RMB assists IPP Msenge with project finance debt funding
RMB is doing its part to help curb South Africa’s energy crisis, reaching financial close on the country’s first utility-scale private wheeled wind energy project, which is contracted to supply 69MW of renewable energy over 20 years to Sasol South Africa Limited’s green hydrogen production pilot at its Sasolburg operations.
RMB was appointed as the sole mandate lead arranger (MLA) and lender to Msenge Emoyeni Wind Farm (Pty) Ltd (Msenge), an Independent Power Producer (IPP), by the project developers and sponsors, African Clean Energy Developments (ACED), African Infrastructure Investment Managers (through its IDEAS Fund) and Reatile Renewables (Reatile), to provide a project finance debt funding package for the transaction.
A Power Purchase Agreement (PPA) was awarded by Sasol to Msenge on the back of the ACED-IDEAS-Reatile Consortium’s competitive offering, which included a low energy tariff and an industry-leading track record of previous renewable energy projects brought into commercial operation. The favourable debt terms offered by RMB, along with innovative debt structuring, played a pivotal role in assuring the cost-effectiveness of Msenge’s bid to Sasol, and ability for the Consortium to reach financial close.
This is a significant milestone in the country’s journey toward more secure and sustainable energy supply and forms a critical part of Sasol’s sustainability strategy which includes reducing the absolute Green-House Gas (GHG) emissions from its South African operations by at least 30% by 2030, off a 2017 baseline.
The renewable energy generated by Msenge will enable Sasol to produce green hydrogen that can be supplied to customers to enable them to decarbonise their operations or will be utilised within Sasol’s own operations to produce sustainable products such as ammonia or methanol.
“Reaching financial close on this project has not been without its challenges, including cost pressures from supply chain constraints and construction cost-related inflation. A large proportion of project costs is linked to the importation of key equipment, including the wind turbines, and Rand weakness, in part due to the deteriorating load shedding situation, has caused project costs to rise. Our structuring skills and ability to think differently helped to defend shareholder returns whilst keeping the project’s commitment to offer the most competitively priced tariff for the buyer,” David Jones, Infrastructure Sector Solutions Senior Transactor, for RMB explains.
Amber Bolleurs, Infrastructure Sector Solutions Senior Transactor for RMB, added: “The extremely tight timelines also added a layer of complexity to the deal, especially against the requirement of limited-recourse project financing so fundamental to achieving low tariffs. However, RMB’s experienced and passionate Infrastructure Sector Solutions team, openness to new solutions, hands-on approach, and dedication to service delivery, helped to drive the pace. We are thrilled to have reached financial close on Msenge, in what we believe is a tremendous result for the ACED-IDEAS-Reatile Consortium, for Sasol and for South Africa.”