The Climate Investment Fund is committing 400 million kroner to Scatec’s Obelisk project in its first investment in Egypt. The hybrid plant, with 1.1 GW of solar power and 200 MWh of battery storage, will help avoid 1.5 million tons of CO₂ annually.

The project, located in Naga Hammadi in Upper Egypt, will deliver stable and cost-efficient renewable energy to a country with rapidly growing power needs. Obelisk is Scatec’s largest project to date.

The large-scale project will generate more than 3,000 GWh of electricity annually, avoiding 1.5 million tons of CO₂ emissions. That is roughly equivalent to Norway’s largest single point source, Mongstad, or about 3 percent of Norway’s annual emissions.

“This project is an example of what we need more of in development policy. By combining private and public capital, we help deliver high-tech solutions that create jobs and cut greenhouse gases in developing countries. In October, I learned about the important role Scatec plays in Egypt when I visited the country, and I look forward to following their work going forward,”

Åsmund Aukrust

Minister of International Development

Through the agreement, Norfund, via the Climate Investment Fund, will own 25 percent of the Obelisk holding company, while Scatec will own the remaining 75 percent. The French company EDF will own 20 percent of the operating company (SPV), giving Scatec and Norfund total ownership shares of 60 and 20 percent respectively.

“The Obelisk project is a good example of how the Climate Investment Fund can help accelerate the transition from fossil to renewable energy in emerging markets through profitable investments,”

Bjørnar Baugerud

Head of the Climate Investment Fund

The investment is the Climate Investment Fund’s first in North Africa and its first in Egypt. The country was added earlier this year as one of the fund’s 13 priority countries, and Norfund has worked with Scatec on this investment for an extended period.

“We are very pleased to continue our valuable collaboration with Norfund. Obelisk is the largest project Scatec has begun constructing to date, and the combination of solar and batteries will deliver stable and cost-efficient renewable energy to meet Egypt’s growing power needs and support its energy transition,” says Scatec CEO Terje Pilskog.

Since Norfund began managing the Climate Investment Fund in 2022, it has committed 5.6 billion kroner during its first three years. These investments support projects that, once completed, will avoid 17.6 million tons of CO₂ annually. That corresponds to 40 percent of Norway’s annual emissions. At the same time, the fund has delivered an average return of 14.4 percent in investment currency (19 percent in NOK).

The Climate Investment Fund, managed by Norfund, has completed a responsible exit from the Kenhardt project — South Africa’s first large-scale hybrid solar and battery facility, built by Norwegian company Scatec. 

“Through early-stage financing, we mobilized private capital and helped make this groundbreaking project by Scatec a reality. Now that private investors are taking over our share as well, allowing us to reinvest in new projects, our contribution gains an additional multiplier effect,” says Bjørnar Baugerud, Head of the Climate Investment Fund at Norfund. 

Kenhardt, developed by Scatec and H1 Capital, is among the world’s largest hybrid plants, with 540 MW of solar power and 225 MW / 1,140 MWh of battery storage. The project was awarded under South Africa’s RMI4P program—a technology-neutral scheme designed to rapidly address the country’s acute power shortages and reduce reliance on costly diesel-based backup plants. Distinguished as the only fully renewable solution among the contenders, the Kenhardt project surpassed fossil-fueled alternatives in the competitive bidding process, by combining solar power with battery storage to deliver stable electricity between 05:00 and 21:30. 

In a country where most energy is coal-based, the project helps avoid 900,000 tons of CO₂ annually — equivalent to the emissions from 460,000 Norwegian fossil-fueled cars. 

South African bank takes over financing 

H1 Holdings has now partnered with Standard Bank to secure long-term equity financing of R1.921 billion, enabling a responsible exit for the original investors—Norfund, British International Investment (BII), and the Industrial Development Corporation (IDC). 

Access to capital on competitive terms is essential for realizing renewable projects in emerging economies, where the cost of capital is significantly higher than in developed countries. This makes it particularly challenging to replace planned and existing coal-fired power plants with solar and wind projects, which require high upfront investments. 

In South Africa, the power sector has faced serious challenges related to aging infrastructure, economic instability, and frequent power outages—with major consequences for both businesses and households. 

Case study highlights local job creation and environmental and social standards

Alongside the exit, Norfund is publishing a case study providing more details about the project. The study outlines how the project was assessed according to both local requirements and IFC’s international guidelines to ensure high environmental and social standards. An independent assessment was conducted to identify environmental and social risks and to validate Scatec’s risk management systems. This was supplemented by government-mandated studies and expert analyses in areas such as cultural heritage, human rights, geohydrology, traffic, and biodiversity, resulting in an action plan with follow-up and monitoring. 

“In a region marked by high unemployment and social challenges, the project has contributed to local value creation through hiring workers from nearby areas, sourcing goods and services from various local suppliers, and social initiatives such as food distribution and water supply. The construction sector is traditionally male-dominated, but the Kenhardt project stood out with a high proportion of female workers,” says Karoline Teien Blystad, Director of Climate and Impact at Norfund. 

During the construction phase, extensive measures were implemented to reduce traffic-related accidents and safeguard worker health and safety, including driver training, GPS monitoring of vehicles, and strict speed limits. The project also conducted a risk assessment related to gender-based violence and harassment (GBVH), and implemented training and awareness efforts in the local community and among employees. Biodiversity was protected through careful handling of vulnerable plant species, and water needs were met without burdening groundwater resources. 

Noisy and polluting petrol generators remain the backbone of Africa’s $75 billion off-grid power market. MOPO, a battery rental company, is challenging this model and has now received a USD 5 million investment from Norfund to scale its solution. 

A model built for the hardest-to-reach communities 

MOPO (Mobile Power Ltd.) operates solar-powered charging hubs in Nigeria, the DRC, Sierra Leone, Liberia, Chad and Uganda – countries with some of the lowest electrification rates in the world. Because diesel generators are cheap to buy but expensive to run, use of solar-powered batteries offers a far cheaper and cleaner option in the long term. There is only one problem – many can’t afford the initial investment. Battery leasing removes this barrier, providing households and businesses in off-grid communities with affordable, reliable power without upfront costs.  

In Sierra Leone, where just 21 percent of the population has access to electricity, customer Ibrahim Bangura shares: “MOPO has changed my life! We no longer struggle with unreliable, expensive energy, we have power exactly when we need it. The batteries are cheaper than petrol generators and we now have consistent affordable power that runs my fridge, helps my children study after dark, and allows me to run my business more reliably.” 

Taking risks where others won’t

To reach the riskiest and most early-stage companies in the toughest markets, Norfund invests through its Frontier Facility. The facility is designed for exactly these kinds of high-risk opportunities in countries where few others are willing to invest.  

“We are thrilled to support MOPO’s expansion through the Frontier Facility, addressing underserved areas in particularly challenging markets. Its model replaces expensive and polluting generators with affordable, renewable power, reaching households and small businesses,” says Pål Helgesen, Investment Director at Norfund.

Disrupting Africa’s fossil fuel dependency

A core part of MOPO’s impact is replacing polluting diesel generators, which remain the default power source for millions of households and businesses across Africa. By offering affordable, renewable batteries on a pay-per-use basis, MOPO helps communities phase out these costly and harmful generators. 

The Kenhardt project, with a capacity of 540 MW of solar power and 225 MW/1,140 MWh of battery storage, stands as one of the largest hybrid solar and battery storage facilities globally. The project was awarded to a consortium of Scatec and H1 Capital under South Africa’s technology-agnostic Risk Mitigation Independent Power Producer Procurement Programme (RMI4P) launched in 2020.

Case study

Download or read as PDF

Norfund’s investment was designed to help boost the supply of renewable energy in South Africa, thereby reducing greenhouse gas emissions and supporting a more reliable power grid. This project serves as a compelling example of how battery storage can help solar power play an even more important role within a renewable energy system in developing countries. 

Investment context for the Climate Investment Fund

Emerging markets are essential to meeting the goals of the Paris Agreement as they account for 34% of global GHG emissions (excl. China) and their emissions are expected to rise significantly due to population and economic growth. It is estimated that emerging markets will need more than USD 1 trillion investment per year to achieve net zero by 2050¹². This is more than six times the current investment of USD 150 bn.  

The cost of capital in emerging markets (EMs) is significantly higher than in developing countries, driven by high country risk premiums. Cost of capital is key to the competitiveness of renewable energy projects as the upfront capital expense is typically higher than fossil projects. In EMs the cost of capital can be more than 7X higher than in developed countries, especially driven by high country risk premium³. Access to capital at more competitive terms is therefore key to replacing planned and existing coal power and fossil fuels with renewable energy. Without this, it will not be possible to achieve the phenomenal scale up in investment required to deliver on global climate goals. 

The challenging South African power sector 

The South African power sector has been facing significant challenges. The country’s power generation and distribution infrastructure, primarily managed by the state-owned utility Eskom, has been grappling with lack of reliable capacity due to issues of aging coal-fired infrastructure, lack of maintenance, and financial instability. Frequent planned power outages, often referred to as “load shedding,” used to be a common occurrence, leading to disruptions in daily life and significant economic impacts: Reduced productivity and financial losses for businesses, increased costs because of the need for expensive backup power solutions like generators, investment uncertainty and job losses were some of the consequences. In fact, a study commissioned by ESKOM, found that a one percentage point increase in load shedding was associated with a 0.4 percentage point drop in GDP growth. The estimated total cost of load shedding between 2007 and 2019 was approximately $2.41 billion, which is roughly the impact of the financial crisis in 2008/9 ⁴.  

The South African government has taken steps to address these challenges, including efforts to diversify the energy mix by incorporating renewable energy sources such as wind and solar power. South Africa, the world’s 12^th largest emitter of greenhouse gas emissions ⁵, aims for 33% renewable electricity by 2030⁶ to transition towards a more sustainable energy mix and reducing the country’s carbon footprint.  

About the investment project

The Kenhardt project is a 540 MWp solar power plus 1,140 MWh battery project developed by Scatec and H1 Capital in South Africa. The project was awarded in 2022 after some delays and became operational in December 2023.  

The project was bid under the Risk Mitigation Independent Power Producer Procurement Program (RMI4P), which differs from the standard renewable procurement program in South Africa in that RMI4P was set up as an emergency procurement round designed to meet the short-term electricity supply gap and aims mainly to reduce the use of expensive diesel-based peaking electrical generators. The program was technology agnostic but required that the projects were able to dispatch power to the grid between the hours of 05:00 and 21:30.  

Distinguished as the only fully renewable solution among the contenders, the Kenhardt project surpassed fossil-fueled alternatives in the competitive bidding process. By day, solar panels supply electricity to the grid while simultaneously charging the expansive Battery Energy Storage System (BESS). When sunlight fades, the plant delivers power by drawing from the battery, ensuring a consistent supply to meet contractual obligations during non-solar hours. 

The project has been awarded a 20-year power-purchase agreement (PPA) with Eskom. This project receives a fixed monthly payment for availability within the agreed timeframe. Scatec is turn-key EPC contractor and is together with H1 responsible for operations and maintenance.  

Norfund’s role and additionality

Norfund contributed as an investor in the project, providing equity financing to a Black Economic Empowerment (BEE) investor and supporting the South African government’s ambitious renewable energy program. This involvement addressed a gap in available financing, as local banks and financers faced exposure and capacity constraints as well as low appetite for greenfield project development, including relatively new battery technology, due to the risk involved. Norfund’s participation also supported objectives such as local job creation, skills transfer, and technology development, complementing the government’s efforts to increase both power supply and local black ownership within the renewable energy sector.  

Securing proper environmental and social standards 

Both local regulations and the IFC Performance Standards for Environmental and Social Sustainability guided Norfund’s assessment of E&S risks and mitigating actions. An independent assessment was conducted to evaluate the project’s environmental and social risks, as well as to review Scatec’s systems and policies for managing these risks. This independent assessment complemented Scatec’s own risk assessments and action plans, government-mandated studies and permits, and additional expert evaluations addressing topics such as cultural heritage, human rights, geohydrology, traffic impacts, and ecological considerations. This resulted in an Environmental and Social Action Plan (ESAP) with follow-up monitoring. 

Health and safety

Throughout the construction phase, traffic-related incidents represented the primary concern due to the significant daily movement of personnel—approximately 40 buses and 50 to 60 external trucks traversed the site each day, often in conditions challenged by dust and limited visibility. To mitigate these risks, the project implemented a comprehensive driver training program, all transport vehicles were fitted with tracking devices to monitor driver behavior, a dedicated observer was appointed to monitor and report any incidents, alongside the enforcement of strict speed limits.

Other critical risks included occupational health and safety incidents affecting construction workers, as well as broader community concerns arising from the influx of job seekers. These included potential transport accidents within the local area and community-worker interactions related to public health issues, such as HIV and Gender-Based Violence and Harassment (GBVH). To further align with international best practices on GBVH, the project conducted a GBVH risk assessment and specific actions were implemented, including community and employee GBVH awareness training.

Community relations and social risks

The power plant is located in a remote region of South Africa, where many households have low incomes. As of 2024, the provincial unemployment rate reached 27.4 percent, with nearly half the local population living below the poverty line. Residents face ongoing social challenges such as substance abuse, violence, and limited access to essential services. Low educational attainment further restricts employment opportunities. Despite these obstacles, the !Kheis community demonstrates an entrepreneurial spirit, as seen by the engagement of local businesses contracted for various project services. 

Drawing on its extensive experience constructing solar power plants in the area, Scatec retained the same management team for this project’s construction phase. Previous projects highlighted the critical importance of strong community relations, which led to the appointment of dedicated HR and Industrial Relations managers, as well as Community Liaison Officer.  

A comprehensive stakeholder engagement plan was developed, outlining strategies to foster and maintain positive relationships with all stakeholders, including mechanisms for addressing grievances. A transparent and inclusive process for workforce recruitment during construction was key to creating positive outcomes for local residents (in the !Kheis municipality as well as the town of Kenhardt). This commitment to fairness also extended to selecting local suppliers for goods and services, with particular care given to ensuring equitable opportunities across different municipalities, and for the benefit of as many suppliers as possible, to avoid social discord.  

South African government regulations of national Power Purchase Agreements (PPAs) require the new renewable energy projects to design and implement socioeconomic development projects in nearby communities. For the Kenhardt project, these initiatives have included supporting municipal soup kitchens, organizing sports tournaments, providing food to schools, and helping with water purification efforts. Access to clean water remains a major concern in the region, and although not required by law, the project also provided generators to power pumps that distribute water locally. 

Environmental considerations and biodiversity

The power plant occupies a large expanse of land in a remote area. During site selection, Scatec undertook a thorough process to avoid identify, assess and ecologically sensitive zones. The vegetation includes both endemic Namaqualand Broken Veld, as well as Bushmanland Arid Grassland, which is widespread in South Africa and not classified as threatened. Species of nationally protected plants, such as the “Quiver Tree”, classified as vulnerable, were present on the site. To avoid and mitigate impact on biodiversity, these plants were either left undisturbed within the project boundaries or carefully relocated just outside the area.  

Water needs for the project, such as cleaning solar panels, are met by sourcing water from the local municipality via tanker trucks. This water originates from the Orange River, ensuring that groundwater resources are not depleted. 

Positive impacts locally and globally 

The Kenhardt project avoids greenhouse gas emissions by replacing diesel peaking power, while also providing more electricity and stability to the grid, enabling job creation and economic growth. At the local level, the project contributes to job creation, both on-site and in the supply chain, supports skills development, and strong female representation in the workforce. 

Avoided emissions

For projects under the Climate Investment Fund, Norfund estimates the expected avoided emissions before the investment decision, as well as annually when the project is operational. The avoided emissions are estimated by using a national emission factor which considers today’s energy mix combined with expected future new build as an estimation of what energy mix the power plant in will substitute. The methodology is IFI’s Methodological Approach for the Common Default Grid Emission Factor Dataset, which is commonly used among financial institutions, Multilateral Development Banks and Development Finance Institutions.

• Ex-ante avoided emissions: The contracted electricity from the power plant was estimated to avoid 870,000 tonnes CO2e annually when operational. 

• Actual production and avoided emissions: The project produces around 900 GWh electricity annually. In 2024, the estimated avoided emissions were around 900,000 tonnes CO2e. 

Job creation and increased income

Local hiring and skills development is an important part of developing energy projects. Job opportunities were announced in various channels in the “Kheis municipality area and most workers were from this or neighboring areas. Throughout the construction phase, more than 3,100 individuals took on a wide range of onsite tasks. Creating a project labor agreement was key to set fair employment standards, including guidelines for work conditions, and health and safety for all workers. 

Upskilling opportunities were provided to select workers who received specialized heavy machinery training, a valuable skill that can be transferred to future projects and other industries. Participation in this training was determined through an application process. 

In addition to direct employment, numerous local small and medium-sized enterprises (SMEs) were contracted for essential services, such as bush clearing before construction, facility cleaning, backfilling, concrete supply, fencing, and transportation. In awarding these contracts, evaluators considered not just the technical qualifications of the businesses, but also their geographic location, ensuring a fair and equitable distribution of opportunities among all participating communities, as outlined in the E&S section above. 

Transitioning from construction to ongoing operations and maintenance is a critical phase, as the workforce required decreases significantly. The project now provides permanent employment to around 100-120 people, of which 37%-39% women. 

The main job creation impact of power projects is created through their effects on the wider economy: better, more reliable energy supplies, and fewer and shorter outages are helping to foster job creation and economic growth as new businesses are established, and productivity improves. 

Strong female presence

Traditionally, construction work has been a male-dominated field. However, the Kenhardt project stood out for its notable inclusion of women. Throughout the project, 489 women—representing 13% of the workforce—were employed. Women-led businesses secured an impressive 48% of all subcontracting opportunities, spanning electrical work, operations and maintenance (O&M), and mechanical services⁷. Several factors contributed to this strong female presence: high local unemployment and poverty encouraged more women to apply, and mandatory substance testing during recruitment saw a greater proportion of women passing, making them strong candidates. Additionally, a centralized procurement process gave all registered SMEs equal access to contracts, ensuring that women-led enterprises could compete on equal terms with their male counterparts. 

Exit to recycle funds

The project started commercial operations in December 2023. Norfund’s strategy is to contribute to the construction of new renewable capacity, and when the project has proven to be successful (i.e. construction completed and commercial operations commenced), the project is considered to have lower risk and is more suitable for mainstream capital. Norfund can then recycle the funds for new projects. The process for Norfund’s exit from the H1 equity financing has commenced off the back of the project having largely been de-risked and will see Norfund exit its direct exposure to the Kenhardt project by September 2025. 

Globeleq, which is 30% owned by Norfund, has in partnership with African Rainbow Energy, announced the commercial close of the 153 MW/612 MWh Red Sands battery energy storage project (Red Sands BESS) in South Africa.

Read the press release here

This project, located in the Northern Cape, is the largest standalone battery energy storage system in Africa to reach this milestone. 

The Red Sands BESS will enhance South Africa’s energy infrastructure by storing energy during off-peak times and releasing it during peak demand periods, providing essential grid stability and support. 

Jonathan Hoffman, CEO of Globeleq, stated, “Commercial close on the Red Sands BESS is a landmark moment for Globeleq and for battery storage in Africa.” 

Mr. Gjermund Sæther, the Norwegian Ambassador to South Africa is pleased with this news: 

“The Red Sands battery storage project’s successful commercial close highlights the importance of international cooperation and public-private partnerships in tackling energy security and promoting a sustainable energy future. Both in terms of energy security, affordability and climate concerns, this project is a milestone. Norway is one of the largest investors in renewable energy in South Africa through Globeleq, Norfund and private companies. The strong partnership between Norway and a democratic South Africa, dating back to our support for the liberation struggle, continues to evolve into the future.”