News Article
African Renewable Energy €400m Impact Investment Fund
NextEnergy Capital has begun fundraising for ix:Africa, a €400m/$550m private equity impact fund dedicated to ethical investment in renewable energy, environmental business and clean technology projects in Africa. At the same time NextEnergy Capital and IDC, the South African development bank, have committed seed capital to launch ix:Africa's showcase project, a 6.5MW solar energy development in South Africa.
ix:Africa is targeting investors from the US, Europe and, through a subsidiary Rand fund, South Africa. Approximately 80% of the fund will be committed to permitted power generation and infrastructure projects, with the remaining 20% used to invest in pre-permit power plant development and to prepare early-stage clean technology for the market. A portion of the fund's profits will go to a charitable foundation, diffusing impact investment in clean energy to other social initiatives, including in food, housing and health projects. J.P. Morgan predicts that Impact Investment, an emerging asset class, will become "one of the most powerful changes within the asset management industry in years to come", potentially attracting invested capital of $1 trillion within the next 10 years*.
Stefano D.M. Sommadossi, Founding Partner at NextEnergy Capital and a senior executive at ix:Africa says: "We have built a dedicated team of professionals with relevant expertise in the sector who will work in parallel, securing investment and developing projects at the same time. There are significant opportunities for capital investors in this space and we want to be able to deploy capital straight away."
The showcase project is located in the Waterberg region, 300Km north of Johannesburg. At 6.5MW, the project will power 74,000 households in the township over a twenty year lifespan, reaching 500,000 people. The project will create 355 jobs during construction and a further 215 jobs for module production in South Africa. On-site, 85 long-term (25 year) jobs will be created. The project will displace 105,000 tonnes of CO2 in total.
Total project investment stands at ZAR 200m (€18m). ix:Africa owns 57% of the project and will invest ZAR 120m, with the remaining 43% being provided by local investors such as IDC. A Community Trust, financed by the South African development bank through a dedicated line of credit, will hold a 21% stake in the plant, ensuring that dividend flows will finance local development initiatives in areas such as education, training and health.
Alongside the investment, ix:Africa has acquired a 20% stake in AfriTrak, an African solar tracking solution utilised in the Waterberg project. AfriTrak expects to develop 360MW of installed capacity in the next 5 years in Southern Africa, creating 5,000 long-term jobs.
"This showcase project has been developed to demonstrate the potential for impact investing to generate considerable social, economic and environmental dividends that will positively affect financial returns to investors", explains Stefano D.M. Sommadossi. "We know that an ethical approach to capital investment can deliver extremely attractive returns, especially in renewable energy. Ethics and returns can be symbiotic."
NextEnergy Capital has assembled a high-profile advisory board for ix:Africa and subsequent impact funds dedicated to investment in other jurisdictions. This includes renowned South African, Dr. Dr. Mamphela Ramphele, a former World Bank Managing Director, Chairperson and board member of Goldfields and several other large listed companies and Chair of the South African Technology and Innovation Agency.
"Growth in emerging countries must include a social and economic perspective", says Dr. Ramphele. "Renewable energy projects provide one of the quickest and most sustainable ways of achieving this, providing power capacity that can boost economic growth in a relatively short space of time. The objectives behind ix:Africa are perfectly aligned with the strategic direction of government, creating a lower risk environment and favourable terms of debt. This means that investments can deliver social, economic and environmental impacts alongside market-leading economic returns."
Over the past 5 years, NextEnergy Capital has invested €140m in power assets and manages over €2bn of clean power assets. The launch of the ix:Africa impact investment fund represents a natural evolution of its experience in renewable energy and environmental business. 12 of its team of 25 professionals will work on the fund, with 5 based in South Africa and working alongside over 40 local professionals.
