UK Climate Investments and Norfund invest in South African joint venture to develop renewable assets

Today, Macquarie-managed UK Climate Investments (UKCI) and Norfund announced they are financing a joint venture between H1 Holdings and Pele Green Energy to fund their 40% equity participation in a 700 MW portfolio of onshore wind farms. Both partners will invest alongside Enel Green Power in one of South Africa’s largest renewable energy equity deals valued at around $US100 million.

UKCI and Norfund’s commitment is aligned with the UN’s Sustainable Development Goal number seven to increase access to clean, reliable, and affordable energy which is a critical enabler of social and economic development. Despite having some of the world’s best renewable energy sources, almost 600 million people in sub-Saharan Africa live without access to electricity.¹ Whilst this number has been in steady decline over recent years, the COVID-19 pandemic has halted progress. 13 million more people lacked access to electricity in 2020 compared to the previous year.²

In addition to tackling this challenge, UKCI and Norfund’s investment will also aim to accelerate South Africa’s transition to a low carbon economy, with a strong emphasis on enhancing Black Economic Empowerment (BEE). To this end, the portfolio will make annual social investments in their host communities which have historically been disadvantaged. These BEE investments will strengthen the joint venture partners as leading Independent Power Producers (IPPs).

The investment from UKCI strengthens the UK Government’s commitment to supporting a green post-COVID-19 recovery in South Africa. It also exemplifies the kind of innovative climate financing and partnership between Development Finance Institutions and the private sector promoted through the Climate Finance Leadership Initiative (CFLI).

Macquarie and Enel are founding private sector members of CFLI, and Norfund has been a leading participant among the European Development Finance Institutions who have partnered with CFLI members in emerging and developing markets.

“UK Climate Investments has operated in the region for over three years now and has committed more than £67 million across several exciting renewable energy projects. This partnership and investment is another sign of the growing maturity of the market, and an indication that the future of green finance in sub-Saharan Africa will be bright. We’re proud to be a part of the solution to transition towards a lower-carbon energy system."

Richard Abel
Managing Director, UKCI

“Norfund believes that providing increased access to affordable renewable energy is an effective way to contribute to create jobs and improve lives. Increasing the share of renewables in the South African energy mix is also an important contribution to limit the climate crisis. We are confident that this new partnership will be an effective tool to reach our common goals.”

Bjørnar Baugerud
Vice President, Clean Energy, Norfund

“The UK Government is committed to making sizeable climate finance investments here in South Africa. This latest initiative from UK Climate Investments will support the expansion of renewable energy and boost local ownership in the sector. It is vital that we maximise the potential of renewable energy as South Africa looks to tackle its current energy deficit and deliver their ambitious Nationally Determined Contribution (NDC) with its targets for emissions reductions by 2030. This is a key part of delivering a Just Transition.”

Antony Phillipson
British High Commissioner to South Africa

“H1 is proud to play a role in assisting the portfolio of wind farms to become a reality. We look forward to working with our funding partners, UKCI and Norfund, as well as our fellow shareholders, Enel Green Power and Pele Green Energy, in contributing to meeting South Africa’s commitments to a lower-carbon energy system.”

Reyburn Hendricks
CEO, H1 Holdings

“We are proud to partner with leading global investment firms such as the UKCI and Norfund to drive a Just Energy Transition in South Africa. This investment expands our operational involvement in wind farms across South Africa but of more significance is the offshore direct investment being attracted into the South African economy. We are humbled to continue serving the objectives of the National Development and Integrated Resource Plans, as these projects form part of the government’s Renewable Energy Independent Power Producers (REIPPP) Programme.”

Gqi Raoleka
MD, Pele Green Energy (PGE)

H1 Holdings is renowned for its fundraising abilities, thus fulfilling a crucial element of the global requirement to increase funding for renewable energy and climate action. Pele Green Energy, which will assume a more operational role across the portfolio, will bring technical expertise given their unique position as one of the few South African IPPs that controls and operates a utility-scale power plant.

Enel Green Power, who will retain a 60% ownership interest in the portfolio, have a proven track record of successfully delivering renewable energy projects in South Africa, as well as other markets.