementation deals with the state.

“We see South Africa as integral to our further plans in Africa,” Chief Executive Officer Eddie O’Connor said by phone.

The continent’s largest economy plans to increase renewable capacity by seeking bids for developments after state-run Eskom Holdings SOC Ltd., which mainly uses coal, suffered shortages that led to power cuts and mine closures in 2008. The country chose 28 renewable projects costing about 47 billion rand ($5.4 billion) in the first round of bidding and plans a third round.

“We see a power starved lower continent which needs a renewable energy solution,” O’Connor said in an interview.

The Dublin-based company, which won licenses for projects in December bidding, agreed a 4.1 billion-rand debt deal and sold shares in the sites to investors led by Globeleq Generation Ltd. to fund its plan, O’Connor said. It will retain about a 10 percent stake in each, he said. Old Mutual Plc’s IDEAS Managed Fund and Thebe Investment Corp Pty Ltd. also invested, as well as local community trusts and engineering companies.

Absa Group Ltd., majority-owned by Barclays Plc, acted as debt lead arranger, with contributions from Development Bank of Southern Africa Ltd. and three other lenders, O’Connor said.

The developments, the 138-megawatt Jeffreys Bay wind farm in Eastern Cape and the De Aar and Droogfontein solar parks both with 50 megawatts in the Northern Cape, are expected to produce enough power for 48,000 households from 2014, he said.

Siemens AG will supply wind turbines and Suntech Power Holdings Co. solar panels, O’Connor said. Eskom will buy the power, with guarantees from the government, he said.

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