Norfund exits South Africa’s first large-scale hybrid plant

From the newsletter

The Climate Investment Fund, managed by Norfund, has exited the Kenhardt project, South Africa’s first large-scale hybrid solar and battery facility. The exit was enabled through a new equity partnership between H1 Holdings and Standard Bank, which secured $109.5 million in long-term financing, allowing early investors to exit.

• The exit allows Norfund to reinvest in other projects and shows how early-stage climate finance can attract private capital in emerging markets.

• African renewables are proving to be profitable, with several exits from private equity funds. Recently, AIIM, a private equity firm, completed a $41 million exit from three of its renewable energy projects in South Africa.

More details

• Renewable energy investments in Africa have expanded rapidly over the past decade, supported by government policies to diversify energy supply and reduce carbon emissions. The market grew to $23 billion in 2024 and is projected to more than double by 2034. This growth has created opportunities for both first movers and secondary investors, making renewables an attractive asset class.

• Beyond Norfund and AIIM, several private equity funds, including Actis and Inspired Evolution, have demonstrated the profitability of renewables through successful exits. For example, Inspired Evolution, a Pan-African private equity firm focused on clean energy, has completed 19 successful exits to date. The firm continues to raise significant new capital, most recently securing $238 million for its Evolution III Fund. Through this fund, it acquired a 75% stake in Red Rocket Group, a renewable energy IPP with a 10 GW project pipeline, primarily in South Africa.

• The sector is seeing rising demand for renewable energy, particularly solar. Data from Ember shows African countries are on track to surpass 2024 solar imports from China, reaching over 15 GW, about 3 GW more than last year. At least 26 countries are expected to import more than 100 MW each, with Algeria and Sudan already breaking their 2024 records. While solar leads the way, hydropower is also growing, though mostly supported by DFIs due to the high costs and long project timelines.

• Norfund has been active across Africa’s energy sector, backing both companies and projects. Recent funding includes $6.8 million for battery rental company Mopo and $40 million for CrossBoundary Energy, which provides renewable solutions to commercial and industrial clients. Norfund has also supported off-grid players such as Arnergy, Candi Solar, and Konexa.

• These successful exits and ongoing investments send a strong signal that renewable energy in Africa is not only environmentally necessary but financially viable. Proven profitability is encouraging more capital inflows, critical for scaling access to the 600 million Africans still without reliable electricity.

• With electricity demand growing and governments reforming energy markets, the business case for renewables will only strengthen. Investors will increasingly view African solar and wind projects not as pilots, but as stable infrastructure assets capable of generating long-term returns in both local and hard currencies.

Our take

• Norfund's successful exit, along with others like AIIM, builds confidence in the market. It signals that a liquid market for these assets exists, which is key to attracting institutional investors who require a clear exit strategy.

• By exiting mature projects, Norfund can reinvest its capital into new, early-stage ventures. This recycling of funds allows the DFI to continually take on the higher risks that private investors might avoid, helping to kick-start more projects.

• Norfund’s exit also proves that solar with battery storage is bankable even at a large scale, providing a strong boost of confidence for investors looking to enter the sector.