South Africa’s SOLA Group & African Rainbow Energy Reach Financial Close On 200 MW Solar PV Projects For Tronox Mineral Sands

Last year, the threshold for companies in South Africa to produce their own electricity without a license was increased from 1 MW to 100 MW.  The new threshold was introduced to catalyze private sector investment into the electricity sector. This move will go a long way in supporting energy users’ power demand and reducing customers carbon footprint.

The private sector is already taking advantage of the new legislation. Since the legislation was passed in August 2021, the first two registered 100 MW energy projects have reached financial close. SOLA Group and African Rainbow Energy reached financial close on 200 MW solar PV projects for Tronox Mineral Sands. The financial close of the projects happened less than 6 months after the power purchase agreements were signed in March 2022. SOLA’s in-house engineering, finance, and project development capabilities have helped to accelerate the conclusion of the deal. The SOLA Group is a vertically integrated Independent Power Producer and one of the leaders in the supply of clean energy solutions to private companies in Africa.

Construction of the 200 MW projects will now begin. These renewable energy facilities will supply electricity, through wheeling arrangements with Eskom, to 5 Tronox facilities in the Western Cape and KwaZulu-Natal for their own use.  Tronox’s operations are highly energy intensive. The projects will ensure Tronox’s economic viability and long-term electricity supply affordability. These projects show how national utilities can work together with Independent Power Producers, leveraging their transmission and distribution network to unlock the opportunities in the distributed renewable generation space on the continent. This is a model worth replicating across the continent.

“Tronox’s renewable energy project with SOLA Group will reduce our global carbon emissions by approximately 13% compared to our 2019 baseline,” commented Melissa Zona, Tronox Holdings plc’s Senior Vice President, Chief Human Resources and Sustainability Officer. “This is yet another example of how Tronox is committed to being a leader when it comes to corporate sustainability and protection of the environment. Switching from coal-based to renewable power in South Africa is one of the many ways Tronox is implementing technology and best practices  at our sites to protect our land, water, air and ecosystems and operate more sustainably,” concluded Ms. Zona.

“There are significant firsts here for the renewable energy industry,” says Dom Wills, CEO of SOLA Group. “These are the first projects of this scale in SA that are based on pure private bilateral trade. It’s also a great plus for the country that these projects are 100% South African owned, financed, constructed, operated and managed.”

The projects needed to raise a total of R4 billion ($222.3 million) of funding for construction and development. Long term Power Purchase Agreements (PPAs) enable corporates to adopt solar PV without large upfront costs. This project is the largest corporate renewable energy PPA in Africa so far. It sets a good example for other large energy users to follow across the continent.

“African Rainbow Energy is a Leading Renewable Energy platform, the largest shareholder in the SOLA Group and the funder of the two projects,” says Brian Dames CEO, African Rainbow Energy. “This is a clear demonstration of African Rainbow Energy’s  and partners, Absa, DBSA, Nedbank and Standard Bank’s commitment to our Country, the economy, and our customers. This investment brings hope.”

The debt arrangement was led by PepperTree Capital, and senior lenders included three of the big banks in South Africa and the DBSA, which provided a total of R3.1Bn of debt into the project. The legal advisors into the transaction were Pinsent Masons, Hogan Lovells, Faskens, Allen & Overy, and ENS.

SOLA also entered into a Joint Venture Agreement with WBHO for the design and construction of the project, where SOLA performs the engineering services and WBHO will perform the construction. The project is comprised of 387,000 solar panels mounted on single axis trackers that track the sun’s position as it moves across the sky. The project will also be one of the first projects to directly feed into Eskom’s high voltage transmission network.

“We’re very pleased to be part of the first major utility energy project in SA for a private offtaker,” says Derek Wallace, Managing Director, Projects, WBHO. “We are looking forward to delivering a world class project.”

This project is seen as a potential breakthrough for the private energy market and has paved the way for more projects like it.  The options for developing projects for private buyers will only increase as the government finalizes its plans to establish a trading market on the national grid.

“Looking ahead, we hope the model of private power through bilateral agreements continues to become more widely adopted,” says Wills. “The benefits to the end user are competition, choice and ultimately a more diverse contribution to the power system.”