Power finance: South Africa stays bullish on structured finance
Structured finance departments have taken a bit of a battering in the past few months but in southern Africa there is still belief in and appetite for the business. The domestic market in South Africa is growing rapidly, partly to meet political pressure to transfer assets to people with little money and no equity. Electricity shortages might well also be a key driver of new deal flows.
"We have been doing deals in South Africa to allow black empowerment to take place," says Peter Hayward-Butt, head of investment banking at Rand Merchant Bank. "This has called for quite a lot of ingenuity. Five years ago there was no mezzanine debt in South Africa. Now we have done a lot of deals, using such instruments."
There is much interest in the country’s first independent power project, a $1 billion 1,000MW project in Port Elizabeth and Durban. The country has been experiencing power cuts, and it is hoped that these peaking plants will partly eliminate these. The deal, put together by a consortium led by AES, has been underwritten by RMB and ABN Amro, with syndication expected within the next couple of months.
The question now is: can this expertise be put to use across the continent? There is a lot of excited talk about surging investment in commodities, mainly oil and gas.