Innovative financing of green infrastructure

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The overarching goal is to support South Africa in achieving its climate goals and thus contribute to its development towards an ecologically sustainable and climate-resilient economy. The project refinances the equity shares of South African Community Trusts (CTs) in projects of the government-run Renewable Energy Independent Power Producer Procurement Programme (REI4P). The REI4P stipulates that municipalities within a radius of 50 km should benefit from a renewable energy (RE) project and hold a minimum stake in the RE project. This requirement is usually met by establishing a CT, which should use the income from the RE project for municipal needs, so that ultimately the South African population participates in the success of the RE projects. However, these equity shares must largely be financed through loans that charge very high interest rates and completely absorb the project income for interest and repayment payments. This means that the CTs will only be able to record revenues and make investments after their loans have been fully repaid (up to 17 years). The refinancing provided will provide the CTs with a more advantageous loan with lower interest rates and optimized cash flows, thus creating liquidity for the CTs to be channeled into sustainable projects at the community level. It will also free up capital at the bank and IPP level (original financiers), which in turn will be available for potential investments in new RE projects.