In order to maintain its position as the market leader in financing renewable energy projects, Nedbank Group Ltd. plans to nearly double the amount of money it lends to green energy projects in South Africa over the next two years.
According to Chief Executive Officer Mike Brown, funding from the bank for the government’s Renewable Independent Power Producer Program, which aims to increase privately generated electricity in the country, could increase from 29 billion rand to about 50 billion rand ($3 billion) in the “short-to-medium term.”
“We would definitely be willing to increase it if client demand were to exceed that,” Brown, 56, said in an interview at Nedbank’s office Friday. “We need masses of new energy.”
After President Cyril Ramaphosa released the private sector’s restrictions in an effort to end the energy crisis holding back Africa’s most industrialized economy, there is likely to be a surge in demand for financing renewable energy projects. The government scrapped a 100 megawatt limit on private power generation, allowing companies to produce electricity without a license to meet their own needs and sell to the grid.
As part of the so-called “bid window six” tender, the state increased renewable energy purchases by twofold, to 5,200 megawatts, in order to hasten the country’s transition away from an over-80% reliance on coal for power and toward greener energy sources. Authorities are rushing to avoid a repeat of recent blackouts—power utility Eskom Holdings SOC Ltd. cut enough electricity to light up 4 million South African homes—that enraged the locals.
Nedbank has been a market leader in previous rounds of the auctions, said Brown. About 10% of Nedbank’s 1 trillion rand balance sheet has been advanced to projects that meet United Nations sustainable development goals, he said.
According to Brown, “We absolutely think that working with advising and financing our clients as they change the energy mix of the countries they operate in over the next 10 to 20 years is a massive opportunity for us and one that we absolutely aim to continue to lead in.”
Nedbank has risen 24% this year making it South Africa’s best-performing bank share. They rose 0.7% on Friday.
Beyond South Africa, the lender sees opportunities in the liquefied natural gas discovered in Mozambique even though projects in the region have been delayed due to attacks by an Islamic State affiliate in the northern part of the country. The insurgence has resulted in thousands of fatalities and the displacement of people since the violence began in 2017.
Given what is going on globally, Brown said, “I am sure all the sponsors will be re-evaluating when and how to start up again.” If those security issues can be resolved, I believe it makes the LNG deposits even more desirable than they were before.
