Neo 1 Solar Lesotho

Project description

This summary covers an application for MIGA political risk insurance by the Renewable Energy Performance Platform of the United Kingdom (REPP; the Guarantee Holder) for its non-shareholder loan into Neo 1 SPV PTY Limited of Lesotho (Neo1; the Project Enterprise) to develop a 20 MW solar PV power plant (the Project), which would be the first independent power producer (IPP) in the country. The loan will be made in Lesotho loti (LSL) for up to LSL 292.8 million (approx. US$18.3 million) and the Guarantee Holder seeks cover for up to 95% of this amount (approx. US$17.4 million) against the risk of Breach of Contract for a guarantee period of up to 15 years. (MIGA’s cover will be denominated in USD and the final amount of cover will depend on exchange rates upon issuance of the policy).

The Neo 1 Project involves the design, financing, construction, ownership, operation, and maintenance of a 20MW solar PV plant in Lesotho, in the Mafeteng district, south of the capital city of Maseru. The Project consists of 70,000 solar panels on single-axis tracker, a 33kV powerline connecting the plant to a substation, and an inverter station. Electricity output will be sold to the state-owned utility the Lesotho Electric Company (LEC) according to the terms of a 25-year Power Purchase Agreement (PPA) signed in November 2021.

The Project is being developed by a sponsorship group led by Scatec ASA, involving the Norwegian Investment Fund (Norfund) Ltd, Sotho Solar Holding SPV (Pty) Ltd. (comprising One Power Lesotho (Pty) Ltd and Power Consult (Pty) Ltd), the Lesotho Pension Fund and Izuba Energy LLP.

Environmental Categorization

The Project is a category B under MIGA’s Policy on Environmental and Social Sustainability.  Click here  to view the Environmental and Social Review Summary.

Development Impact

The Project aims to support the diversification of Lesotho’s power generation mix from hydropower domestic supply and coal-powered imported supply, increasing Lesotho’s domestic power generation through clean, cost-effective electricity supply. The use of solar power also helps reduce the country’s reliance on importing electricity from the Southern African Power Pool (SAPP), which is largely coal powered. In addition, as the country’s first IPP, the Project should help make the case for financial viability in Lesotho’s solar power sector. It should also lower barriers to investment in Lesotho by demonstrating the benefits of private investment in the country.

The Project is aligned with the World Bank Group’s Country Partnership Framework (CPF) 2016-2020 for Lesotho and Lesotho’s National Strategic Development Plan (NSDP) 2018/19-2022/23, which highlights the potential for clean energy given the country’s abundant hydro, wind and solar resources. The Project also supports the Government of Lesotho’s Energy Policy vision that energy should be universally accessible and affordable, with minimal negative impact on the environment.