The project

In September 2023, STOA committed $50 million to strengthen the capital of Red Rocket, a South African independent power producer (IPP).

STOA participated in this transaction alongside FMO (the Dutch development bank) and the South African Evolution III fund managed by Inspired Evolution, thus joining the management investment vehicle and Inspired Evolution’s Evolution II fund in the capital.

This financing (totalling $160 million) will enable the development, construction and operation of renewable energy projects owned by Red Rocket in Africa, providing clean, reliable electricity.

The issues

Improving access to energy in Sub-saharan Africa

For several years now, South Africa has been experiencing power cuts of up to 9 hours a day. These power cuts are linked to load shedding measures implemented to prevent the network from collapsing: the high demand for electricity cannot currently be met due to repeated breakdowns at the country’s power stations, with the national electricity production and distribution company, Eskom, observing a failure in the management of the current installed base of power plants and in the construction of new plants. Faced with the financial and operational crisis that the company is experiencing, the South African government has undertaken to increase the deployment of capacity by the private sector.

Red Rocket is the second largest IPP in South Africa, with over 1.6 GW of solar and wind projects awarded to date. The company is positioned in government tenders to supply electricity to Eskom (via the REIPPP programme), as well as in private PPA (to supply electricity to industrial customers). With 240 MW already installed in South Africa and Uganda, this investment will enable Red Rocket to finance notably three REIPPPP Round 5 projects (364 MW) that have reached financial close, and two REIPPP Round 6 projects (440 MW – the largest share obtained in these auctions).

A key project for the Sustainable Development Goals

In this way, Red Rocket’s projects are helping to increase the country’s electricity production capacity, which is critical for many economic activities and for the provision of essential education and health services, and to reduce the additional cost of energy associated with the use of expensive and polluting alternatives (diesel generators). In a country with a particularly carbon-intensive energy mix, Red Rocket is helping to limit new greenhouse gas emissions. This project therefore contributes to achieving sustainable development goals 7 (clean and affordable energy), 8 (economic growth and decent work) and 13 (measures to combat climate change).

This transaction is also in line with STOA’s commitment to devote at least 50% of its investments in Africa, and as much to projects with climate co-benefits.

Expected results

3 GW of assets in the portfolio of projects awarded, in operation or under construction.