Out-Law News 1 min. read

European loan deal signed for South African wind farm


Germany’s KfW IPEX-Bank (KfW) has signed a loan agreement for around €160 million with Italian renewables developer Enel Green Power (EGP) to finance construction of a wind farm in South Africa.

The loan will be used to finance investment in the Gibson Bay wind farm, in South Africa’s Eastern Cape.

KfW is acting as lender, lead arranger and agent, with partial credit insurance coverage provided by Euler Hermes for the German Export Credit Agency.

EGP said the agreement will provide its wholly-owned subsidiary EGP RSA with two separate lines of financing, with maturities of 7 and 17 years respectively, with “an interest rate in line with the market benchmark”.

EGP is a subsidiary of Italian government-controlled energy company Enel Group. It develops and manages energy generation from renewable sources in Europe, the Americas and Africa. KfW said several German manufacturers are involved in the construction and development of the South African facility.

Gibson Bay will have 37 turbines with a generating capacity of 3 megawatts (MW) each. The facility will have a total installed generating capacity of 111 MW and be capable of generating some 420 gigawatt hours of electricity annually.

The facility, part of a portfolio of large-scale wind energy projects being developed across Southern Africa by South African firm Red Cap, was approved by South Africa’s Department of Energy in October 2013.

The project had been entered into the third round of the government’s independent power producer procurement programme by Red Cap Investments. Gibson Bay is expected to enter commercial operation in early 2017.

Ernst & Young’s (EY) market attractiveness survey on Africa (80-page / 2.4MB PDF), published last year, said South Africa had led 15 African nation destinations in attracting new FDI projects (82%) since 2003.

EY’s survey said the US and UK were the “most notable investors” in South Africa from 2003-2011, with Germany, India and Australia making up the next top spots. According to EY, FDI inflows to South Africa are forecast to average about $10bn annually up to 2017, “with approximately 125,000 new jobs created as a result”.

A study published earlier this year by the South African government-owned Council for Scientific and Industrial Research said renewable energy from South Africa’s first wind and solar plants generated a “net financial benefit” of around $702,000 for the country in 2014.

The study was conducted as the Department of Energy continued with a procurement programme to expand the nation’s electricity generating capacity amid severe power shortages.

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