RMB sees the money in financing solar power

Johannesburg - Savvy investors are eyeing off-grid solar power as a vehicle to earn money and improve property yields.

A R100 million 50-50 joint venture, called First Energy Alternatives, between Rand Merchant Bank (RMB) and solar firm BrightBlack Energy will test this market. The venture installs solar panels and finances them.

Wessel Wessels, CEO of BrightBlack Energy, said landlords who invested in solar power could improve their yields – solar power cuts properties’ utility bills, so the property owner rakes in more profits.

“Normally, property owners are happy with a yield of about 8%. Solar pushes that up to 12%. Some of our clients are getting a 20% yield,” said Wessels.

Solar power research website Power Quality & Renewable Services estimates that R2 billion was invested in the private photovoltaic sector last year.

Power Quality & Renewable Services’ energy and solar consultant Carel Ballack said he had documented at least 138 000 installations by the end of last year with a total capacity of 189 megawatts.

Greg Mckenzie, investment banker at RMB and joint CEO of the venture with Wessels, said that the average size of rooftop photovoltaic installations was between R2 million and R25 million, which was too small to excite RMB.

“This opportunity wouldn’t be interesting on an individual basis,” he said. “However, when you bulk this into a portfolio, the opportunities become compelling.”

He said that First Energy Alternatives would collect multiple rooftop solar projects in the commercial and industrial space to build a portfolio of up to R1 billion. It will then be able to secure debt financing against this.

There are three financial models to choose from. Firstly, the property owner could buy the infrastructure outright. If a property owner was looking for cheaper power, a power purchase agreement was the way to go. Lastly, if the developer was looking for a better property yield, leasing the solar infrastructure was an option.

Clients include Emira Property Fund, which has installed a R6 million solar farm at its Epsom Downs Shopping Centre in Bryanston, Sandton, as well as KPMG in Parktown.

Wessels was optimistic that the portfolio could exceed R500 million within the next 12 to 16 months.