France’s Engie seeks renewable-energy project finance for South Africa and Egypt

By David Whitehouse
Posted on Wednesday, 30 March 2022 16:12

Mohamed Hoosen, Engie managing director for renewables Asia, Middle East and Africa. Photo supplied.

French energy company Engie is seeking to raise around $350m in project finance for renewables projects in South Africa, Mohamed Hoosen, managing director for renewables in Asia, the Middle East and Africa, tells The Africa Report.

The project finance will be a combination of debt and equity, and Engie is now in talks with South African lenders over the debt, Hoosen says from Johannesburg. The funding will be divided between solar and wind capacity, and the Oya hybrid project, which will combine solar, wind and lithium batteries. The Oya project may account for roughly $150m of the funding, Hoosen adds.

South Africa is trying to enlarge the role of renewable  energy to reduce reliance on coal and tackle a power shortfall estimated by President Cyril Ramaphosa at 4,000MW. The government will at the end of March request proposals for 2,600MW in the sixth renewable energy bid window, as well as 513MW of battery storage. The seventh bid window is scheduled for six months later.

The country is a priority market for Engie due to the ability of companies to make corporate power purchase agreements (PPAs). Engie has “every interest in pursuing the corporate PPA space”, which is still in its early stages, Hoosen says.

In November, Engie bought a 40% stake in the 100MW Xina Solar One solar plant in the Northern Cape from Spanish engineering group Abengoa.

Engie also operates in renewables in Egypt and Morocco. The company will seek project finance for the 501.7MW onshore Gulf of Suez II wind project, Hoosen says, adding that the funding is likely to come from outside Egypt. Engie has a 35% stake in the project, alongside Orascom Construction with 25%, Eurus Energy Holdings and Toyota Tsusho.

  • Hoosen wants to develop Engie’s renewables portfolio in Morocco at the next auction, for which as yet there is no date. The company will need project finance in the country, he says.
  • A strategic review led to the conclusion that Engie’s renewables activity in Africa should be focused on these three countries, Hoosen says.
  • The company is looking for new industrial partners for future projects in all three to add to existing partnerships, he adds.

Russia-Ukraine impact

Russia’s invasion of Ukraine has led to “significant upward pressure” on prices for solar and wind energy equipment, says Hoosen. This is due to higher prices for crude oil, freight and commodities such as steel. There is no choice but to deal with the challenge, he argues. He says that regardless of the outcome of the war, it is likely that prices will remain high for the next 12 to 24 months.

Within the renewables industry, projects with commitments  will go ahead. Those which are at a late pre-commitment stage are most likely to be delayed, while early-stage projects are unlikely to be affected because companies will have time to work around the cost increases, Hoosen says.

He does not expect that the higher prices will be permanent. Ultimately, he says, prices “will revert to something like their pre-war levels. This will pass. The transition to low carbon is here to stay.”

The bottom line

Engie sees higher input prices as a blip on the road to Africa’s transition to renewable energy sources.

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