Energy traders emerge in South Africa
For Sherrill Byrne, Standard Bank's head of project finance, 2025 has been the year in which the bank saw the emergence of energy traders in South Africa. By Hazel Sheffield.
Standard Bank has closed 31 transactions in 2025, with another eight trying to close out before year-end. More than 80% of the transactions that closed in 2025 have been to energy traders as offtaker, in a market that was until very recently dominated by bilateral deals.
“It’s been a very busy year,” Byrne says. “It’s a new market that has developed in South Africa.”
Under the trader model, an entity or agent buys power on a long-term basis from an IPP funded by the bank, in order to sell to customers on more flexible terms, with different tenors. The agent takes the risk of contracting long term and selling on a medium-term basis to different customers.
Standard Bank has funded two payment guarantee facilities and 12 generation projects for energy traders, with a total capacity of over 1600MW of new renewable generation. This has involved supporting all three of the main energy traders to emerge: NOA, Etana Energy and Discovery Green. Standard Bank closed the first generation projects for Etana and Discovery Green in 2025, and the first for NOA in 2024. It has provided payment guarantee facilities to NOA and Etana to support their growth.
The explosion of contracts to traders is the end of a three-year campaign by the bank. Byrne and her team could see that the market was changing as South Africa moves towards the model favoured in Europe and the US. Bilateral transactions were beginning to become burdensome for the end user who just wanted to buy power. The bank saw that when independent power producers were selling to a single corporate offtaker, the negotiations had become quite lengthy and the corporates were becoming more resistant to sign them, since the risk became consolidated on their balance sheet.
At the same time, Standard Bank was having conversations with energy traders who wanted to set up in South Africa. These conversations helped them tailor solutions for the future.
“We could see that the market was going to shift to an energy trader model,” Byrne notes. “It was just about getting the mind around how you see those risks, and how you get comfortable with those risks, and what guardrails we would need, from a lending point of view, to protect the generator, given that the trader doesn't have a balance sheet of substance to stand behind the payment obligations.”
The firm had been disappointed, Byrne says, to find itself on “the back foot” for bilateral deals. So it adopted a proactive stance to stay ahead as energy traders emerged. In practice, that meant cultivating relationships with the parties the bank thought were most likely to be successful, alongside lots of internal work to decide how to bank the emerging sector in order to provide the right support to help it grow.
“When you’re doing the first project for each of these traders there is no template,” Byrne says. “So we have to work very much hand in hand with them and with the generator to understand what is bankable, because what works for a utility deal doesn't work for a trader.”
In South Africa, energy traders are required to provide a payment guarantee and a liquid bank guarantee in the form of 15 months of revenue. Standard Bank was able to step in to provide those facilities, or at least part of those facilities, on behalf of the energy trader. The first traded project closed in October 2024 with a two-year build cycle, so those facilities are yet to be tested. But so far Standard Bank has funded all of the energy trader projects that have closed in the market to date – proof that the proactive stance is paying off.
The path did not always run smoothly. In July, South Africa's state-owned power utility, Eskom, launched a long-threatened legal review into the national regulator’s decision in 2024 to grant licences to five electricity traders, citing an unfair competitive landscape. Eskom’s case was based on the idea that as the state facility it faced greater regulation than the new traders, preventing fair competition.
In September, Eskom halted its legal challenge against the National Energy Regulator of South Africa after intervention by the electricity minister, to allow the regulator to put together trading rules.
“There’s still a lot of uncertainty in the regulatory environment that we have to navigate both as lender to generators and traders, but at the same time we can’t just sit still and wait for everything to be resolved and perfect, because then we would have continued load shedding in the country,” Byrne says.
Load shedding, or scheduled national power outages, has ceased in South Africa for about 12 months thanks to new generation capacity coming online and Eskom improving its efficiency and resolving maintenance issues at its coal-fired power plants. However, Byrne notes, as those coal plants reach the end of their life, South Africa is at a crossroads where it has to make plans for the future. “It’s not that we’re in a surplus,” Byrne notes. “We’re just not in a deficit anymore.”
In the decade or more that load shedding has affected South African energy supply, tariffs have come to play an increasing role in the cost of power. Traders are now able to offer clients a fixed price, taking into account cost savings and tariff certainty, that is highly competitive in an environment where the cost of coal power has sharply increased.
In addition, many South African companies have been trying to demonstrate more sustainable supply chains, especially for exports to the EU, by looking beyond coal power. While demand for solar and battery has slowed down in South Africa, Byne notes that companies are still looking for price certainty and a competitive advantage through decarbonisation.
With that in mind, Byrne highlights the 153MW/612MWh Red Sands battery energy storage project in the Northern Cape, which closed in July with R5.4bn (US$306m) of financing from UK-based renewable energy developer Globeleq and South Africa’s African Rainbow Energy.
Red Sands is the largest BESS project to reach financial close in South Africa so far, covering five hectares. It was awarded in 2024 at an estimated cost of US$300m and has a 15-year offtake agreement with Eskom at R546.50/MWh (US$30.07/MWh) and will involve upgrades to local grid infrastructure.
The project aims to ease pressure on demand for energy and enhance grid stability in Northern Cape under South Africa’s Energy Storage Capacity Independent Power Producer Procurement Programme.
“Projects like this are critical, because they help with grid flexibility for Eskom, but they also help store some of the renewable energy and allow Eskom to dispatch it at peak periods,” Byrne says. “So we’re very proud of that project and what it means for South Africa in the future.” Without BESS projects of this scale, Byrne contends, South Africa cannot continue to attract renewables that are essential to shore up local supply.
The Red Sands deal included a 15-year power purchase arrangement with an augmentation facility that allows the company to draw down debt to pay for the capital expenditure of augmenting the battery, so that it can last for the full 15 years.
Widespread markets
Standard Bank operates in 21 markets. Outside of South Africa, the bank has become adept at tailoring solutions to the needs of local markets, leveraging its position on the continent to show that the skills learned in one market can be transferred to other African countries where the bank has a presence. “Our centralised structure, at least in terms of product expertise, allows us to have a huge competitive advantage, because we ensure that those learnings are taken from one market into other markets,” Byrne says.
Within that, there have been several market firsts: in Zambia, Standard Bank acted as lead arranger on the 100MW Kariba North Bank Extension Power Corporation transaction, the largest project to date in Zambia to hit the grid. It closed the lower Magaduza hydro project in Eswatini, selling to the utility EEC, marking the first project finance and first hydro IPP in the country, and it did the Diaz 44MW wind farm selling to Nam Power, marking the largest wind farm in Namibia.
Looking ahead, Byrne sees the private sector as a key part of meeting electricity demand in Zambia and Zimbabwe. Both markets have power deficits and open access for private companies to sell power to another private entity without going through a utility. Both also have large energy users in the mining sector. While utilities are challenging to a bank on a standalone basis, the private market is growing, with energy traders and large energy users wanting to buy bilaterally.
While the public and private sectors have historically been mistrustful of one another, shortages of electricity have facilitated a more open-minded stance, Byrne says. Clients are more willing to take advice from the bank about how agents and traders can help meet demand.
“At the moment, the environment is very enabling to try and find solutions, knowing that the need for power is critical,” Byrne says. “People tend to be very solution-oriented. So you can come up with ideas and people willing to look at it rather than saying, ‘This is how it's been done for centuries before, and this is all I'm willing to consider'.”
Nonetheless, she says, the African market remains challenging. As in the Eskom case the regulations are unclear, or regulations are at cross-purposes. “It’s not like there's a big programme,” Byrne says. In addition, demand in some countries is still very low because of low electrification, so companies can’t get large economies of scale they might find in other markets. “You have to be comfortable to play the long game,” she adds.
She has set her sights on the goal of doing a project in each of Standard Bank's 21 markets. “In a smaller market, you can make such a big difference," she says. "It'd be really nice to be part of the solution and make a tangible difference.”
