Treasury’s energy bounce-back scheme off to a slow start

The rollout of National Treasury’s Energy Bounce-Back (EBB) Loan Guarantee Scheme has been off to a slow start since it was announced in August 2023, with participating banks effectively only starting to offer the scheme to clients in recent months.

Nedbank confirmed that it only managed to finalise its agreement with National Treasury at the end of last year.

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“Final agreements between Nedbank and National Treasury in order to bring the EBB Loan Guarantee Scheme into effect were finalised towards the end of 2023, therefore client loan roll-out across our Nedbank client-facing businesses is scheduled to take place in 2024,” Nedbank told Moneyweb in an emailed response.

Read: SA’s energy bounce-back scheme ‘too little too late’

An Absa spokesperson noted that it only began offering the loan scheme to its clients at the start of December and has not gathered enough data on its activity to gauge its uptake from the target audience.

Treasury launched the loan guarantee scheme last year to help alleviate the impact of load shedding on small businesses and households. The scheme incentivises the generation of 1 000MW of energy through renewable energy sources by offering households loans of between R3 000 and R300 000, while small businesses can access between R10 000 and R10 million.

To facilitate greater take-up of the offering, government agreed to cover 20% of defaults on solar loan books, allowing banks to maintain interest rates at relatively low levels.

The country’s big four banks – Standard Bank, FNB, Absa, and Nedbank – have been named participants in the EBB Guarantee Loan Scheme, which is administered by the South African Reserve Bank.

Banks soar

Although the state’s interventions with energy relief financing seem to be off to a slow start, commercial banks, which responded to demand with greater urgency with their own initiatives, are reporting positive uptake numbers from businesses and households.

Absa told Moneyweb that its solar project financing solutions for small and medium-sized enterprises (SMEs) and commercial businesses continued to register positive growth in value and volume of payouts in 2023.

The red bank has reportedly seen a doubling of client installations in 2023 compared to 2022.

Absa says it expects demand for financing solutions in the renewable energy space to continue to register positive growth for as long as the country’s power crisis continues.

“Absa has seen varying levels of residential demand for finance for rooftop solar and energy installations, with demand being commensurate with periods of high load shedding levels and we expect a similar trend this year,” it said.

“Furthermore, leveraging our strong ecosystem and commercial partnerships including infrastructure and device providers, Absa also commenced with an expansion of its personal loan offering for alternative power solutions to the corporate sector with the creation of tailored employee solutions,” Absa added.

Read: Standard Bank’s solar lending book grows by 26%

In November 2023, Nedbank launched its own solar financing product called Avo Solar, which includes full installation by certified Nedbank-approved solar suppliers and installers. It offers solar financing packages to households and businesses, and according to the bank, it has seen “an accelerated uptake” of the offering since its launch to market.

Nedbank is currently unable to offer updated data on the performance of its solar book up to December 2023, as it is in a closed period.

However, in its interim results in June last year, the green bank informed investors that its total renewable-energy exposures across SA Renewable Energy Independent Power Producer Procurement Programme (Reipppp) and private power generation stood at R28 billion.

At the end of June 2023, Nedbank reportedly had a “strong pipeline” across rooftop solar PV, private generation and Reipppp projects of almost R24 billion.

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“On the back of our leadership position in the first four rounds of the REIPPPP, where we supported 3,5 GW of renewable energy, we are the lead arranger on four projects in the emergency round Risk Mitigation IPPPP, four projects in round 5 of the REIPPPP and two projects in round 6 of the REIPPPP,’ Nedbank told Moneyweb.

“Our Nedbank solar financing solution, offered through our MFC [asset finance] platform to assist customers with their energy needs was launched in August 2022. Pleasingly, the solar financing solution had delivered over R60m of disbursals to customers at the end of June 2023.”

Read:
Home, business solar installs doubled to 5GW last year
Thank private solar for no daytime load shedding, not Eskom

Standard Bank reported in January that its green lending book had grown by 26% to R2.9 billion, with over R1.2 billion added in 2023. Africa’s biggest bank acknowledged Treasury’s scheme as contributing to the surge in demand for renewable energy financing.

However, the bank also acknowledged that its financing solutions, through its LookSee solar installations, have seen an even bigger growth surge, claiming a 400% uptick in demand for LookSee’s product offering.

Outlook

SME financier Business Partners Limited notes that although load shedding intensity had – in some intervals – eased towards the end of 2023, demand for solar and renewable energy financing will continue as the country’s energy provision remains unstable.

“Our experience has been that the demand for finance of alternative energy sources oscillates with the intensity of the various load shedding bouts/stages. We do still regularly have the stages being intensified by Eskom for one reason or the other,” it said.

“Indications are that load shedding will be with us for quite some time still, and for as long as the problem is still a factor, the need to bolster the capacity of SMEs to sustain their operations and minimize downtime through alternative energy finance will remain,” it added.

South Africa’s households and businesses are currently experiencing Stage 3 power cuts, but over the weekend Eskom was forced to implement Stage 6 load shedding for the first time this year as the national grid struggles to retain generation capacity.

Read:
Stage 6: ‘Calculated risk’ materialised, says Sputla – Moneyweb
Load shedding to remain at high levels over next five years – Eskom [Nov 2023]
Is Eskom doing more maintenance than under De Ruyter? [Feb 2024]

Absa shared similar sentiments on the outlook, further noting that it expects the elevated levels of demand to continue well into 2025 as the industry continues to measure growth.

“As a result of load shedding, the business case for solar plus batteries is a very attractive one. As such, we expect that increased demand for solar business loans will continue – it is important to note that the case for solar is not purely based on resilience, there is also a strong business case for solar plus batteries,” Absa added.

FNB declined to comment on Moneyweb’s questions as the bank is currently in a closed period that restricts commentary on financial performance.

Read:
Eskom’s irregular supply impacting big energy users
Eskom says transmission company to be operational by 2025
4 000 MW to be cut from grid, new power accords

Source: moneyweb.co.za