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South African based asset manager involved in 23 local renewable energy projects

By on 3 December 2013

Futuregrowth Asset Management has successfully won five projects in round three of the Department of Energy's (DoE) Renewable Energy Independent Power Producers' Procurement Programme (REIPPPP).

REIPPPP provides for the procurement of 3 725 MW of renewable energy over five phases. In round three, the DoE received 93 Bid Responses and last month announced the 17 Preferred Bidders, of which Futuregrowth’s five projects total approximately R165-million in investment for the company. This brings the total number of REIPPPP projects in which Futuregrowth is involved, either through its Power Debt Fund (the projects in round one and two) and/or its Development Equity Fund (round three projects) to 23. Futuregrowth, on behalf of clients, has provided debt financing totalling over R4-billion for 18 energy projects during rounds one and two in wind, solar photovoltaic (PV) and concentrated solar thermal (CSP), and expects to provide more funding in the secondary market.

The DoE has announced, however, that due to the large number of responses it may reconsider additional preferred bidders. Margo Buchanan, Renewable Energy Specialist at Futuregrowth Asset Management believes Futuregrowth may pick up more projects later this year and said its success was due in part to having been involved in the REIPPPP process from its inception.

"In round three, Futuregrowth achieved a 45.5 per cent success rate in our bids as compared to an average success rate of 18 per cent. In addition we won four out of four of our bids for onshore wind, which is 60 per cent of the total allocation in this phase."

One of the wind projects located at Gibson Bay in the Kouga Municipality in the Eastern Cape was awarded to Italian Enel Green Power (EGP) and will supply 111 MW. Futuregrowth is a development equity partner in the Gibson Bay Wind Farms. The 37 turbine wind farm will enter commercial operation in early 2017, generating in excess of 424 GWh (gigawatt-hour) per year at a fully indexed price of 66.4c/kWh, the lowest tariff bid in round three of the REIPPP program.

In addition to this, Futuregrowth is an equity partner in a consortium led by global wind and solar company Mainstream Renewable Power, which was awarded Preferred Bidder status for three large-scale wind energy projects in the Northern Cape with a total generation capacity of 360 MW. The Mainstream projects, which represent a total investment of approximately R9-billion, are the Khobab Wind Farm and Loeriesfontein 2 Wind Farm (both with 140 MW capacity) located at Namakwa, and the Noupoort Wind Farm at Umsobomvu (with 80 MW capacity).

The fifth project is a R2.05-billion ($200-million) 86 MWp (megawatt-peak) ground mounted solar power plant that is expected to generate approximately 210 GWh annually. The project is secured under a co-development agreement between Total SA and Mulilo Renewable Energy.

All the projects involve an off-take purchase agreement with Eskom for power they will produce over the next 20 years.

Buchanan said these investments in renewable energy projects presented a growing asset class in local capital markets and offered a unique opportunity for Futuregrowth’s clients to access a pool of assets not normally available to institutional investors.

"Futuregrowth is a long-term player in the renewable space, and we have a unique offering to renewable projects because of our ability to invest across the capital structure €”in senior debt, mezzanine debt and equity, depending on the needs of the project," said Buchanan. "We expect an exciting few years to come as this space continues to grow."

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