One of the actions the IEA called for in its report tagged ‘Financing Clean Energy Transitions in Emerging and Developing Economies’ is that renewable energy investment should no longer be just an option out of many but a top priority for governments and investors worldwide.
This, according to the report, will fast-track clean energy transitions in emerging and developing economies.
Today, African Rainbow Energy and Power (AREP) and Absa have launched a renewable energy investment platform that will see the company invest in up to 700 megawatts of renewable energy, driving the development of South Africa’s energy industry.
While AREP will make an initial investment of assets covering wind, solar photovoltaic, and biomass projects, Absa, for its part, will make an initial investment of R500 million in cash and transfer R5 billion of its existing renewable energy assets to African Rainbow Energy.
The establishment of African Rainbow Energy is a major step as the new entity will have approximately R6.5 billion of gross assets, making it one of the largest and most diverse independently owned and African-led energy businesses in the country.
At a time when South Africa is accelerating its plans to expand and diversify its energy base through the Renewable Energy Independent Power Producer Programme (REIPPP), the investment fund will expand the capital available for renewable energy developments nationwide.
In a joint statement, AREP and Absa said, The private sector is simultaneously expanding its energy supply. This is an important step for the South African economy, which aims to source reliable and cost-effective renewable energy to drive growth and employment.
According to Brian Dames, African Rainbow Energy CEO, “Renewables have been one of the most successful asset classes globally offering a unique mix of attractive long-term, inflation-linked returns, and growth providing significant scope to deploy further funds.
African Rainbow Energy is engaging with other investors to increase its equity base and fund further growth with the aim of listing on the JSE in future.”
With both players already active in the space, the partnership serves as a means to strengthen their position.
AREP’s holding company, Ubuntu-Botho Energy Holdings Proprietary Limited was founded by Dr. Patrice Motsepe and is the only African company that is a partner in the Breakthrough Energy Ventures, an investor-led fund that is building new, cutting-edge companies that aim to provide energy with zero emissions
Launched by Bill Gates, the fund includes several globally renowned leaders such as Jeff Bezos, Richard Branson, Jack Ma, Mukesh Ambani, and others.
For Absa, the partnership is a testament to the bank’s commitment to supporting renewable energy development.
“Climate change is a risk to society and the impact is evident globally. This week saw the death toll from China’s floods reach 300 people this week, while recent heatwaves in California raised temperatures above 50℃,” says Absa’s acting CEO Jason Quinn.
“Responding to climate change requires global, national, regional, and local collaboration and banks have an important role to play in financing the transition to a low-carbon future. We have targeted financing or arranging more than R100-billion for the environment, social and governance-related projects by 2025”, he said.
Through the partnership, AREP’s objectives to utilize modern and renewable energy technologies to provide affordable electricity for South African and Africans as a whole will begin to take shape.
“We aim to build a world-class energy company,” said Motsepe, the founder of AREP. He continued, “We feel there is a sense of urgency – we have to get going with the right things.
The private sector has a critical role to play when it comes to stimulating the green economy, while at the same time investing and creating jobs.”
He believes that the energy company would also contribute to the growth of the South African economy and the economies on the rest of the African continent while improving the living conditions of the poor, unemployed and marginalized.
“Absa is a like-minded partner that shares our vision of building this initiative at scale in Africa.”