A consortium of developers has secured R2.31bn (about US$231mn) project financing for a solar project in South Africa.

Rand Merchant Bank (RMB) has provided R1.1bn in debt financing, as well as a preferred share option of around R175mn. It syndicated part of the debt to the Southern African Development Bank, with the remaining finance coming in the form of equity from a range of backers, including Google. RMB was the sole mandated lead arranger and underwriter of the debt portion.

The Jasper Project, near Kimberly, is being operated by Solar Reserve (US), the Kensani Group (South Africa) and Intikon Energy (also South Africa). Upon completion, the 96MW solar photovoltaic (PV) facility will be one of the biggest in Africa.

The deal is the latest in a host of solar projects to gain financing in South Africa, as part of the government’s Renewable Energy Independent Power Producer Procurement programme (REIPPPP). Last November, RMB closed a similar transaction for the Letsatsi project.

The offtaker is Eskom, the national electricity company. As South Africa heads into winter, rumours of power cuts abound. The government’s ongoing drive to carve out solar power transactions are designed to alleviate such worries.

Daniel Zinman, who led the transaction for RMB’s infrastructure finance team, tells GTR that while the project was structured as a “pure project financing”, the government will provide a guarantee should Eskom default on its offtake obligations under the power purchase agreement.

Zinman says that in South Africa, it’s not uncommon for commercial banks to lead renewables deals. He explains: “In the South African context, the vast majority of the renewable energy deals have been led or co-led by commercial banks. It’s probably also the result of the level of government support for the programme and a very well thought out risk allocation.”

He points to the fact that South African banks perhaps don’t have the balance sheet woes that some European banks do, but also to the more favourable climate of investment in renewables projects in South Africa compared to, say, Spain. On numerous recent occasions, the Spanish government has approved retroactive changes to the nation’s feed-in tariff system, which has led to a change in the formula for payment. With solar projects mostly funded on a non-recourse basis, uncertainty such as that can only prove to deter potential lenders.

Zinman expects a flurry of further deals to be closed over the coming period. He also confirms that RMB will be supporting a number of projects looking to bid in the third round of the renewable energy IPP programme in August, with financial close forecast for mid-2014.

For Google, this is the first investment in solar energy in Africa. The search giant is thought to have invested equity north of US$1bn in solar projects around the world to date.