Renewable energy to power Africa
October, 07th 2020
Vuyo Ntoi, joint managing director?of African Infrastructure Investment Managers (AIIM) speaks to African Review about the development of renewable energy projects in Africa.
The pandemic has significantly impacted economies around the world, including our operations as an investment business and our underlying investment portfolio. We’ve fortunately been able to seamlessly transition to work from home arrangements, and our ability to manage existing investments and to consider and implement new transactions has remained intact. Our underlying portfolio of investments has been affected by the pandemic as well, but has remained quite resilient, as one would expect of an infrastructure portfolio.
The impact of the pandemic on our energy infrastructure projects has been relatively limited. Many of our investments in renewable energy projects operate with take-or-pay arrangements with state power utilities. Looking at our South Africa-focused IDEAS Fund, despite minor incidents of curtailment during the lockdown period, the plants in which the fund is an investor have continued to operate and earn revenues from the off-taker. Where we have faced some challenges has been on plants under construction, where activity was reduced by lockdown measures, resulting in delays.
In other areas, particularly across transport, the pandemic has had a more material impact. That being said, the toll roads in our portfolio are quite well capitalised and have been able to withstand the liquidity impact of some months of much-reduced traffic levels. Moreover, effects of the pandemic have been felt less on heavy vehicle volumes, which account for a disproportionate portion of overall revenue. Airport assets have been notably affected. International air traffic has reduced significantly and this accounts for majority of the revenue for African airlines. However, as airports implement more stringent codes for travel and restrictions ease up across the world, we are seeing activity pick up in the sector.
Renewable energy is playing an important role in the South African energy mix. This has been evidenced by the increasing contribution to the overall energy generation capacity over the last decade and the associated reduction of carbon emissions. Integral to the development of the renewable energy sector across the country has been the Renewable Energy Independent Power Producer Procurement (REIPPP) programme. Competition, supported by a continuous pipeline of opportunities and a transparent bidding process with a high degree of regulatory and execution certainty, enhanced private sector involvement in the early stages of the process. Procurement costs of electricity across solar PV and wind projects have fallen by between 69% and 37% respectively, through the bid windows.
AIIM has invested in renewable projects and contributed to circa 24.5% of total green energy generation capacity across the country. We have investments in more than 25 renewable energy projects in South Africa through our IDEAS Managed Fund. These projects span the wind, solar PV and mini hydro sectors. An example is our investment in the139MW Cookhouse Wind Farm in the Eastern Cape, which produces around 341,000MWh of clean electricity on an annual basis, which is enough to power 43,000 medium-sized South African homes for a year. This generation helps to avoid approximately 348,000 tonnes of carbon emissions from traditional coal-fired power stations annually. Beyond the clean energy generation, this project is located in a very poor rural part of South Africa, and is a lifeline for many of the communities around it. The project company’s flagship social initiative has been the development of more than 45 early childhood development centres in the region, from which more than 2,500 children have benefitted to date.
Source: gulfbusiness.com