The National Treasury has confirmed that it will inject 20% of the $500-million initial funding required to set up the Credit Guarantee Vehicle (CGV) being established to derisk South African public infrastructure projects that will be built by private investors without recourse to any government guarantees.

The CGV will be set up as a private non-life insurance company, regulated by the Prudential Authority, in July 2026; a timeline that is aligned to the scheme supporting the first independent transmission projects (ITPs) that will be procured in the coming months.

Electricity and Energy Minister Dr Kgosientsho Ramokgopa formally launched the first stage of government’s ITP procurement programme at an event hosted at the JSE in Sandton, following the release of a request for prequalification (RFQ) on July 30.

Through the RFQ, the department aims to identify and shortlist prequalified bidders with the technical expertise, financial capacity and experience to build high-voltage transmission lines and associated substations across seven pre-identified corridors.

These prequalified project sponsors will be invited to submit bids in response to a request for proposals (RFP), to be launched at the end of November.

Preferred bidders would be named following a six-month adjudication process conducted under the auspices of the Independent Power Producer Office, which has been authorised to manage the first ITP procurement stage.

Deputy Finance Minister Dr David Masondo said the CGV was being established with the support of the World Bank and its group companies, specifically the International Finance Corporation and the Multilateral Investment Guarantee Agency.

He confirmed that the National Treasury’s 20% contribution would amount to about R2-billion, which would be funded by way of a World Bank loan. However, details were still being finalised with further announcements likely in the Medium-Term Budget Policy Statement and next year’s Budget.

The balance of the funding would most probably be raised from development finance institutions, with the National Treasury’s Jeffrey Quvane reporting that up to seven such institutions had expressed an eagerness to participate during recent pre-capital-raising meetings.

Quvane indicated that the National Treasury was also aiming to tap concessional funding that had been committed by international partners to South Africa’s Just Energy Transition Partnership.

The CGV will extend a combination of payment and termination guarantees to the ITP special purpose vehicles, which would pay premiums to the CGV to secure such insurance. These premiums would be recovered through the electricity tariff.

“While the Credit Guarantee Vehicle will focus in the initial phase on enabling investments in transmission infrastructure, it will be expanded into other areas such as logistics and water over time,” Masondo said.

He lauded the scheme as being a “globally innovative model”, while describing it as a “privatisation” of the risk that would otherwise have increased government’s contingent liabilities.

“The CGV will operate as a standalone entity with an independent balance sheet and will target a minimum credit rating of AAA.

“A professional executive management team and board of directors with relevant experience and expertise will be appointed to operate and manage the fund,” Masondo added.

“We are targeting an initial capital raise of $500-million for the vehicle, spread across a range of development partners.

“National Treasury has committed to providing first-loss capital of 20%, which will be an initial $100-million increasing to $500-million (about R9-billion) if needed,” he added.

FIRST ITP PROCUREMENT

Ramokgopa said the infrastructure earmarked for the inaugural procurement of ITP capacity had been identified by the National Transmission Company South Africa (NTCSA) from late-stage and potentially high-impact projects included in its Transmission Development Plan (TDP).

The TDP envisages the construction of 14 500 km of new powerlines and 133 000 MVA of additional transformers by 2034 to be delivered by both the NTCSA itself and ITPs at a cost of about R440-billion.

The NTCSA was starting to ramp-up its own roll out, but faced financial and capacity constraints, with the Minister indicating that it was currently building powerlines at a yearly rate of less than 350 km.

The projects identified for the first stage of ITP procurement involve 1 164 km of powerlines and 2 630 MVA of transformation capacity across seven corridors, including:

• The 200-km Aries-Aggeneis 400 kV powerline, in the Northern Cape;
• The 126-km Groeipunt 400 kV powerlines upgrade, with 500 MVA of transformers, in the Northern Cape;
• The Kimberley strengthening Phase 4 project, involving the 265-km Boundary-Ferrum 400 kV overhead line, in the Northern Cape;
• The Nama strengthening and Gromis projects, in the Northern Cape, involving 117 km of powerlines and 1 000 MVA of transformation capacity;
• The 180-km Mahikeng Integration Phase 1 development, with 630 MVA of transformation, in the North West province;
• The 240-km Mookodi-Hermes 400 kV powerline, in the North West province; and
• The 36-km Hera-Westgate 400 kV powerline and 500 MVA of transformation capacity, in Gauteng.

Together the seven projects are expected to unlock 3 222 MW of additional renewable-energy generation when they enter into commercial operation in stages during 2029 and 2030.

Winning bidders will be expected to design, finance, construct, operate and maintain the infrastructure procured under the programme and transfer the assets to the NTCSA at the end of the concession period.

The commercial model has not been finalised, but is likely to involve some form of build, operate, own and transfer arrangement over a term of between 25 and 30 years.

The Department of Electricity and Energy’s Shaakira Karolia said the final model would be outlined in the RFP.

Karolia also stressed that the projects identified for the first stage were ones that had been developed to a relatively advanced stage with regard to environmental approvals and the securing of servitudes, with some servitudes already fully safeguarded.

However, Ramokgopa said that South Africa’s expropriation laws would be invoked in those cases where landowners were preventing progress.

Prospective bidders wishing to access the RFQ will be required to pay a non-refundable documentation fee of R150 000 and the last date to register for participation in the RFQ phase will be about 20 days prior to the response submission date of September 23.

Eskom CEO Dan Marokane welcomed the RFQ, describing its launch as a significant milestone.

He added that Eskom, through its subsidiary the NTCSA, had worked hard to prepare the seven projects to be procured under the first phase of ITP procurement, so as to ensure an accelerated delivery of the country’s TDP.

“The seven projects include those beyond the broader Cape regions and are planned to reach implementation readiness in 2026.

“We are comfortable that NTCSA will continue with these projects to ensure that they are ready for the ITPs to construct after the procurement process is completed,” Marokane said.