Kathu Solar Park concentrated solar power project

June 22, 2016

Project description

Kathu Solar Park is a 100MW CSP plant using parabolic trough technology that will be equipped with a molten-salt storage system that allows 4.5 hours of thermal energy storage. The CSP plant is expected to be operational in the second half of 2018.

This CSP project will be the first CSP project that ENGIE has undertaken and is an impressive addition to its existing African energy portfolio, which currently includes the operational 94MW West Coast 1 wind farm in South Africa, the operational 301MW Tarfaya wind farm in Morroco, two Safi thermal power generation units under construction in Morocco, the 670MW Avon plant and 335MW Dedisa peaking plants in South Africa.

ENGIE Global Developments B.V holds a 48.5 per cent ownership stake in the special purpose vehicle established in South Africa that will own the CSP plant. The remainder of the shareholding is held by the PIC, Lereko Metier REIPPP Fund Trust, Investec Bank Limited, SIOC CDT and smaller black economic development partners.

Scope of work

Advised ENGIE as Sponsors’ and Borrower’s legal counsel in respect of development, structuring, construction, operation, debt and equity financing of a 100MW trough concentrated solar power project selected as preferred bidder under Round 3.5 of the South African government’s renewable energy IPP procurement programme (REIPPP programme) that reached financial close in the second quarter of 2016.

Main highlights

ENGIE is a leading global energy developer with experience in renewables as well as natural gas technologies and energy efficiency services around the world. ENGIE is one of the largest international developers that have successfully bid under the REIPPP programme which is set to very tight time scales. This project is the first CSP that ENGIE has undertaken and uniquely, ENGIE has played the role of lead developer and will be the operator of the project after commissioning is complete, which reflects a firm commitment to the continuing success of the project for the full life of the project.

The size of the funding requirements which required multiple lenders (including commercial banks and development finance institutions) to participate in the debt funding, the complexity of CSP technology and the number of equity participants made this a challenging transaction particularly in light of the strict compliance requirements in the request for proposals under the REIPPP programme issued by the SA Department of Energy

Once completed, the 100MW CSP plant will be one of the largest CSP plants in South Africa. Once constructed, the plant will have the ability to generate sufficient power to electrify 80 000 households. It will be a significant contribution to South Africa’s objective of establishing sustainable energy generation in an effort to obtain a clean energy future which aligns with the country’s Integrated Resource Plan which was first published in 2010. In addition, the project promises to assist in socio-economic development in South Africa, through job creation and local community support.