The Infrastructure Debt team specialises in infrastructure debt financing, focusing on large-scale economic infrastructure projects across various sectors, with a primary emphasis on renewable energy, transmission, transportation and public infrastructure development in South Africa. Infrastructure Debt is a leading institutional provider of financing that supports essential infrastructure projects in South Africa.
“The capital outlays for infrastructure projects are very large - a new 140MW wind project, for example, can cost around R5 billion,” explains Rolf Canto, Head of Infrastructure Debt at Old Mutual Alternative Investments.
That amount is generally financed by a combination of equity and credit. As Canto notes: “By providing loan financing for large infrastructure projects — typically working with a capital structure of 70-80% debt (loans) and 20-30% equity — it allows for more affordable infrastructure since debt has a lower return requirement than equity investments, resulting in overall reduced charges for end users.” Infrastructure Debt works with conservative, long-term institutional investors such as insurers and pension funds, which are comfortable with 20-year loan commitments that align with their long-term liability profiles.
KEY TRANSACTIONS IN 2024
Infrastructure Debt plays a crucial role in bridging financial gaps, thereby enabling critical infrastructure projects that might otherwise be impossible to realise. Driven by a deep commitment to supporting South Africa’s infrastructure development, Infrastructure Debt offers investors the confidence that comes from dealing with experts who boast a deep
understanding of infrastructure financing, have the ability to structure complex, long-term financial solutions and appreciate the value of participating in sustainable and economically viable projects.
By providing specialised debt financing and working closely with developers, investors, and government entities, Infrastructure Debt continues to contribute to the transformation of South Africa’s infrastructure landscape. Our imprint can be felt across:
Renewable energy financing:
The most significant project for which the Infrastructure Debt team provided financing last year was the Oya Energy renewable energy project, located between Matjiesfontein and Sutherland in the Karoo. The single largest hybrid renewable energy facility in Africa, the project represents a breakthrough in sustainable power generation by combining wind energy generation, solar power production, battery storage technology and targeted power delivery during peak morning and evening hours. The project forms part of the South African government’s Risk Mitigation Independent Power Producer Programme and demonstrates an innovative approach to addressing South Africa’s energy challenges.
“Normally traditional renewable energy is only generated when the wind blows or the sun shines. By integrating multiple renewable technologies with battery storage, the project can provide more predictable and consistent power to the grid,” explains Canto. “This transaction demonstrates the highly specialised capabilities available within the Infrastructure Debt team to support complex, yet critically needed infrastructure.”
Power market deregulation support:
Following the severe load shedding in 2022, the South African government announced a gradual deregulation of the power market to stimulate private investment. The deregulation aims to create more transparent and competitive power prices, thereby addressing the issue of rising power prices. In addition, by scrapping all licensing requirements for renewable energy projects, private developers can now proceed with projects if they are in areas with available grid capacity and have a firm off-take agreement.
Infrastructure Debt has supported this evolution through financing private renewable energy projects, supporting industrial users in securing long-term renewable energy contracts and helping developers navigate the new regulatory frameworks.
Emerging infrastructure projects:
While there are significant challenges in the infrastructure sector, Canto sees substantial opportunities in grid expansion and innovative infrastructure solutions. Per the Electricity Regulation Amendment Act, investors can now develop new transmission lines and stations - in other words expand the capacity of the national grid. “You can only build a 500 MW plant if you have a way of exporting that energy to the users of that energy. That is a 2025 and beyond theme,” says Canto. “We are ready to support the rollout of new transmission infrastructure and there have been a lot of developments in that space.”
Beyond energy, Infrastructure Debt is also exploring and financing water and rail infrastructure, port development and public-private partnership (PPP) projects. The PPP projects typically involve the private sector investing a significant amount of upfront capital to develop and maintain critical infrastructure under long-term government contracts, with particular interest in border post infrastructure development, logistics infrastructure improvements and municipal facility upgrades.
“The Infrastructure Debt team is positioned to continue financing renewable energy projects, support grid infrastructure development, explore new sectors for infrastructure investment and provide valuable input as these sectors are opened up for private investment,” concludes Canto.