Absa teams up with Motsepe’s African Rainbow Energy and Power to launch investment platform for renewable energy

Absa Group and billionaire Patrice Motsepe’s African Rainbow Energy and Power (AREP) have announced a partnership to establish a renewable energy investment platform for the continent. This move comes as Absa looks to focus on sustainable financing and address climate change. In an interview with CNBC Africa, David Renwick, Head of Investment Banking at Absa Corporate and Investment Banking, shared insights into the new entity and its objectives. Renwick explained that this initiative is part of Absa's commitment to renewable energy, stating that EPSA has been actively involved in the sector for over a decade. By creating this new entity, Absa aims to boost its renewable energy presence in South Africa and across Africa. The decision to spin out the renewable asset base into a separate entity allows Absa to collaborate with AREP and other partners to establish a locally owned energy company that can contribute significantly to sustainable financing. The ownership structure of the new entity will see AREP as the controlling investor initially, with Absa also holding an equity position. As the platform evolves, additional third-party investors will be brought on board to fuel further growth. The focus of the entity will be on renewable energy assets exclusively, with plans to scale up quickly by leveraging suitable investment opportunities. In terms of projects, the primary focus will be in South Africa initially, with Absa actively participating in the latest round of the Renewable Energy Independent Power Producer Procurement (REIPPP) program. The company is also exploring opportunities for captive power generation with large corporates. While the immediate focus is on South Africa, the mandate is pan-African, with plans to expand into regions like Eastern and Southern Africa. Renwick highlighted that the new entity aims to fund commercially viable projects that offer attractive returns to investors while considering factors such as off-taker credit quality, robust project structure, and technology suitability. The goal is to provide a pool of capital that can effectively compete in the renewable energy space and drive industry growth. As for the potential listing on the Johannesburg Stock Exchange (JSE), Renwick emphasized the need for scale before considering such a move. In the short term, the focus will be on private capital, but as the platform matures and achieves sufficient scale, there may be an opportunity for traditional equity investors to participate. Regarding investor interest, Absa is engaging with a mix of domestic and international investors, with a keen interest from emerging market investors who understand the dynamics of investing in such markets. Despite challenges around policy certainty and macroeconomic conditions in South Africa, the discussions with potential investors have been constructive. Overall, the partnership between Absa and AREP signals a significant step towards advancing renewable energy investments in Africa. By combining their expertise and resources, the two entities aim to drive sustainable development and combat climate change across the continent.