Teraco unveils R2bn SA solar backup plan
Teraco Data Environments, Africa’s largest data centre provider, has set aside R2bn to build its own power plant locally to secure stable, reliable backup energy for its systems that can ill afford Eskom’s continued loadshedding.
Last week, Teraco said it had secured its first grid capacity allocation from Eskom and would start building a 120MW solar facility in the Free State.
“It’s not an IPP [independent power producer] agreement. This is actually Teraco building its own power plant. We’re going to own it, we’re going to fund it, we’re going to build it,” CEO Jan Hnizdo told Business Day.
Still, Teraco regards Eskom as the cheapest and most efficient source of power for its operations. “The base layer [of power] that we still rely on is Eskom. For a data centre, it’s not viable to go off-grid,” he said.
Businesses have tended to make deals with specialist (IPPs to supply their operations with power. Teraco, though, will partner with Juwi Renewable Energies SA and Subsolar to develop the solar plant, with Juwi appointed to design and manage the procurement, construction and commissioning.
“Globally, it’s a big deal for data centres. There are not many data centre companies that have done that. Hyperscalers have done such investments. But for data centre companies such as ours, it’s fairly unique,” Hnizdo said.
By design, data centres require backup power to ensure that service to clients isn’t interrupted. Teraco has invested in such backup for years, but SA’s deepening energy crisis has prompted it to double down on greater self-sufficiency.
Teraco, which counts the likes of global tech firms such as Amazon, Google and Microsoft among its clients, has seen an increase in companies wanting access to its centres to store and process large amounts of data.
The company, which is majority owned by New Yorklisted Digital Realty, has been on an aggressive expansion drive in recent years. Increasing demand from content providers, such as social media, search or streaming companies, has been a growth area for Teraco, which now holds about 40% of the data centre capacity in Sub-Saharan Africa.
“It’s taken three years for us to get here. Literally threading the eye of the needle on regulatory issues, municipal bills and then the last piece was getting grid access,” Hnizdo said.
The deal enables the data centre to connect its planned facility to the national grid. The power generated from the solar plant will be wheeled across Eskom and municipal power networks to Teraco’s facilities countrywide. Wheeling refers to the transportation of electricity from a generator to a remotely located end-user through the use of an existing distribution or transmission system.
To fund this development, the company is using a portion of its R5.7bn investment commitment for SA.
“The solar plant will be an approximately R2bn investment and then we’ve got the continuous investment in data centres that we’re doing,” Hnizdo said. “We’ve got committed funders. Our existing funder, which is Absa, and various financial institutions that sit behind them. We’ve got a normal line [of credit] and a green line.”
In January 2023 the company secured an R11.8bn syndicated loan facility led by Absa. A total of R5.7bn was earmarked to finance the company’s growth, while R6.1bn was to refinance and extend the average maturity profile of existing drawn debt.
Like many other companies, Teraco has been investing in solar for a number of years, mainly through panels installed on rooftops at its sites. But that has not been enough.
“On our rooftops, we’ve tried to maximise as much as possible but we can only get to 10MW. This [new plant] is 120MW. By 2035, we want to 100% renewable energy. In today’s environment, we can only buy energy from Eskom and municipalities that we’re in.”
Over the past two years, Teraco has deployed about 6MW of rooftop solar integrated into its facilities, and this amount will increase to 10MW as new facilities become operational.