Sale of SA's first solar IPP is first green shoots of maturing market

Daily Maverick

29-04-2025

The Competition Commission's approval of Gaia's 10% stake acquisitions in each of the Linde and Kalkbult solar PV plants in the Northern Cape, signals a maturing renewables market that can now transition to institutional investment.
When Kalkbult came online in late 2013 (the very first REIPPPP project to feed the grid) and Linde followed in mid-2014, both rode the wave of policy credibility and fiercely competitive tariffs that characterised the first rounds of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).
They were built 'bulletproof': fixed-tilt modules at Kalkbult, single-axis trackers at Linde, 20-year Eskom power purchase agreements (PPAs) and robust community trust and socioeconomic development covenants.
Those early projects set the template for scale and structure; today they stand as 'blue chip' assets in a sector that has grown from a few hundred megawatts to multiple gigawatts under the REIPPPP.
Gaia SA has now been granted Competition Commission approval to acquire a 10% stake in each of the Linde and Kalkbult solar PV plants in the Northern Cape as part of a broader deal that also includes a 21% stake in the Jeffreys Bay Wind Farm in the Eastern Cape. The total value of the transaction: more than R700-million.
Capital recycling and the rise of the secondary market
What we're witnessing with Gaia's acquisition isn't just another corporate deal – it's the essential process of capital recycling in action.
Let's break this down: Initial developers and early investors like the IDEAS Managed Fund (managed by Old Mutual's African Infrastructure Investment Managers) can now exit operational assets, freeing up capital for new developments. It's this circulation that keeps the renewable sector alive and growing.
Without a functioning secondary market, the renewable energy sector would eventually stagnate as capital remains locked in existing projects.
Think of it as a relay race. The developers sprint the first leg, then pass the baton to long-term holders like Gaia who are marathon specialists. This handoff is critical for the race to continue.
New funds for new futures
This maturing market enables specialised infrastructure funds such as Gaia, which focus on operational assets with predictable returns, to acquire projects with stable, long-term cash flows under 20-year PPAs with Eskom.
At the same time that Gaia purchased IDEAS's 10% stakes in the Linde and Kalkbult solar PV plants, the Stanlib Infrastructure Fund II acquired majority interests from Scatec in the same farms – a coordinated reshuffle of ownership towards long-hold vehicles.
The growing secondary market liquidity makes renewable assets more attractive to a broader range of investors, including institutional players seeking inflation-linked returns with manageable risk profiles. When pension funds and insurers can confidently invest in renewable energy, that's when you know a sector has truly arrived. It's a sign of the sector's maturation that assets can now change hands in structured transactions with clear regulatory pathways.
Solar a victim of its own success
But the business case for these acquisitions depends on the predictable revenue streams provided by those 20-year PPAs with Eskom, which are designed to deliver inflation-linked cash flows – a key component of Gaia's investment strategy.
So, here's the twist: The economics of solar extend beyond these initial contracts. Solar PV costs have plummeted following what's known as the 'learning curve' – costs falling by about 20% every time global capacity doubles. This relentless cost reduction changes the calculus for long-term ownership of solar assets.
This cost trajectory creates multiple options after the initial PPA expires. Plant operators can upgrade facilities with newer, more efficient technology to extend operational life, or alternatively and most likely, dismantle the installation and return the land to its natural state – a flexibility that few other energy technologies can match.
What this means for the long-term viability of solar farms/h3>
Yield compression: As the value of solar energy drops, the prices and valuations of power purchase agreements (PPAs) will adjust. In plain English: future solar might not be as profitable as it once was. This might lead to lower yields in the secondary market, slowing down transactions or changing return expectations.
Complementary investments: To fight the drop in value, investments in storage, demand response and transmission become crucial. Buyers like Gaia need to consider the costs of grid upgrades or pair solar assets with batteries to maintain revenues. The standalone solar farm may become a relic as integrated power solutions take centre stage.
Policy implications: The government may need to introduce market reforms like hourly pricing, ancillary-services markets or capacity payments to keep financing costs at reasonable levels and to value flexibility and firming. The rules of the game will need to evolve as the technology does.
Delayed gratification
It's wild to think back on the news cycle during the commissioning of the first generation of REIPPPP projects – Jacob Zuma was president and State Capture was entrenched in the country's power structures.
Now the grand old ladies of the energy transition are mature and transitioning to long-term institutional ownership, finally paying off on the bets made in a different time. The programme's success is now shown to be not just in building renewable capacity but creating sustainable assets of long-term value. DM