Leading in renewable energy finance



Even a brief search of the headlines of newspapers around the world will leave one in no doubt that the threat posed by climate change has morphed from being solely a focus of climate activists to a global concern. The climate emergency is now being recognised at board level, so contributing towards meeting the UN Sustainable Development Goals (SDGs) has become a requirement in all responsible multinational or major companies.

With Nedbank being the first South African bank to issue green bonds on the JSE and among the first to announce that it would no longer finance new coal-fired power plants, it comes as no surprise that the bank is seriously committed to doing its bit to help meet South Africa’s commitments to the SDGs, and that it holds a leadership position in renewable energy finance.

The bank has prioritised nine of the 17 global SDGs as these potentially entail banking solutions and so guide the bank’s sustainable-development activities. Arguably, one of the most pressing SDGs with regard to climate change is SDG 7: Affordable and clean energy. In pursuit of this goal, the bank’s business banking division is at the forefront of providing finance for renewable energy solutions to commercial enterprises, specialising in the agricultural, service, manufacturing and financial sectors. Typical applications include the installation of photovoltaic (PV) panels on buildings with large roofs such as warehouses, factories, shopping malls and office blocks; installations of solar and wind farms on vacant land; and energy-intensive businesses which can benefit from more cost-effective and cleaner generation of electricity than the national grid can provide.

Floating solar farm near Franschhoek in the Western Cape (Photo: Farmers Weekly).

Strategically, the bank aims not only to be good with money but more importantly to do good with it as well. It is therefore proud to use its core business to drive sustainable development, thereby supporting new industries and creating jobs and economic growth based on clean energy.

A recent innovation the bank financed is the country’s first commercial floating solar farm, installed by one of the oldest farming operations in the country and located near Franschhoek in the Western Cape. The owners of the solar farm started investigating renewable energy projects in 2018 because of the increasing costs of electricity and the carbon emissions associated with it. The bank’s specialised finance and credit teams came up with a creative solution to use an overdraft facility to fund the development stage of the project, and then move to SDG asset-based finance, with progressive payments over a term of ten years. This solution recognises the need for longer payback periods for solar and other sustainability-related projects.

The solar park can produce 60 kW of energy and is now used to power almost everything on the farm, from irrigation pumps to the machinery involved in the packaging of fruit for export. Infrastructure has been installed to allow for a battery system, which will take the farm completely off the grid in the second phase of the project.

The bank also provides solutions for companies which want to generate energy for end-users like existing independent power producers (IPPs) which bill their clients in a similar manner as municipalities and Eskom would. The benefit for the end-user is fixed pricing, with built-in mutually agreed increases over 25 years or more, providing peace of mind for the increasingly cash-strapped consumer. The bank partners with potential IPPs to create a business entity, fund the purchase of equipment and assist with the legal documentation and agreements.

The bank advises businesses which apply for renewable energy finance to shop around for suppliers, equipment and solutions as they would for any acquisition of a large asset: Research different technologies, pricing, guarantees and post-sales maintenance. Obtain quotes and specifications to compare the generation outputs, costs and equipment with the research and the various suppliers’ offerings.

Since it is important that these companies familiarise themselves with equipment installers and suppliers, the bank partnered with the South African Photovoltaic Industry Association (SAPVIA) to develop the PVGreenCard, which provides assurance that the installer is qualified, follows the latest industry guidelines, uses quality components, specifies the system correctly and installs it properly, and warrants that the system will perform to specification.

It’s also a good idea to speak to fellow business owners in similar industries who have embarked on the renewable energy journey to gain insight into the performance and professionalism of their installers. Remember to determine the owners’ levels of satisfaction with the actual energy delivery and utilisation versus the promised specifications.

When applying for finance, business owners should ensure that the specifications, invoices, agreements or contracts supplied by the installer accompany the financial records of the company and electricity bills submitted to the bank.

Contact Mark Boshoff, Nedbank, Tel 082 902-8201, markbo@nedbank.co.za

 

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