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Power and Infrastructure Finance in South Africa: A Plain Guide

In South Africa, most large private power projects have been financed through government procurement programmes such as REIPPPP, with Eskom as the buyer, but more projects now sell directly to companies over the grid. The Electricity Regulation Amendment Act, signed in August 2024, sets out a move to a competitive electricity market with an independent transmission system operator.

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How is the power sector in South Africa set up?

Eskom is the state utility. It runs most power stations and, through the National Transmission Company South Africa (NTCSA), the national grid. Municipalities distribute power in many cities.

The National Energy Regulator of South Africa (NERSA) licenses generators and sets tariffs. The Electricity Regulation Amendment Act, signed on August 16, 2024, provides for an open market platform for buying and selling electricity and for NTCSA to act as transmission system operator until an independent operator is set up within five years.

Key projects and programmes

These are public, well-documented examples from the sources below. They show how the market works.

  • The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), run by the IPP Office, which has procured wind and solar projects in bid windows since 2011.
  • Other IPP Office programmes for battery storage, gas, and risk mitigation power.
  • Private power purchase agreements, where a company buys power from a solar or wind farm and the power is wheeled over the Eskom or municipal grid.

How are projects financed?

REIPPPP projects are usually financed by South African banks, DFIs, and equity investors, backed by a 20-year PPA with Eskom and an implementation agreement with the government.

Private PPAs depend on the credit of the corporate buyer, grid capacity, and wheeling rules. Lenders in rand reduce currency risk for local projects.

What should investors, lenders, and off-takers check?

Common checks include:

  • The credit quality of the buyer: Eskom, a municipality, or a company.
  • Grid connection capacity, which is limited in some provinces with strong sun and wind.
  • Wheeling and trading rules as the new market code develops.
  • Local ownership and economic development rules in each procurement round.

Where does Vektron Merchants fit?

South Africa is one of the six countries covered by the Vektron Merchants African Gateway. Vektron Merchants is a marketing agency for energy, commodities, infrastructure financing and industrial firms. We find buyers, offtakers, lenders and partners for companies in these four industries, and we secure meetings with the people who sign.

Frequently asked questions

What is REIPPPP?

South Africa's Renewable Energy Independent Power Producer Procurement Programme. Private developers bid to build wind and solar projects and sell power to Eskom under long-term PPAs.

Can companies in South Africa buy power directly from a private generator?

Yes. Companies can sign private PPAs and have the power wheeled over the grid, subject to grid capacity, licences, and wheeling terms.

Sources

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General information, not investment, legal or tax advice. Facts are from the public sources listed and may change.