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Cape Town - While the headlines are filled with nuclear power proposals, the renewable energy sector is quietly forging ahead, generating much needed new power capacity. Total investments since the Department of Energy (DOE) embarked on its alternative energy sector drive in 2012 now stand at almost R200bn.
Futuregrowth Power Debt portfolio manager, Paul Semple, said the growth of the sector reflected the success of the Department’s Renewable Energy Independent Power Producers' Procurement Programme (REIPPPP). Though it’s not official, he said the government has confirmed that it plans to add an additional 6 000MW to the grid over the next couple of years.
“The programme is a strong model for private-public participation and that has a lot to do with the government’s commitment to transparency and the efficiency with which it’s run,” he said.
Futuregrowth has participated in all four rounds of the bid programme and to date has made debt and equity investments worth more than R7 billion in 23 renewable projects located around the country.
“The Futuregrowth Power Debt Composite is a suitable way for pension funds to access these projects,” said Semple. “It provides good long-term inflation-linked returns for our clients - outperforming the South African STeFI Composite Index benchmark by 4.07% for the one-year period ending 30 March 2016 - while delivering positive social development impact.”
He said that while there was a lot of interest from offshore investors, the fact that the power purchase agreement with Eskom was rand based acted as a deterrent. “Offshore investors would have to hedge the currency risk and that would wipe out their profits so that has effectively limited the funders to South Africa,” he said.
All the projects have a 20-year off-take purchase agreement with Eskom, which provides the revenue stream to repay the debt finance. Between 70% to 80% of the almost R200bn invested in the South African renewable sector is debt.
Semple believes that the outlook for the renewable energy sector is good. “The rest of world is very positive on renewables and because we have some of the best natural resources available for solar and wind power, together with a reputationally strong and well run independent power procurement programme, we are well positioned to take advantage of it.”
* Paul Semple Futuregrowth power debt portfolio manager.
FAIS disclaimer: Futuregrowth Asset Management (Pty) Ltd (“Futuregrowth”) is a licensed discretionary financial services provider, FSP 520, approved by the Registrar of the Financial Services Board to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002. The fund values may be market linked or policy based. Market fluctuations and changes in exchange rates may have an impact on fund values, prices and income and these are therefore not guaranteed. Past performance is not necessarily a guide to future performance. Futuregrowth has comprehensive crime and professional indemnity in place. Performance figures are sourced from Futuregrowth and I-Net Bridge (Pty) Ltd. GIPS disclaimer: Futuregrowth Asset Management (Pty) Limited (“Futuregrowth), a subsidiary of Old Mutual Investment Group Holdings (Pty) Limited is a specialist investment company which manages the full range of interest bearing and developmental investments in an ethical and sustainable way. Futuregrowth claims compliance with the Global Investment Performance Standards (GIPS®). Contact Futuregrowth at +27 21 659 5300 to obtain a list of composite descriptions and/or a presentation that complies with the GIPS® standards. The investment returns reflected are supplemental information as they are not calendar year returns and are gross-of-fees. Currency: ZAR
