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$16.5 million [1]) and the Guarantee Holder seeks cover for up to 95% of this amount (approx. US$15.7 million1) 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 composed of Red Rocket Holding GBV through its Neo 1 Equity (Pty) Ltd subsidiary, 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. It is also expected to improve access to reliable and efficient energy in a country where electricity access rate is still low at 47.4%, thereby boosting economic activities.  In addition, as the country’s first IPP, the project has the potential to demonstrate the viability of solar power technology and private investment in the country’s power sector.   

The Project is aligned with the World Bank Group’s Country Partnership Framework (CPF FY24–28) for Lesotho aims to, inter alia, strengthen household resilience to shocks. Improving reliable access to energy is germane to this objective as it supports connectivity to digital platforms, critical for early warning and emergency response. It is also aligned with the second National Strategic Development Plan (NSDP2; 2023/24 to 2027/28) which has renewable energy as one of its strategic focus. 

[1] Based on a USD/LSL exchange rate of 17.69, as of July 26th, 2023. Figures in USD will fluctuate based on the USD/LSL exchange rate.