Even with the electricity landscape as explained above, one needs to acknowledge that numerous agricultural subsectors have faced challenging seasons over the past two to three years. This is likely to affect investment appetite into renewables as businesses will face debt repayment ability and cash flow constraints. In this context, we explore what cash flows could be like under different electricity price paths and highlight some issues that could affect the cash flow positions of producers opting to invest in solar PV systems, using a case study.
A practical view on cash flow implications of different future electricity price paths - A hypothetical example
Chapman Farms produce maize, wheat, oats, lucerne, and table- and seed potatoes under irrigation in the Northern Cape. Electricity is currently consumed directly from Eskom. They have decided to invest in a hybrid (solar plus batteries) installation as a risk mitigation tool
against lost irrigation time. These panels will allow them to generate 90% of their electricity irrigation requirements. Chapman Farms are looking to finance this system, with a cost of R11 000 000, through a 7-year term loan through Absa. The interest rate on the loan is 11%*. Figures 4.5, 4.6 and 4.7 show the cash flow implications of three different
*rates are risk dependant
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