BOKPOORT CSP MIDDLE EAST & AFRICA THE SUN SHINES FOR THE BOKPOORT BOYS THE BOKPOORT CONCENTRATED SOLAR POWER PROJECT IN SOUTH AFRICA HAS BROKEN NEW GROUND IN TECHNOLOGY WITH 9.3 HOURS OF THERMAL STORAGE, WHICH IS CONSIDERED TO BE THE HIGHEST AMONG COMMERCIAL CSP PROJECTS OF COMPARABLE SIZE. BY ADITYA THAKUR, MANAGER, ACQUISITIONS AND PROJECT FINANCE, AND PRABASHEN GOVENDER , PROJECT DIRECTOR, ACWA POWER . t the same time, the project is a electricity and two molten salt tanks will store landmark in the Renewable Energy excess heat energy for conversion into electric IPP programme with its economic energy after sunshine hours. Aempowerment funding structure, One remarkable feature of the plant is the size which potentially heralds a new era of private of thermal storage – it is the world’s first sector funding for the empowerment equity that commercial utility-scale CSP plant to have more hitherto had been the mainstay of public than nine hours of storage, which provide the financial institutions of South Africa. ability to deliver power well after sunset, effectively making it a base-load power plant. The REIPP procurement programme Once operational, it will generate over The government of South Africa has, quite 230,000MWh every year – enough to meet the successfully so far, completed two rounds of electricity requirements of 17,000 households in bidding and awarding of projects under the South Africa while avoiding some 200,000 tons of REIPP programme. Of the original target of carbon dioxide through clean, emissions-free 3,725MW of renewable energy capacity power 1 . across different technologies 1,416MW and The shareholders of the project include ACWA 1,044MW has been awarded in Rounds I and II Power with 40%; Public Investment Corporation respectively. (PIC), a state-owned institution, with 25%; Lereko While much can be written about the success Solafrica Investments , a BEE 2 partner, with 13%; of the REIPP programme, remarkable results have Lereko & Metier through its investment funds been achieved in areas of reduction in the cost of LMSF1 (9%) and LMSCF (3%); and Kurisani , an procurement of electricity and increasing the investment arm of Lovelife (a South African NGO local content procurement progressively. The working towards HIV/Aids prevention) and a local programme also allays concerns about South community trust with 5% each. Africa’s heavy reliance on coal-based generation Kurisani and the community trust are the and provides a much-needed boost to the BBBEE 3 partners in the project. The community renewable energy industry in the country. trust is envisaged to bring economic benefits to For Round II in March 2012, a total of 79 the local communities living within a 50km bids were received and 19 projects were radius of the project location by virtue of its selected as preferred bidders. Bokpoort was the shareholding in the project in addition to the only CSP project in the second round to bid and socio-economic development activities carried out with a tariff that was 7% lower than the average by the project company. tariff for Round I CSP projects, was awarded the The equity funding for the BEE and preferred bidder status soon afterwards in May BBBEE has historically been funded by public 2012. financial institutions in South Africa. However, in the Bokpoort CSP project, the lead Bokpoort CSP project – A landmark in REIPP sponsor ACWA Power , decided to provide The Bokpoort project is located at Bokpoort farm, such funding to the BEE shareholder, Lereko roughly 120km from the town of Upington in the Solafrica Investments with 13% shareholding, Northern Cape Province of South Africa. The site thereby setting a precedent of sorts in the is ideally suited considering its proximity to a REIPP. sub-station, good access via a road network and a An amount of R195m for this purpose water source in its vicinity. The plant, once built, will be provided by ACWA Power’s will have an array of solar collectors connected empowerment funding vehicle to Lereko. The together through heat transfer tubes that will funding terms are on a par with what is transfer heat energy to a boiler for steam otherwise available in the market from public generation. A 50MWe conventional steam turbine financial institutions. The equity funding for will then use the steam flow to generate BBBEE partners, Kurisani and the community Project Finance International Middle East & Africa Special Report September 2013 13 BOKPOORT CSP MIDDLE EAST & AFRICA TABLE 1 – THE REIPP PROGRAMME Allocation to preferred Allocation to preferred MW allocation per Bidders: Window 1 Bidders: Window 2 determination MW Percentage MW Percentage Solar PV 631.53 43.60 417.1 28.80 1,450.0 Solar CSP 150.00 75.00 50.0 25.00 200.0 Wind 633.99 34.30 562.4 30.40 1,850.0 Biomass 0.00 0.00 0.0 0.00 12.5 Biogas 0.00 0.00 0.0 0.00 12.5 Landfill Gas 0.00 0.00 0.0 0.00 25.0 Small Hydro 0.00 0.00 14.3 19.10 75.0 Total MW 1,415.52 39.00 1,043.9 28.00 3,625.0 Source: Department of Energy, Govt. of South Africa trust is being provided by PIC through its Financing structure empowerment funding channels. The debt financing for the project is provided The construction of the project is being carried by Investec, ABSA and OMSFIN. Investec and out by an EPC consortium that includes industry ABSA acted as the initial mandated lead arrangers leaders Acciona , TSK and Sener , all Spanish and for the project and provided R850m each on a all of which have a well-established track-record take and hold basis. There was also an of developing, constructing and operating CSP underwriting commitment for additional R1.3bn power plants across the globe. Crowie together from Investec and ABSA, part of which Concessions of South Africa is the fourth party in was later taken up by OMSFIN. The debt has been the consortium. The performance of the provided for a contractual tenor of 19.5 years contractor’s obligations under the EPC contract with a cash sweep starting 12.5 years after has been secured by financial guarantees in line completion to bring it down to 17.5 years. with standard project finance practice. It is Repayment profiles have been sculpted to worthwhile highlighting, that, in spite of CSP maintain debt service cover ratios of 1.35x or being a relatively new technology in South Africa above at P50 irradiation levels. and the economic turbulence in Spain, there is The financing structure also features a no completion support in any form from the mezzanine loan tranche provided by ACWA sponsors for this project. Power with fixed pricing for the duration of the The operations and maintenance of the PPA. Investec and ABSA also act as the working project will be carried out by a joint venture capital banks and the hedging banks. of NOMAC (a wholly owned subsidiary of The project has to comply with the hedging ACWA Power) and Invest in Africa Energy strategy to make sure that the entire foreign Services (South African empowerment currency exposure under the EPC contract has to partner). The EPC contractor will continue to be hedged. At the same time, since the interest provide O&M support for the first three years of rate is based on floating JIBAR, the project has commercial operations under a technical services undertaken to swap the senior debt for at least agreement. 90% during construction which drops to 75% for The PPA has been signed with Eskom , the state the next 10 years. utility, for a 20-year period. Eskom’s payment The equity financing is provided by obligations are guaranteed by the South African ACWA Power, PIC and the Lereko Metier government through the provisions of an funds with BEE/BBBEE empowerment funding implementation agreement. from ACWA Power and PIC. The equity financing FIGURE 1 – COMPANY STRUCTURE ACWA power international 100% Offshore: Saudi Arabia Onshore: South Africa ACWA power Africa holdings 100% ACWA power 100% community Local ACWA power Public Kurisani community LMSF1 Bokpoort Lereko LMSCF investment trust holdings corporation 5% 5% 9% 40% 13% 3% 25% Project company 14 Project Finance International Middle East & Africa Special Report September 2013 BOKPOORT CSP MIDDLE EAST & AFRICA has been provided through a mix of share capital approvals within the short window of time Footnotes and shareholder loans. available was a Herculean task by any standards. The financing itself was quite aggressive with 1 – Based on an Financing – Overcoming the challenges long debt tenors and extremely sharp pricing, average The path to financial close for the project was not which were unheard of in the South African 1,100KWh/mon without its share of challenges. At the time of market. th per bidding in March 2012, the sponsors’ consortium Investec and ABSA played an extremely critical household included ACWA Power, Industrial Development role here by agreeing to underwrite an additional consumption Corporation (IDC), Lereko, Lereko Metier Funds, R1.3bn for the project which would later be (ESKOM) and Kurisani and the community trust. IDC held a syndicated in the SA market. While this bridged 0.94tCO2 / significant equity stake (25%) and an additional the gap significantly, there was still a need for MWh grid amount of debt funding as part of the lender additional debt funding. One solution could have emission factor consortium, which included Investec and been to reduce the gearing but because of the for South Africa Development Bank of Southern Africa (DBSA). short timeframe available, all equity investors 2 – Black IDC was also the provider of empowerment could not get their approvals to increase their Empowerment funding to Lereko, Kurisani and the community equity commitments.