This sector is ripe for the picking as R56 billion in new contracts get signed

by , 11 April 2018
This sector is ripe for the picking as R56 billion in new contracts get signed
During the Zuma era we had to watch as South Africa's largest source of foreign direct investment dried up.

This of course was renewable energy. And it was due to the Zupta administration rather looking to enrich a select few with a nuclear plant program…

But that's now in the past.

And on Wednesday 4 April 2018, Energy Minister Jeff Radebe signed 27 agreements with independent power producers.

These agreements represent an investment of R56 billion by the private sector into the economy with no contribution from government other than the support to Eskom in the event of a default by the buyer.

    
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Massive job creation opportunities and positive growth for the economy on the horizon
 
This signing of these 27 contracts was delayed since the last successful round in 2015.
 
These projects will create at least 61,000 jobs in the coming five years, not to mention the positive effect of lower dependence on coal.
 
And, in the Department of Energy’s Integrated Resources Plan (IRP 2016) it envisages that the majority of SA’s electricity will be from sources other than coal in 2050.
 
South Africa’s targeted energy mix


 

Considering this, it is clear that both wind and solar projects will see massive investment in coming years – in favour of coal. 
 
Perhaps the largest other unexpected is the big increase in both open cycle and combined cycle gas power generation…
      
      
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Opportunities to invest in renewable energy are gaining ground – here’s where to look
 
There aren’t a lot of locally listed companies investing in renewable projects and independent power producers at this stage – but it is gaining ground.
 
A number of companies I suggest you look at are:
 
Opportunity #1 - Hulisani owns 100% of Rustmo, a North West based solar project with 7MW of production capacity. It is one of the very first solar projects to be constructed in South Africa.
 
Hulisani also owns a 6.67% share in the Kouga Wind farm in the eastern cape. But perhaps its most strategic investment is its investment in GRI Wind Steel. GRI is a manufacturer of towers for the wind generation sector. It already has the capacity to produce 150 new towers per year, and could increase this should demand increase (as I expect it will).
 
Opportunity #2 – York Timber. York has plans to build a biomass electricity production plant. With this it can produce enough electricity to take its own operations off the grid, and still sell electricity into the grid as well. The project would use waste material from its timber operations. The project was put on ice when the IPP bids were delayed following 2015. But increased optimism and certainty with the new projects could see York revisit this.
 
Opportunity #3 – Renergen, the company purchased a gas field in the free state and has been developing it since 2015. It produces Helium, which it sells to a chemical company, and then compressed natural gas, which can be used as a fuel source. Considering plans for increased investment in gas fired power stations, an investment such as this can prove very strategic. Based on a valuation of the gas resource, Deloitte reported that the value per share for the company could be as high as R77, compared to its current R9…
 
Simply put – there’s a lot of opportunity in the renewable and the independent power production sector. And as the sector gains maturity, investors on the JSE will get more and more opportunities to partake… Keep your eyes open – this is the future! 
 
Here’s to unleashing real value
  
Francois Joubert



This sector is ripe for the picking as R56 billion in new contracts get signed
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