Exclusive: Old Mutual’s AIIM to invest in 1GW South Africa solar farm

SolarAfrica and Starsight Energy are in the process of merging to create a pan-African solar power supplier. AIIM, which has $2.4bn under management, is part of Old Mutual Alternative Investments and manages private-equity African infrastructure funds. It first invested in Starsight in 2018 and is now contributing $73m through its IDEAS Fund to accelerate the growth of the new company.

The main use of that money will be to build a new solar farm at De Aar in Northern Cape province, Agbaje says, declining to give an exact figure. Power from the farm will be transmitted across South Africa’s grid to commercial and industrial (C&I) customers, displacing the use of dirtier fuels such as coal, Agbaje says.

Subject to regulatory approval, construction will start in the first quarter of 2023 with the plant taking about 12 months to build. The project will employ 3,000 people during construction and create 100 permanent jobs, he says.

The merger between Starsight and SolarAfrica will create a new entity for which the name and leadership have yet to be announced. The combined group will have an existing portfolio of 220MW of operated and contracted generation capacity, with 40MWh of battery storage.

• The new company will continue investing in existing countries including Nigeria, Ghana and Kenya, and is evaluating new opportunities in other countries. Francophone west Africa is a “particular area of interest,” Agbaje says.
• AIIM is also constantly evaluating possible new renewable energy investments, he adds.

Willing buyers and sellers

African utilities under financial strain have, for want of an alternative,  been the intermediaries between power producers and consumers, Agbaje says. Many C&Is would be willing to pay market rates for power, so they should be taken off the utilities who could then focus on consumers who don’t have other options, he argues. “We need to get closer to a willing buyer and willing seller model.”

AIIM wanted Starsight to be present in South Africa even before regulatory changes in 2021 which allowed corporates to generate up to 100 MW of power without needing a license, Agbaje says. The reform also allowed independent electricity generators access to state utility Eskom’s transmission and distribution system through a process known as “wheeling”.

• The regulatory landscape in South Africa has “changed on a massive scale,” Agbaje says. Similar changes in other African jurisdictions would drive up investment in renewable energy, he says. “The continent can look to South Africa.”
• High prices are being paid for diesel fuel while cheaper alternatives are available, so expanding access to solar is urgent, Agbaje argues. “The urgency around the sector doesn’t support long development cycles. The potential is huge across the continent. ”

Bottom line

Letting African corporates make their own energy arrangements would take some pressure off national grids and let them focus on serving vulnerable consumers.