Standard Bank has signed a R20bn (US$2.1bn) deal with the Industrial and Commercial Bank of China (ICBC) for renewable energy projects in South Africa.
Under the 12-year agreement, ICBC will provide rand funding to Standard Bank through its 20% shareholding in the South African bank.
ICBC chairman Jiang Jianqing says: “ICBC’s aim is to promote the use of renewable energy in South Africa in support of the South African government’s renewable energy programme, and through this partnership, to help save the environment. ICBC is also certainly interested in raising awareness of the South African investment opportunity among Chinese suppliers as potential sources of contracting capability.
“In addition, the objective of this partnership is to facilitate the entry of investors into South Africa, and ICBC is excited about the opportunity to co-lend into renewable energy with Standard Bank, ICBC’s South African strategic partner, through to 2025.”
It is hoped the deal will increase liquidity for renewable projects. Standard Bank already lent R9bn in debt funding in a first round of bidding for independent power producers (IPPs), and expects to extend a further R6bn in the second round, but predicts the third round will require even more funding due to increased interest from developers.
“Standard Bank and ICBC will jointly provide debt financing on a project finance basis to companies that are awarded preferred bidder status under the country’s renewable energy IPP procurement programme. This will apply to projects where Standard Bank is or will be mandated as a lead arranger.
“It represents a further diversification of our sources of funding in addition to domestic asset managers, who are currently keen to invest in such projects. The renewable energy programme will require a large funding commitment and the more sources of available capital the better. The flexibility that these long-term sources of capital offer allows us to structure deals appropriately,” says George Kotsovos, head of power and infrastructure finance at Standard Bank.