Commodities

Macquarie-Backed Renewables Investor Seeks Fresh Funds

A wind farm in South Africa. Photographer: Dwayne Senior/Bloomberg (Dwayne Senior/Bloomberg)

(Bloomberg) -- Revego Fund Managers, which runs Africa’s first fund focused on primarily investing in operating renewable-energy assets, is seeking new investors as it works toward an eventual listing. 

The fund manager wants to raise about 3 billion rand ($165 million) to invest in projects to add to the 2 billion-rand Revego Africa Energy Fund, a so-called yieldco focused on dividend flows, Chief Investment Officer Ziyaad Sarang said. It will consider listing when it has about $500 million of assets under management and currently has a pipeline of about 10 billion rand in potential investments, he said.

“We are in due diligence with two investors currently,” Sarang said in an interview. “The ideal investors at this point in time are development finance Institutions to come in and help us scale up together with institutional investors and pension funds.”

The open-ended fund - formed to invest in assets across sub-Saharan Africa - was ready for investment from August 2021. Its initial backers include a joint venture between the UK government and Macquarie Asset Management Ltd. It yields investors a return while freeing up capital for developers to build new plants.

“What we are focusing on is the recycling of capital from developers,” Sarang said, adding that a study his company commissioned shows that the region needs $193 billion in renewable energy investment by 2031. “To increase that amount of investment and widen the investment base, you really need to have an efficient financial system that has got primary investment and secondary-market recycling of capital.”

In addition to the Macquarie-British joint venture known as UK Climate Investments LLP, Revego’s initial funders include Investec Bank Ltd. and the Eskom Pension and Provident Fund, which manages the pensions of workers at South Africa’s state power utility. 

The Eskom fund may invest further but the other two “cornerstone investors” are unlikely to, he said. 

“The long-term goal is to ultimately list this,” Sarang said. “Institutional investors are interested in two things. They’re interested in liquidity and they’re interested in scale.”

Sarang has spent 25 years working on transactions in the power, mining and infrastructure sectors. He is the former head of infrastructure at Standard Bank Group Ltd. and is head of fund initiatives at Investec.

While the fund has a regional focus, all of its 10 investments so far are in South Africa, which has by far the biggest renewable energy industry in the sub-Saharan region. 

Last year, the fund invested in a 150-megawatt solar plant in South Africa’s Free State province that will be the first to sell electricity to multiple private buyers including miner Sibanye Stillwater Ltd. and brewer Anheuser-Busch InBev NV.

(Corrects ninth paragraph to show that Sarang still works at Investec.)

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