Vantage Green-X Fund Advisors

Introduction

Vantage GreenX Fund Advisors (Pty) Limited (the “GreenX”) established Vantage GreenX Note I in 2013 (“Note I”) and in 2017 established Vantage GreenX Note II (“Note II”). Both Note I and II are funds which invest in energy and renewable energy projects in South Africa that exhibit stable cash flows and strong defensive characteristics.

GreenX Note I and II provides investors with exposure to South African renewable energy projects as part of carefully selected portfolios. This is achieved through the Notes issuing Asset Backed Notes to investors and then using the proceeds to acquire permitted investments in the form of senior debt in selected projects. Note I and II have been structured in such a way that the project economics flow through to the investors allowing for a management fee to be charged by the Advisor.

Both Note I and Note II seeks to capitalise on three major economic trends: (i) the continued commitment of the South African government to reducing the country’s carbon footprint through the extended rollout of a renewable energy program, (ii) the requirement that the majority of funding for these projects originate from local banks in ZAR and the foreseeable requirement for increased liquidity in the market going forward due to forthcoming statutory requirements such as Basel III, and (iii)  the expansion of African infrastructure, in particular energy infrastructure, to support sustainable economic growth on the continent.

GreenX Note I - Core Product and Inaugural Project Portfolio

GreenX has carefully selected a portfolio of assets to ensure fund performance in accordance with its mandate. This objective will be achieved through an optimal balance of the following factors, amongst others, in the fund’s portfolio:

  1. The underlying sponsor and construction entities,
  2. The technology and track record thereof,
  3. The geography of each particular project and
  4. The social and environmental contributions of the project.

Taking these factors into consideration, the inaugural GreenX Note I has constructed a portfolio with exposure to the following eight renewable energy projects all of which have reached their operational stage since the initial investment except the 100MW solar CSP Plant (which was a later stage investment):

  1. A 30MW solar PV plant in Mpumalanga
  2. A 28MW solar PV plant in Mpumalanga
  3. A 75MW solar PV plant in the Eastern Cape
  4. A 74MW wind plant in the Eastern Cape
  5. A 140MW wind plant in the Eastern Cape
  6. A 134MW wind plant in the Eastern Cape
  7. A 85MW solar PV plant in the Northern Cape
  8. A 100MW solar CSP power plant in the Northern Cape

The Launch of Note II

GreenX has positioned itself to complement the commercial banking sector. GreenX has established itself as a preferred distribution channel for banks who would like to sell-down long-term debt into the secondary debt market for renewable energy projects funded in South Africa but has also evolved into a financial-close lender able to invest alongside the banks. GreenX provides investors with an opportunity to invest in an  asset class that may not ordinarily have been considered or one which may not have been available for investment in the ordinary course of business.

Following on from the success of Note I, the GreenX reached final close in 2017 on Note II with commitments of R2.8 billion ($200 million). Note II has the same fund structure as Note I and will also focus on investing senior debt in South African renewable energy projects. Note II will differ from Note I however as it will focus on the provision of CPI-linked debt and will also allow GreenX to act as a financial-close lender rather than merely a sell-down and syndication channel for banks.

Beyond Note I and Note II, GreenX will also explore additional power and infrastructure opportunities. In addition to REIPPP (Renewable Energy IPP programme), other countries on the continent are also investing in significant infrastructure programmes of which sustainable energy will constitute a large proportion. The Advisor will explore opportunities for investment in such opportunities providing investors exposure to ex-SA projects and providing additional financing avenues for African projects. 

What value can GreenX provide to an Investor?

  • GreenX will carefully select projects and hand-pick a portfolio to ensure an optimal balance of technologies, locations and sponsors so as to diversify any single concentration risk.
  • GreenX will engage with primary lenders and engage at a detailed project level providing investors with exposure to the energy sector, and in particular, renewable energy projects that institutional investors would not otherwise have considered on a standalone basis. Vantage has also developed extensive networks on the continent enabling access to attractive deal flow that investors will be able to leverage off.
  • Through its management team and credit committee, the GreenX Fund will bring a team to each negotiation that understands project finance and will play an active role in project and loan documentation negotiations.

What transactions will GreenX avoid?

Vantage GreenX will avoid projects with weak economics or a weak sponsor, projects that do not meet necessary environmental/social standards or projects that will make use of technology without a suitable commercial track record.