The Climate Investment Fund, managed by Norfund, has completed a responsible exit from the Kenhardt project — South Africa’s first large-scale hybrid solar and battery facility, built by Norwegian company Scatec.
“Through early-stage financing, we mobilized private capital and helped make this groundbreaking project by Scatec a reality. Now that private investors are taking over our share as well, allowing us to reinvest in new projects, our contribution gains an additional multiplier effect,” says Bjørnar Baugerud, Head of the Climate Investment Fund at Norfund.
Kenhardt, developed by Scatec and H1 Capital, is among the world’s largest hybrid plants, with 540 MW of solar power and 225 MW / 1,140 MWh of battery storage. The project was awarded under South Africa’s RMI4P program—a technology-neutral scheme designed to rapidly address the country’s acute power shortages and reduce reliance on costly diesel-based backup plants. Distinguished as the only fully renewable solution among the contenders, the Kenhardt project surpassed fossil-fueled alternatives in the competitive bidding process, by combining solar power with battery storage to deliver stable electricity between 05:00 and 21:30.
In a country where most energy is coal-based, the project helps avoid 900,000 tons of CO₂ annually — equivalent to the emissions from 460,000 Norwegian fossil-fueled cars.
South African bank takes over financing
H1 Holdings has now partnered with Standard Bank to secure long-term equity financing of R1.921 billion, enabling a responsible exit for the original investors—Norfund, British International Investment (BII), and the Industrial Development Corporation (IDC).
“The 2022 investment was crucial to meet the local ownership requirement in the Kenhardt project, but it also illustrates how climate finance can play a catalytic role in the early stages of pioneering energy projects,” - Bjørnar baugerud, head of the climate investment fund.
Access to capital on competitive terms is essential for realizing renewable projects in emerging economies, where the cost of capital is significantly higher than in developed countries. This makes it particularly challenging to replace planned and existing coal-fired power plants with solar and wind projects, which require high upfront investments.
In South Africa, the power sector has faced serious challenges related to aging infrastructure, economic instability, and frequent power outages—with major consequences for both businesses and households.
Case study highlights local job creation and environmental and social standards
Alongside the exit, Norfund is publishing a case study providing more details about the project. The study outlines how the project was assessed according to both local requirements and IFC’s international guidelines to ensure high environmental and social standards. An independent assessment was conducted to identify environmental and social risks and to validate Scatec’s risk management systems. This was supplemented by government-mandated studies and expert analyses in areas such as cultural heritage, human rights, geohydrology, traffic, and biodiversity, resulting in an action plan with follow-up and monitoring.
“In a region marked by high unemployment and social challenges, the project has contributed to local value creation through hiring workers from nearby areas, sourcing goods and services from various local suppliers, and social initiatives such as food distribution and water supply. The construction sector is traditionally male-dominated, but the Kenhardt project stood out with a high proportion of female workers,” says Karoline Teien Blystad, Director of Climate and Impact at Norfund.
During the construction phase, extensive measures were implemented to reduce traffic-related accidents and safeguard worker health and safety, including driver training, GPS monitoring of vehicles, and strict speed limits. The project also conducted a risk assessment related to gender-based violence and harassment (GBVH), and implemented training and awareness efforts in the local community and among employees. Biodiversity was protected through careful handling of vulnerable plant species, and water needs were met without burdening groundwater resources.