Scatec's solar-storage project suffers blow in S Africa, 2021 target missed

Norwegian green power producer Scatec ASA (OSL:SCATC) has been forced to reschedule construction of its Kenhardt 540-MW solar-plus-storage project in South Africa due to a delay in the government approval process, and back out of projects in Brazil and Ukraine.

The Oslo-based company secured preferred bidder status for Kenhardt’s 150 MW in South Africa's Risk Mitigation Power Procurement (RMIPP) programme in June this year, and expected to reach financial close by the end of 2021. On Friday, Scatec said it had been informed of the approval delay for RMIPP, which pushes the financial close to the end of January 2022.

The construction of Kenhardt, which will also add 225 MW/1,140 MWh of battery storage, is now seen to commence some time in the first quarter of 2022.

Scatec also said that the renewable energy industry in currently being affected by cost inflation and supply chain disruptions, the context that its projects in the backlog and pipeline could not avoid. Therefore, Scatec decided not to move forward with 166 MW of projects in Brazil and Ukraine, saying that “projected margins and returns fall below the Company’s hurdle rates”. It said it expects to record total impairment of NOK 40 million (USD 4.6m/EUR 4m) to NOK 50 million of development cost related to the projects.

As a result, Scatec will not be able to reach the target of 5.9 GW in operation or under construction by the end of 2021. With projects in Brazil and Ukraine no longer in the plans, Scatec’s backlog has slimmed to 1,915 MW.

“It is disappointing not to reach the 2021 growth target, but with our track record and solid pipeline we will continue to deliver growth and long-term value. South Africa is our home market, and we are looking forward to delivering much needed electricity under the RMIPP programme”, CEO Raymond Carlsen said in a statement.

Scatec has not given up on the target to have 15 GW in operation or under construction by the end of 2025.

(NOK 1.0 = USD 0.115/EUR 0.099)

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