GuarantCo and British International Investment (BII), the UK’s development finance institution and impact investor, expect to unlock US$500 million of new renewable power development through a groundbreaking deal with Etana Energy, the South African energy trading company.

GuarantCo and BII will provide $100 million ($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.

Recent regulatory changes in South Africa have opened the opportunity for private power producers to sell electricity to business customers, and companies like 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.

It is expected that the US$100 million in guarantee financing will provide a major boost to South Africa’s green energy transition – underlining the UK’s support for the country’s Just Energy Transition Partnership (JETP). JETP is funded by several governments, including the UK, and serves to accelerate South Africa’s environmental transition in the energy sector.

Displacing fossil fuel generation with electricity generated from renewable sources will avoid more than 1.2 million tonnes of CO2-equivalent emissions annually and create a significant number of new jobs.

The guarantee facility will enable around 500MW to be added to the grid by several renewable energy (wind and solar) IPPs over the next few years.