Macquarie-backed African renewable energy investor seeks new funding

(Bloomberg) — Revego Fund Managers, the firm managing the first fund in Africa investing primarily in renewable energy assets, is seeking new investors in anticipation of a stock exchange listing.

The fund manager is looking to raise about 3 billion rand ($165 million) to invest in projects to be added to the 2 billion rand Revego Africa Energy Fund, a so-called yieldco focused on dividend flows, said chief investment officer Ziyaad Sarang. It will consider listing once it has about $500 million in assets under management and currently has about 10 billion rand in potential investments, he said.

“We’re currently conducting due diligence with two investors,” Sarang said in an interview. “The ideal investors at this point are development finance institutions that will come in and help us grow, along with institutional investors and pension funds.”

The open-ended fund – set up to invest in assets in sub-Saharan Africa – has been ready to invest since August 2021. Its first investors include a joint venture between the UK government and Macquarie Asset Management Ltd. It delivers returns to investors while freeing up capital for developers to build new facilities.

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

In addition to the Macquarie-British joint venture, known as UK Climate Investments LLP, original investors in Revego included Investec Bank Ltd. and Eskom Pension and Provident Fund, which manages pensions for employees of South Africa’s state-owned energy utility.

The Eskom fund may invest more, but the other two “major investors” are unlikely to do so, he said.

“The long-term goal is to eventually 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 deals in the energy, mining and infrastructure sectors. He is the former head of infrastructure at Standard Bank Group Ltd. and worked for Investec.

While the fund is regional in nature, all 10 of its investments to date have been in South Africa, which has by far the largest renewable energy industry in sub-Saharan Africa.

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