Verdure Targets More Sales of Securities Backed by Rooftop Solar
(Bloomberg) -- Verdure Fund, which last month sold South Africa’s first securities backed by loans made to small-scale solar power facilities, plans further sales, starting with an issuance in the first quarter of next year.
The Johannesburg-based fund, backed by German state development bank KfW, sold 229 million rand ($13 million) of the bonds from its portfolio of loans used to erect 159 rooftop solar installations, on Nov. 7. It aims to sell at least 300 million rand of the securities every year for the next decade, said David Johnson, one of Verdure’s co-directors.
“It’s a new class of asset,” said Johnson. It’s “bundled to form a diversified portfolio which has found favor with the market in a three times over subscription on our maiden issue,” he added.
South Africa, which still relies on coal for almost four-fifths of its electricity generation, has seen a surge in investment in solar power and other renewable-energy technologies in recent years. A lengthy period of intermittent blackouts instituted by the state utility Eskom Holdings SOC Ltd., a loosening of regulations governing private participation in the electricity industry and a 600% surge in Eskom’s tariffs over the last two decades has driven the boom.
The projects to which Verdure has made loans typically see the installation of rooftop solar panels by small-scale renewable energy companies on the properties of customers such as gas stations and shopping mall owners. The customers sign long-term purchase agreements that give them certainty on their costs years in advance and the securities are sold on the expectation that the guaranteed cash flow will allow the loans to be repaid.
You get “certainty of supply and certainty of pricing,” Johnson said.
Verdure is currently a fund of more than 1 billion rand, with the proceeds of the securities sale adding to 600 million rand provided by KfW and a 300 million rand loan from Rand Merchant Bank. Over the next decade it expects to fund over 4.5 billion rand of renewable-energy projects.
It has funded about 280 projects with all but three of them being solar-power installations.
The firm also paid for a small hydro-power plant that sells its electricity to Eskom and two biogas-to-power facilities that sell their energy to Rainbow Chicken Ltd., a South African poultry producer.
At those plants, methane from bacteria feeding on the waste from chicken abattoirs is used to produce electricity. The heat generated as a byproduct is used to prepare water for steam-cleaning operations and the water at the end of the process is clean enough to be put back in the river system. Ammonia fertilizer is made as a by product and money is also generated by the sale of carbon credits.
“It’s quite an interesting project,” said co-director Greg Ansermino. “It produces renewable energy but it does a whole bunch of things in addition to that.”
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