Financial services provider FedGroup has announced its acquisition of a controlling stake in Emergent Energy, the largest provider of installed solar photovoltaic (PV) commercial projects in South Africa.
The strategic acquisition aims to vertically integrate FedGroup's pioneering Direct Ownership investment platform into the solar energy generation sector, to rapidly scale the project and meet growing demand. It also gives FedGroup the ability to leverage the economies of scale this footprint creates to drive down the cost of solar on a scale that has never been achieved before in South Africa.
In November 2016, FedGroup launched the first iteration of the Direct Ownership fintech platform as a new way for local investors to generate wealth through the burgeoning sharing economy. "Our vision was to disrupt the traditional investment paradigm by offering the public access to a broader range of income-generating assets," explains Grant Field, CEO at FedGroup.
Interest in the Direct Ownership model has outstripped predictions, which has justified FedGroup's move from partnering with Emergent Energy to acquiring the company. "We looked to the market to expand rapidly and capitalise on the opportunities we've identified. As a pioneer in its sector, Emergent Energy's expertise and experience in rooftop solar systems made it the ideal choice," says Field.
Solar panels through FedGroup's Direct Ownership model have to date earned investors a nominal rate of return of 9%, with the financial projections expected to deliver a nominal rate of return of 11% and an effective rate of return of 15%. As a result, since launching less than a year ago, FedGroup has gone live with five commercial solar farms, four of which have already sold out.
"There is no doubt that green energy is in demand. The opportunity to save the environment and contribute to a greener, more sustainable future, while enjoying robust returns, is resonating with local investors," continues Field.
FedGroup's investment in Emergent Energy aims to take advantage of this value proposition and meet increasing investor demand for the offering. "Our stake in the company will enable us to scale the platform by leveraging Emergent Energy's existing base of over 65 commercial and industrial solar installations," he adds.
Emergent Energy also boasts the technical and practical experience needed to make solar PV a high yield, low-risk, and reliable investment due to its safe and fully predictable outputs.
Emergent Energy boasts a significant project pipeline, which will offer FedGroup numerous opportunities to grow its Direct Ownership platform. "The combined value of the installed base and project pipeline exceeds R1 billion, which is significant for the future of renewable energy in South Africa," he adds.
Through FedGroup's investment and the additional source of funding provided through Direct Ownership, Emergent Energy aims to increase its share of the private sector renewable energy market from 2% to 10%.
