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R500m fund set to unleash growth in photovoltaics

Inspired Evolution invests in SPV created by SolarAfrica, opening up access to finance.

South Africa has one of the highest solar indexes in the world, just behind the Mojave Desert in the US and neighbouring country Namibia. Yet while SA has perfect conditions to embrace clean solar energy, current uptake is not as fast as it could be.

The reason, says James Irons, CEO and co-founder of SolarAfrica, is limited access to finance. “The technology is in place, the increase in adoption in Europe and US has caused a decrease in the cost of solar panels, and adoption in SA has moved beyond boutique and into the mainstream. However, the cost of a new system is sometimes beyond the reach of the average small business or household. Finance options to either rent or buy a system are limited.”

However SolarAfrica develops and owns solar systems on behalf of its customers, making its business complementary to many players in the solar industry.

Where finance is available, it is development or infrastructure finance that is being deployed into large scale Renewable Energy Independent Power Producer Procurement (REIPPP) projects, which deliver a better return on effort. “The financing of smaller projects has lagged and this constrains growth of the industry – the contractors, suppliers and installers that currently sell and install solar panels,” he says.

Unlocking growth

A deal between Inspired Evolution, an Africa-focused investment advisory firm that specialises in the clean energy sector, and SolarAfrica may help to unlock growth in the sector. 

The deal sees Inspired Evolution invest R100 million in equity finance into a special purpose vehicle (SPV) created by SolarAfrica that will be used to provide funding to long-term commercial and industrial solar photovoltaic (PV) customers. The deal will see Inspired Evolution owning just over 50% of the SPV – known as Commercial Energy SA – with SolarAfrica owning the balance. Another R300-R400 million of debt finance will be raised from two to three banks to create a R500 million fund.

“Until this, we financed such deals off our balance sheet or via Section 12J funds,” says Irons. “Both of these options provide limited scope for growth. Having Inspired Evolution as our funding partner in this growing market adds value to Commercial Energy SA as a financing platform under SolarAfrica. It will allow us to expand our digital credit portal with more aggressive acquisitions of solar PV rooftop projects, as well as launch in other maturing markets.”

While Irons is unwilling to divulge details on the commercial terms of the deal, he says the cost of funding is competitive and will enable Commercial Energy to match the cost of power of large scale projects. “This is remarkable if you think about the economies of scale,” he says.

For Inspired Evolution it also marks a new type of deal. “We have been evaluating the commercial and industrial market over the last three to four years and concluded on the merits of establishing an affordable, credit-worthy financing platform as the best point of entry for our Evolution II Fund,” says Christopher Clarke, managing partner.

“This way, we offer an independent financing portal that crowds-in system integrators and contractors that can secure long-term finance for their projects to benefit underlying private business customers.”

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Eskom would have been in a better financial position if they installed free PV systems in all SA residences instead of building Kusile and Madupi and employing 1000’s of staff that’s on full pay and being productive for only 2 hours every day.

Agree. Eskom should’ve gone big into the PV-solar business…they have the electrical/technical skills. Could’ve given the private industry some competition…but no, we stick with coal.

A landmark test case would be where a whole municipal region/town agrees to dump Eskom as main supplier, and buys elect from nearby PV-solar plant at lower tariff than Eskom. Poorly run city councils are always in need of extra revenue….and as the middleman…they can charge the retail-user the same (or a tad less), but reap the bigger margin. The higher Eskom tariff goes in future, the sooner a municipality will start to deal with private IPPs. (..only issue is night-time supply, but problem can be overcome)

u r so right . my yardstick for Zar productivity is the orange overall brigade one sees working on the roadside – out of a group of 10 , one is lucky to see 2 actually working . Azanian labour is as lazy as sin – no hope !

Great that we get more renewables, but potential clients should do their homework. Paying somebody else per kWh will ALLWAYS mean that there is about 30% friction loss.

For commercial rooftop in sensible locations, the business effectively gets 28% “free” by virtue of 100% tax deduction in year 1. Then finance say 72% over seven years and unless you are being ripped off for the solar system, your first year energy savings will already exceed your year one finance repayments. Then you have another 20 years of pure benefit after you’ve paid off the finance in year 7. Great investment – if you do your own instead of third party owned.

Just please don’t fall for the jokers selling commercial rooftops for R15/watt and a LOT more. Systems over 50kW should be 12 and lower, otherwise you are being shafted

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