Amith Singh, Head of Energy Finance at Nedbank Corporate and Investment Banking, spoke to Africa Oil & Power about how the bank’s division recognizes the importance of sustainable power across the African continent and the role of the private sector.
What motivated Nedbank to make its initial investment in Africa’s energy sector?
Nedbank has been one of the first and leading funders of Infrastructure and energy projects on the African continent over the last two decades. Nedbank recognizes that energy is the oxygen for any economy.
Access to power is an important basic human right to all Africans – for education, improved standards of living, commerce and healthcare. Therefore, to contribute to this, Nedbank has part of our sustainable and strategic contribution have funded energy projects on the African continent.
We have been able to achieve this through our Energy Project and Umbrella Embedded Generation Financing products. Nedbank recognizes the importance of sustainable power across the continent and notes that the private sector in the form of Independent Power Producers (IPP), in powering Africa have the ability to power Africa.
Renewable energy provides the African continent the opportunity to leapfrog from darkness to light through its ability to generate power at an affordable tariff and bypass the need for large transmission and distribution networks as these renewable power plants can be developed close to the actual consumption.
Nedbank has been funding power projects and we have been a key participant in major power transactions across the continent. Our team of sector specialists focuses on the African power sector and is responsible for initiating, executing and managing transactions.
In addition to capital injection, what does Nedbank provide for companies in the energy sector?
We provide transactional banking, hedging facilities, agency facilities, project finance, acquisition finance, embedded-energy finance (corporate and industrial offtake), letters of credits and working-capital facilities, structured financial products and preference-share funding to support equity investments. We further have financing tools to bank the construction companies building the renewable energy plants. Energy Finance is committed to providing financial solutions for projects ranging from large-scale, centralized utility power generation to small-scale, off-grid power solutions and support for contractors across the power value chain.
What has been the extent of Nedbank’s involvement in the renewable energy sector? What major renewable energy projects has Nedbank been involved in?
The ‘Just Energy Transition’ has always been an important strategy of Nedbank’s sustainability journey as a Green Bank for the last few decades. Nedbank recognizes that renewable energy is a critical input due to the environmental considerations, bringing cheap power and energy security to Africa.
Nedbank is the market leader in South Africa’s Renewable Energy Program with a market share of about 40%.
What is Nedbank’s message to potential investors interested in Africa?
This sector has a lot of opportunities. Nedbank’s firm dedication to a just energy transition in South Africa is clear in our performance in financing 42 energy projects worth more than R35 billion in the South African Renewable Energy Independent Power Producers Procurement Program (REIPPP) program. Energy Finance is the industry leader in REIPPP program and Nedbank has retained its position as the leading bank in favor of sustainable energy production through its continuing participation in the REIPPP program.
Nedbank is also the lead financier in the Embedded and Captive Power generation Projects through our innovative Portfolio Funding Product.
What is Nedbank’s ultimate objective for Africa’s energy sector?
Our objective is to support the ultimate success of power projects that will deliver economic and environmental benefits and greater access of power to all Africans. Also, the inclusion of the private sector through IPPs in the African power sector will help provide a sustainable power supply model for African governments to support their economies without a significant debt burden on the utilities and fiscus. We are here to contribute to the success of the continent’s Renewable Energy journey.
With the advances in renewable energy technology, commitments to climate change and a sustainable future, we have seen growth in many large commercial, industrial and mining companies embark on their own Renewable Energy Journey. Energy Finance foresaw this development and has well-structured funding instruments to support the specific funding requirements of embedded and captive energy transactions.
What are the key projects – in the energy sector – is Nedbank involved in, and how have they been affected by the COVID-19 pandemic?
We recently launched an innovative Sustainable Development Goal (SDG) linked, Tier 2 capital instrument in partnership with the African Development Bank. The launch of the bond builds on our established leadership in the sustainable development finance space, having previously offered two highly successful renewable energy ‘Green’ Bonds, the proceeds of which are now funding a number of high-potential solar and wind renewable energy projects.
The Bond was independently verified by the Carbon Trust, which offered a second-party opinion and reaffirmed that this capital product is entirely compliant with the Green Bond Principles, thereby providing complete legitimacy and clarity to the usage of the proceeds in favor of environmental growth projects and contributing considerable interest to the product and its holders.
We also have wind, photovoltaic and biomass projects under construction, which will experience delays due to the lockdown from COVID-19.
About Nedbank Corporate and investment Banking:
Nedbank Corporate and Investment Banking is a division of Nedbank – a leading African bank that provides global markets, transactional, corporate and investment banking services. The bank’s client base includes leading corporations, financial institutions, state owned entities and governments in South Africa, as well as across Africa as a whole.