GuarantCo – part of the Private Infrastructure Development Group (PIDG) – and UK development finance institution British International Investment (BII) expect to unlock $500-million of new renewable power development through a “groundbreaking” deal with South African energy trading company Etana Energy.

GuarantCo and BII will provide $50-million each of default guarantee finance for Etana in South Africa’s largest “energy wheeling framework” transaction.

This innovative type of deal is designed to unlock new renewable-energy capacity by providing independent power producers (IPPs) with the revenue certainty they need to break ground on new renewable-energy projects.

It is expected that the $100-million in guarantee financing will unlock an estimated $500-million of new renewable-energy projects – providing a major boost to South Africa’s green energy transition – and underlining the UK’s support for the country’s Just Energy Transition Partnership (JETP).

The companies note that displacing fossil fuel generation with electricity generated from renewable sources will avoid 1.2-million tonnes of CO₂-equivalent emissions a year and create a significant number of new jobs.

This transaction qualifies under the International Partner Group (IPG) countries as part of their JETP commitment to South Africa.

JETP is funded by several governments, including the UK, and serves to accelerate South Africa’s environmental transition in the energy sector. This is GuarantCo’s first contribution to this programme.

The guarantee facility will enable about 500 MW of wind and solar capacity to be added to the grid by several renewable-energy IPPs over the next few years.

The companies note that recent regulatory changes in South Africa have opened up the opportunity for private power producers to sell electricity to business customers, and companies such as Etana are looking to accelerate this opportunity, expanding the addressable market by buying renewable energy from private generators and then selling that output to a portfolio of commercial customers by “wheeling” the electricity across the existing transmission network.

Etana’s founding shareholders are H1 Holdings, a black-owned investment company with which BII has a longstanding relationship, and Chariot, a British group which is focused on developing transitional energy projects in Africa, listed on the LSE.

“BII is demonstrating global leadership in unlocking private capital for climate finance. The Etana deal is a truly innovative form of financing that I hope will serve as a template for unlocking South Africa’s green energy potential,” says BII Africa director and head of project finance Iain Macaulay.

“We need to pursue all avenues that can unlock the capital required to build new electricity generation capacity in South Africa. Local businesses need low-carbon, cost-competitive electricity to remain relevant and viable. Etana’s aggregation model offers a way to meet these needs whilst enabling new renewable-energy capacity to be built.

“This guarantee facility is a critical piece of the puzzle for a relatively new company like Etana to be a bankable offtaker for IPPs. We are incredibly grateful to GuarantCo and BII for their vision, support and commitment to catalysing this opportunity with us,” says Etana Energy CEO Evan Rice.

“We are proud to support the renewables sector in South Africa by entering into this guarantee framework agreement with Etana Energy. From an investment point of view, it provides strong replication opportunities by proving to the market that a guarantee framework can work at scale.

“GuarantCo continues to seek out potential market transformation transactions like this in lower-income communities to deliver against the UN’s Sustainable Development Goals in alignment with the PIDG 2030 strategy,” says GuarantCo deputy CEO Surabhi Mathur Visser.