INVEST and Partners Announce $12.1 Million Investment in Clean Energy in South Africa
On April 3, Power Africa, USAID, and Lion’s Head Global Partners announced a $12.1 million investment in clean energy in South Africa. This is likely the first acquisition of renewable commercial & industrial (C&I) projects by an institutional asset manager in South Africa. The investment will create jobs and save over 328,000 tons of CO2 emissions, the equivalent of taking 70,000 cars off the road for a year.
Decentral Energy Managers, a South African renewable energy developer, just announced a $12.1 million investment in commercial and industrial renewable energy assets from local investors Flyt Property Investment and Anuva Investments. This is Decentral’s first financial close.
With support from INVEST and Power Africa, Lion’s Head worked with Decentral to develop pitch materials, a financial model, and project structuring and strategy documentation to engage institutional investors and raise capital. The sale is the first of three transactions envisioned with Decentral and local fund managers, with a $17+ million senior debt facility expected to close later this year.
South Africa has faced an energy crisis for the last decade and a half, with widespread blackouts and challenges within Eskom, the state-owned energy company. South Africa’s central bank estimates that the blackouts are costing the economy more than $50 million a day.
Decentral’s model serves a missing middle between small solar home systems and large renewable installations. For example, it provides power to medium-sized businesses that have been among the hardest hit by energy shortfalls. These businesses are critical for job creation.
Decentral will use the liquidity generated by this sale for further greenfield commercial and industrial transactions, primarily in the small- and mid-scale sectors.
This press release was originally published by Lion’s Head here.
April 3, 2023, Cape Town, South Africa: Lions Head Global Partners, Power Africa in conjunction with the U.S. Agency for International Development, and Flyt Property Investment/Anuva Investments announce a landmark $12.1 million investment in South Africa’s power sector. This is the first financial close for Decentral Energy Managers, a South African renewable energy-focused Independent Power Producer (IPP).
Decentral’s model caters to customers in the retail, tourism, residential, and commercial and industrial (C&I)sectors, providing power to medium-sized businesses that are the backbone of job creation in South Africa but have been among the hardest hit by the country’s energy shortfalls. The company currently has developed, owns, and operates over 10 megawatts (MW) of solar photovoltaic assets in the C&I sector and has 500 MW of active development assets nationwide. This is likely the first acquisition of renewable C&I projects by an institutional asset manager in South Africa.
South Africa has faced an energy crisis for the last decade and a half, with widespread blackouts, aging infrastructure, and challenges within Eskom, the state-owned energy company. Renewable energy is critical to improving the country’s energy security, and a significant increase in its capacity is required. However, eroded investor confidence and weak macroeconomic conditions are stalling transaction activity. The Just Energy Transaction Partnership, an international commitment to support South Africa’s transition away from coal, has pledged USD $8.5 billion over the next three to five years through a combination of financial instruments, and renewable energy is expected to makeup a significant portion of the partnership.
The liquidity generated by this sale will be used to fund further greenfield C&I transactions, primarily in the small- and mid-scale sectors. This will allow Decentral to reach scale and increase renewable energy generation capacity to 45–50 MW across 30–40 C&I offtakers in the South African market. Decentral’s wheeling strategy (selling to third-party buyers via the grid) would push the sector forward in its efforts to relieve the electricity provision burden on Eskom. The investment will create jobs and save over 328,000 tons of CO2 emissions, the equivalent of taking 70,000 cars off the road for a year.
The $12.1 million investment consists of equity from Flyt Property Investment and Anuva Investments, a property development company and a real estate and renewable energy investment firm respectively. This fund raise was made possible with transaction advisory services provided by Lion’s Head Global Partners, an investment bank and asset manager, thanks to support from the U.S. Agency for International Development through the INVEST initiative. It supports the U.S. government’s Power Africa initiative, which aims to increase energy access and to end energy poverty in sub-Saharan Africa.
About Lions Head Global Partners: Lion’s Head is an international investment bank and asset manager with offices in Nairobi, London, Lagos, Dubai and Amsterdam, operating across emerging and frontier markets globally, but with a specific focus on Sub-Saharan Africa. Lion’s Head provides high-quality, specialist financial advisory, capital raising and asset management services to a broad range of private and public sector clients, across multiple sectors including energy, infrastructure and natural resources.
About Decentral Energy Managers: Decentral develops, owns and manages renewable energy assets in South Africa. Beginning as a developer of renewable assets that were bid into the Renewable Independent Power Power Producer Programme (REIPPP) auction programme of South Africa, in 2017 Decentral diversified into the C&I market and asset management space, with a focus on small-scale distributed energy projects.
About Flyt Property Investment/Anuva Investments: Flyt is a property development company based in the Western Cape, with a joint venture with AnuvaI Investments, a Cape Town-based Venture Capital Company that channels retail capital into real estate and renewable energy investments. Both Flyt and Anuva make investments under Section 12J of the South Africa Income Tax Act.
About Power Africa: Power Africa is a U.S. Government-led Presidential partnership initiative, coordinated by USAID, that brings together the collective resources of over 200 public and private sector partners to double access to electricity in sub-Saharan Africa.
About USAID INVEST: USAID INVEST unlocks the power of private capital to drive inclusive growth in countries where USAID works. INVEST is a flexible buy-in mechanism designed to address the challenges that make it difficult for USAID to work alongside the private sector. Buy-in scopes of work are designed to address the goals of individual USAID Missions, Bureaus, and Independent Offices (MBIOs).To date, the initiative has built a portfolio of 65 buy-ins from 36 USAID MBIO clients, with INVEST activities spanning 81 countries. INVEST has mobilized over $500 million in new investment for development.
