Revego and H1 Mull Merger for $807 Million Africa Renewables Fund

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(Bloomberg) — Revego Fund Managers is exploring a merger with H1 Holdings that would create one of South Africa’s largest renewable energy-focused funds.

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The transaction would combine the portfolios of Investec-backed Revego’s Africa Energy Fund with those of H1, creating a fund with assets exceeding 13.3 billion rand ($807 million) and featuring 36 projects with interests spanning solar, wind, hydro and battery-storage projects across southern Africa. 

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“It’ll allow both of us to invest on a primary basis in new infrastructure build,and new energy generation, but also allow sponsors and existing investors to recycle their capital,” H1 Chief Executive Officer Reyburn Hendricks said in an interview. Regulatory approval for the transaction is expected by 2028.

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Revego, an open-ended fund that began in August 2021, has a portfolio of 2.4 billion rand, thanks to investments from UK development-finance institution British International Investment Plc and South African pension administrator Alexander Forbes Group Holdings Ltd.

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Its initial backers include Investec, Eskom Pension and Provident Fund — which manages the retirement savings of workers at South Africa’s state-owned power utility — and UK Climate Investments LLP, a joint venture between the British government and Macquarie Asset Management Ltd.

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It has 10 investments in South Africa, which has the biggest renewable-energy industry in the sub-Saharan African region. As part of the new structure, it will take on H1’s 26 projects, which will grow its scale, and give investors access to a de-risked and diversified portfolio. 

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The new vehicle’s target yield will be inflation plus 5% to 7%, Revego Chief Investment Officer Ziyaad Sarang said.

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H1 — which began in 2011 and has been structuring projects across natural resources, energy, agriculture and infrastructure — will become Revego’s majority shareholder after increasing its stake to 51% from 36% currently.

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Investors are working to consolidate renewable-energy assets given rising electricity demand and accelerating decarbonization efforts across the region. South Africa’s chronic power shortages and growing corporate appetite for clean-energy procurement have fueled a surge in infrastructure investment over the past five years. 

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The combined group has a pipeline of as much as 10 billion rand in green projects in South Africa, and a further $100 million elsewhere on the continent that will require billions of rand in additional investment over the coming decade. It will seek to attract investment from long-term capital holders such as insurers and pension funds to boost the country’s and continent’s energy transition. 

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With the increased assets under management, Revego plans to almost double staff it has to as many as 12 over the next 18 months as it seeks to create dedicated teams looking at fundraising, origination of deals, and asset management, Sarang said. 

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The transaction also moves Revego closer to its target of listing once its reaches $1 billion in AUM. 

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The fund will consider listing as soon as 2031. 

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“We were looking to do this in eight to ten years, but we are not very far from $1 billion in assets under management at 13 billion rand currently,” Sarang said. “I think we can do in three to five years’ time.”

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