Standard Bank has signed a R20 billion ($2.17 billion) Funding Support Agreement for Renewable Energy Projects in South Africa with the Industrial and Commercial Bank of China (ICBC).

ICBC is Standard Bank’s single largest shareholder with which it has a 20% shareholding. The deal is innovatively structured to provide the funding out of rand money accruing to ICBC by virtue of the shareholding.

The agreement was signed by ICBC Chairman Jiang Jianqing and Standard Bank Group Joint Chief Executive Ben Kruger.

ICBC is also certainly interested in raising awareness of the South African investment opportunity among Chinese suppliers as potential sources of contracting capability. In addition, the objective of this partnership is to facilitate the entry of investors intoSouth Africa, and ICBC is excited about the opportunity to co-lend into renewable energy with Standard Bank, ICBC’s South African strategic partner, through to 2025,” said Chairman Jiang.

“Standard Bank and ICBC will jointly provide debt financing on a project finance basis to companies that are awarded Preferred Bidder status under the country’s Renewable Energy Independent Power Producer Procurement Programme. This will apply to projects where Standard Bank is or will be mandated as a lead arranger,” said Mr George Kotsovos, Head: Power and Infrastructure Finance at Standard Bank.

In the first round of renewable IPPs that were finalised last year, Standard Bank financed over R9 billion of ($900 million) debt funding, and in the second round it expects to fund R6 billion ($600 million).

Mr Kotsovos says the imminent third round is expected to illicit further significant interest from developers and liquidity may soon become an issue, while ICBC’s involvement will help to reduce the pressure.

“It represents a further diversification of our sources of funding in addition to domestic asset managers, who are currently keen to invest in such projects. The renewable energy programme will require a large funding commitment and the more sources of available capital the better. The flexibility that these long-term sources of capital offer allows us to structure deals appropriately,” said Mr Kotsovos.