HITTING THE SWITCH - JSE MAGAZINE

HITTING THE SWITCH

The JSE could present a very viable option for renewable energy businesses keen to harness Africa’s potential

HITTING THE SWITCH

The sun’s power is staggering. Research in 2010 states in one second it emitted more energy than the potential of all fossil fuels in the Earth (3.827 × 1026 J versus 3.9 × 1022 J).

It goes without saying that humans, faced with the rapidly escalating effects of climate change, need to move away from fossil fuels, despite their easy access, to more renewable forms of energy creation, such as hydroelectric, wind and solar.

This is something that not only applies to the developed countries of the world, but even more so for Africa, which is faced with a great need for power generation. The renewable energy potential of the continent is huge – most African countries have over 300 days of sunshine a year, making solar a very viable energy generation prospect. According to a report carried out in the mid-2000s by the German Aerospace Centre, a solar facility covering just 0.3% of the area of North Africa could provide all the EU’s energy.

Yet despite the potential, there is not a single renewable energy company listed on the JSE, although in terms of the FTSE’s ICB classification, the JSE does have an alternative energy sector.

‘This is a great opportunity,’ says Patrycja Kula, the Business Development Manager, Issuer and Investor Relations of the JSE.

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‘For the right projects there is definitely a need for investors to get involved in renewable energy ventures’

She says the exchange could present a very viable option for renewable energy businesses to raise capital and expand.

‘In terms of the JSE offering there are a number of ways we could assist either through our equity or debt market. On the equity market we have the Main and AltX boards, which cater to various listing options for big or small renewable companies. For those whose core business is to invest in these projects, one could list as an investment company. Other vehicles that are available are SPACs, which are publicly-traded buyout companies that raise money in order to pursue the acquisition of an existing company, as well as specialised instruments such as hybrids or asset backed securities. From a debt perspective one can look at a convertible bond or just a plain bond issue, similar to the Soitec issue of R1 billion, which was an inaugural solar financing bond transaction in SA by CPV Power.

‘Having said all of this, the sector has a specific framework and regulations – we would encourage those interested in listing on the JSE to engage with the various advisory firms that work in the capital markets as well as the JSE on how we could assist.’

Kula says there would be excellent benefits for investors. ‘For the right projects there is definitely a need for SA investors to get involved in renewable energy ventures.

‘This is an opportunity for global, local and African investors to invest in this sector by investing on the JSE. For the current investors, listing increases liquidity and it could be an exit platform at a point in time.’

She says the JSE could help with renewable energy financing in other African countries too. ‘National Treasury has announced that JSE-listed companies can transfer R2 billion in and out of a holding company on an annual basis. In addition to this, an extra amount of 25% is allowed for listed companies’ market value on Reserve Bank approval. Essentially this means that companies are able to leverage their expertise and capital- raising opportunities for projects outside the borders of SA.’

There are a couple of dozen renewable energy companies listed on the NYSE and the NASDAQ, to say nothing of the exchanges in Europe. Perhaps soon there will be some companies on the JSE giving Africans access to sustainable energy.

By John Rossouw
Image: Fredrik Broden/reneerhyner.com