South Africa: Norway Opens Renewable Guarantee Scheme to Private Sector

Norway has signed the first private-sector agreement under its state guarantee scheme for renewable energy, backing Norwegian company Scatec ASA's 254-megawatt Thakadu solar power plant in South Africa with up to NOK 150 million ($16.1 million) in coverage.

Norway's Minister of International Development, Asmund Aukrust, said the country's renewable energy guarantee scheme represents cost-effective development assistance, and that the Thakadu deal marks the first time the scheme has been used to back a private-sector partner rather than a government or multilateral counterpart.

The shift suggests Norway sees direct guarantees to private developers as a way to extend its development assistance model into commercially-driven renewable energy projects.

Guarantee protects against a specific commercial risk

The guarantee is structured to address a particular vulnerability in how the Thakadu plant sells its power.

The facility will supply electricity to commercial and industrial customers in South Africa through power trading platform Lyra Energy, in which Scatec holds a 50% stake alongside Standard Bank and Stanlib.

Rather than backing the project's construction costs directly, the Norwegian guarantee covers payments to Lyra if its commercial and industrial customers fail to pay for the electricity they purchase, a type of risk known as offtaker credit risk that can otherwise make lenders reluctant to finance projects reliant on private buyers rather than a government utility.

Scatec said the guarantee was the missing piece needed to move construction of the Thakadu project forward. Lyra had already reached financial close on the plant in March, but the coverage announced by Norway was required before building could begin.

Deal could open the door to more private guarantees

By extending its guarantee scheme to a private developer for the first time, Norway is testing a model that could be replicated for other renewable energy projects that rely on commercial and industrial offtake rather than utility-backed contracts, an increasingly common structure in African solar markets as private buyers seek cheaper, cleaner power outside the traditional grid.

How reliably Lyra's commercial and industrial customers meet their payment obligations once the Thakadu plant begins operating is likely to shape Norway's appetite for extending similar guarantees to other private developers.