State Eksfin is offering NOK 1.2 billion as security for Scatec’s largest investment to date, a solar and battery joint venture in South Africa.
Eksfin and Scatec report to E24.
Eksfin was created when the Norwegian Export and Export Credit Guarantee Institute was merged in 2021. In recent months, among other things, Eksfin loaned a quarter of a billion to wild salmon farming in China and promised four billion in loans and guarantees to battery manufacturer Freyr.
Eksfin is now offering guarantees of NOK 1.2 billion for the Kenhardt 1-3, three power plants that Scatec will build in the Northern Cape province of South Africa.
The facilities will consist of 540 MW of solar energy with a battery capacity of 225 MW, and will be among the largest solar and battery projects globally.
This is Scatec’s largest investment to date. The project is also special because it will provide constant electricity from early morning until late evening, rather than connecting a production that varies with sunlight.
The capital cost of the entire facility is about one billion dollars. So of course it is a huge investment. And then we might invest nearly NOK 1 billion in the equity side, says Scatec CEO Terje Pilskog to E24.
– How important is Eksfin’s participation?
– It’s very important. Eksfin has supported our investments from the start. He says it facilitates access to liquidity and volume.
Two years ago, Scatec paid about $11 billion to buy SN Power and thus expanded its business to include hydropower as well. Last year, the company announced investments of around NOK 100 billion through 2025.
Seven billion guarantees
In total, Scatec has received seven billion NOK government guarantees since 2010. It has contributed to developments in countries such as Ukraine, the Czech Republic, Honduras, Pakistan, Malaysia, Brazil and Egypt.
Previous GIEK provided guarantees and risk mitigation to Scatec early on. Our involvement has expanded the capacity of banks such as Nordea, Swedbank and DNB so that Scatec can take on large projects early on, says Eksfin CEO Tone Lunde Bakker to E24.
Appointed last year as head of the new body, she was previously head of Norwegian operations for Swedbank and Danske Bank.
– We have worked with Scatec since 2010, and they themselves say that they could not have achieved what they have accomplished without this contribution. Many projects are being undertaken in countries with high political risk, and Norwegian banks are not able to take on this kind of risk on their own, she says.
She notes that Eksfin is working with private banks to help launch private financing.
– In the project we are now funding in South Africa, Nordea issues guarantees to Scatec, and then we issue counter guarantees to Nordea again. They guarantee project completion and Scatec equity. Eksfin guarantees the ability to catalyze, and we’re taking a big chunk of risk mitigation, Bakker says.
It should offer stable strength
As the only pure renewable project in South Africa, the Scatec project won, among other things, gas, oil and other forms of energy, Bilskog notes. Unlike many other renewable projects, it should provide stable production throughout the day.
– What distinguishes us is that we provide stable energy from five in the morning until ten thirty in the evening, 150 megawatts throughout the entire period. Bilskog says he’s completely new to renewable energy.
“The way we do it is to combine the batteries with solar cells, so that you fill the batteries during the day and extract energy in the morning and evening to deliver stable power,” he says.
The Scatec director sees it as a good sign that renewable energy can compete with other forms of energy on an equal footing.
The renewable energy industry and technology is developing. In the beginning, it was often the case that you delivered what you produced and got paid for it, while the network operator had to deal with the changing production. What we’re seeing now is that renewable energy is increasingly taking responsibility for that disparity itself, he says.
Eksfin chief talks about further support for Scatec.
– Absolutely. First, it is a strategic priority for us to be part of the green transition, and both capital and risk mitigation for green investments are particularly urgently needed. Scatec has also shown time and time again that it delivers what it’s supposed to, so our risk is lowered through warranties, Packer says.
Eksfin’s guarantees for Scatec projects also expire in turn, after which there will be scope to provide guarantees for new projects, she points out. Scatec has plans for renewables and projects in green hydrogen and green ammonia, for which the company has received support from Norad.
We definitely want to do more with Scatec and that kind of company, says Bakker.
Eksfin and its predecessors previously had a large share of oil and gas projects, but, according to Bakker, the stake was significantly reduced. She notes that in 2020 and 2021, there were almost no requests for oil and gas financing.
Last year, 40 percent of orders were for green projects, so there’s no doubt that this is where we’re going to grow, and that’s where the industry needs capital and risk mitigation, says Packer.
– The important thing now is the batteries, as a lot of capital and risk mitigation are required for new plants, and then there is offshore wind, where we have contributed to the funding of ten billion kroner to deliver Norway to international offshore wind projects, he says.
Eksfin expects hydrogen and ammonia to become a significant space for industry. At the same time, the administration is careful not to take on too much risk, after the previous oil boom ended with a number of restructurings, and the country became a partial owner of companies such as Seadrill and Siem Offshore.
– These are capital intensive projects over many years, so we have to do good risk assessments with the board of directors, so we don’t end up in the same situation as we did in offshore oil and gas. We take the experiences from that time with us, Packer says.
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