Scatec's 288 MW Solar PV Project: A Boon for South Africa's Renewable Energy Ambitions

In a significant development for South Africa's renewable energy sector, Scatec has been awarded a 288 MW solar PV project in a government tender. This project, part of the seventh round of the Department of Mineral Resources and Energy's Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), is set to contribute significantly to the country's solar energy targets. Let's delve into the details of this project and its implications for South Africa's renewable energy landscape.



South Africa has set an ambitious goal of installing more than 8 GW of solar capacity by 2030. Scatec's 288 MW solar project is a substantial step towards achieving this target. With this project, Scatec's total solar capacity in South Africa will reach 1.2 GW, representing 15% of the country's 2030 solar target. This project alone accounts for 36% of the 800 MW solar capacity procured in the seventh round of the REIPPPP, demonstrating Scatec's commitment to South Africa's renewable energy goals.



The project's timeline aligns well with South Africa's renewable energy targets. By 2030, the country aims to install more than 8 GW of solar, and Scatec's 288 MW project contributes significantly to this goal. The project is part of the seventh round of the Department of Mineral Resources and Energy's Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), indicating a commitment to renewable energy expansion. This aligns with South Africa's overall energy transition plan, which aims to reduce greenhouse gas emissions and increase the share of renewable energy in the energy mix.

In terms of financial performance, the 288 MW solar project is expected to generate significant revenue for Scatec and its partners. Assuming an average PPA price of ZAR 0.60/kWh (as per REIPPPP Round 7), the project will produce approximately ZAR 1.7 billion (USD 100 million) in annual revenue. This represents a 25% increase from Scatec's current South African portfolio, which generates around ZAR 1.3 billion (USD 75 million) annually from 730 MW of solar capacity.

Based on Scatec's historical projects, the company typically targets an IRR of 8-10% for its renewable energy projects. Assuming a similar target for this 288 MW solar project, and considering the project's estimated capex of USD 207 million, the expected IRR could be around 9%. However, this is a rough estimate and the actual IRR may vary based on factors such as project execution, market conditions, and changes in energy prices.

Scatec's 288 MW solar project in South Africa aligns with its growth strategy, leveraging the country's Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). With a total project cost of ZAR 5.1 billion (USD 270 million), the project's estimated capex of ZAR 4.5 billion (USD 241 million) in non-recourse project finance debt, and Scatec's 51% equity ownership, the project is expected to generate solid returns. Scatec's EPC and O&M services further enhance the project's value, contributing to its overall strategy of profitable growth and scale-building in Sub-Saharan Africa.

In conclusion, Scatec's 288 MW solar project in South Africa is a significant development for the country's renewable energy sector. This project not only contributes to South Africa's solar energy targets but also demonstrates Scatec's commitment to the country's renewable energy goals. With a promising financial outlook and alignment with Scatec's growth strategy, this project is set to play a crucial role in South Africa's energy transition.